<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Laboratory Corporation of America Holdings
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LABORATORY CORPORATION OF AMERICA LETTERHEAD APPEARS HERE]
October 25, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Laboratory Corporation of America Holdings. The meeting will be held at the
Holiday Inn, 4810 New Page Road, Research Triangle Park, N.C. 27709, on
Wednesday, November 20, 1996 at 9:00 a.m., Eastern Standard time.
The business of the meeting will be to elect directors to the Company's Board
of Directors, to consider and vote on the approval of the Company's 1997
Employee Stock Purchase Plan and to ratify the appointment of independent
auditors for the Company's fiscal year ending December 31, 1996. Information on
these matters can be found in the accompanying proxy statement.
Whether or not you plan to attend the meeting in person, your shares should
be represented and voted at the meeting. Accordingly, after reading the
enclosed proxy statement, kindly mark the proxy card to indicate your vote,
date and sign the proxy card, and return it in the enclosed postage-paid
envelope as soon as conveniently possible. If you desire to vote in accordance
with management's recommendations, you need not mark your votes on the proxy
card but need to sign, date and return it in the enclosed postage-paid envelope
in order to record your vote. If you later decide to attend the meeting and
wish to vote your shares personally, you may revoke your proxy at any time
before it is exercised.
Sincerely,
/s/ James B. Powell
JAMES B. POWELL, M.D.
President and Chief Executive Officer
<PAGE>
LOGO LABCORP
Laboratory Corporation of America
LABORATORY CORPORATION OF AMERICA HOLDINGS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Laboratory Corporation of America Holdings:
Notice is hereby given that the 1996 Annual Meeting (the "Annual Meeting")
of the stockholders of Laboratory Corporation of America Holdings (the
"Company") will be held at the Holiday Inn, 4810 New Page Road, Research
Triangle Park, N.C. 27709, on Wednesday, November 20, 1996, at 9:00 a.m.,
Eastern Standard time, for the following purposes:
1. To elect all of the members of the Company's board of directors to
serve until the Company's next annual meeting and until such directors'
successors are elected and shall have qualified.
2. To consider and vote upon a proposal to approve and adopt the
Laboratory Corporation of America Holdings 1997 Employee Stock Purchase
Plan.
3. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1996.
4. To transact such other business as may properly come before the Annual
Meeting or at any adjournments thereof.
A proxy statement describing the matters to be considered at the Annual
Meeting is attached to this notice. Only stockholders of record at the close
of business on October 18, 1996 are entitled to notice of, and vote at, the
Annual Meeting and at any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Bradford T. Smith
BRADFORD T. SMITH
Secretary
October 25, 1996
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL INSURE THAT YOUR SHARES ARE
VOTED IN ACCORDANCE WITH YOUR WISHES.
<PAGE>
LABORATORY CORPORATION OF AMERICA HOLDINGS
358 SOUTH MAIN STREET
BURLINGTON, NORTH CAROLINA 27215
----------------
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
by the Board of Directors of Laboratory Corporation of America Holdings, a
Delaware corporation (the "Company"), of proxies to be voted at the 1996
annual meeting of stockholders to be held Wednesday, November 20, 1996 at 9:00
a.m., Eastern Standard time, at the Holiday Inn, 4810 New Page Road, Research
Triangle Park, N.C. 27709 and at any adjournments thereof (the "Annual
Meeting"). The Notice of Annual Meeting, this Proxy Statement and the
accompanying proxy card are first being mailed to stockholders on or about
October 25, 1996, to all stockholders entitled to vote at the Annual Meeting.
At the Annual Meeting, the Company's stockholders will be asked (i) to elect
the following persons as directors of the Company to serve until the Company's
next annual meeting and until such directors' successors are elected and shall
have qualified: Thomas P. Mac Mahon, James B. Powell, M.D., Jean-Luc
Belingard, Wendy E. Lane, Robert E. Mittelstaedt, Jr., David B. Skinner, M.D.
and Andrew G. Wallace, M.D., (ii) to consider and vote upon a proposal to
approve and adopt the Laboratory Corporation of America Holdings 1997 Employee
Stock Purchase Plan (the "Plan"), and (iii) to ratify the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors for the fiscal year
ending on December 31, 1996, and (vi) to take such other action as may
properly come before the Annual Meeting or any adjournments thereof.
GENERAL INFORMATION
SOLICITATION AND VOTING OF PROXIES; REVOCATION; RECORD DATE
All proxies duly executed and received by the Company will be voted on all
matters presented at the Annual Meeting in accordance with the instructions
given therein by the person executing such proxy or, in the absence of such
instructions, will be voted in favor of the election to the Company's Board of
Directors of the seven nominees for director identified in this Proxy
Statement, the approval and adoption of the 1997 Employee Stock Purchase Plan
and the ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for 1996. Any stockholder may revoke his proxy
at any time prior to the Annual Meeting before it is voted by written notice
to such effect delivered to the Company at 358 South Main Street, Burlington,
North Carolina 27215, Attention: Bradford T. Smith, Secretary, by delivery
prior to the Annual Meeting of a subsequently dated proxy or by attending the
Annual Meeting and voting in person.
Solicitation of proxies may be made by mail and may also be made by personal
interview, telephone and facsimile transmission, and by directors, officers
and regular employees of the Company without special compensation therefor.
The expenses of the preparation of proxy materials and the solicitation of
proxies for the Annual Meeting will be paid by the Company. The Company
expects to reimburse banks, brokers and other persons for their reasonable
out-of-pocket expense in handling proxy materials for beneficial owners.
Only holders of record of the common stock, par value $0.01 per share, of
the Company (the "Common Stock") at the close of business on October 18, 1996
(the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on the Record Date, there were issued and
outstanding 122,927,797 shares of Common Stock, not including shares held by
certain stockholders who, in connection with the Merger, which is described
below, submitted demands for appraisal, of which there were 2,160 (the
"Appraisal Shares"). Except for the Appraisal Shares, each of the shares
issued and outstanding on the Record Date is entitled to one vote.
A quorum for the Annual Meeting consists of a majority of the total number
of shares of Common Stock outstanding on the Record Date. Directors of the
Company will be elected by a plurality vote of the shares of
<PAGE>
Common Stock represented at the Annual Meeting and entitled to vote.
Accordingly, abstentions and broker non-votes will not affect the outcome of
the election. The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting and entitled to vote is required for
approval and adoption of the 1997 Employee Stock Purchase Plan and for the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1996. On any such
item, an abstention will have the same effect as a negative vote but, because
shares held by brokers will not be considered entitled to vote on matters as
to which the brokers withhold authority, a broker non-vote will have no effect
on the vote. As of October 18, 1996, the directors and executive officers of
the Company beneficially owned an aggregate of 234,997 shares of Common Stock,
representing under 1% of the total number of shares of Common Stock
outstanding.
BENEFICIAL OWNERSHIP
On April 28, 1995 (the "Effective Date"), Roche Biomedical Laboratories,
Inc. ("RBL"), then a wholly owned subsidiary of HLR Holdings Inc. ("HLR"),
merged with and into the Company (the "Merger") pursuant to an Agreement and
Plan of Merger (the "Merger Agreement") dated as of December 13, 1994, among
the Company, RBL, HLR and Hoffmann-La Roche Inc., a New Jersey corporation
("Hoffmann-La Roche"). HLR is a wholly owned subsidiary of Hoffmann-La Roche,
which is in turn a wholly owned subsidiary of Roche Holdings, Inc., a Delaware
corporation ("Holdings"), which is in turn an indirect wholly owned subsidiary
of Roche Holding Ltd, a Swiss Corporation ("Roche Holding"). HLR and its
affiliates (other than the Company and its subsidiaries) are collectively
referred to herein as "Roche." In the Merger, HLR was issued 49,008,538 shares
of Common Stock, and Holdings was issued 12,320,718 shares of Common Stock,
representing in the aggregate approximately 49.9% of the outstanding shares of
Common Stock as of the Record Date, in exchange for all of the outstanding
shares of common stock of RBL and $135,651,100 in cash. The Merger Agreement
was included as an exhibit to the annual report on Form 10-K of the Company
for the year ended December 31, 1994 (the "1994 10-K") filed with the
Securities and Exchange Commission (the "Commission").
In connection with the Merger, the Company distributed a dividend consisting
of an aggregate of approximately 13,826,308 warrants to stockholders of record
of shares of Common Stock as of April 21, 1995, each such warrant (a "Warrant"
and, together with the Roche Warrants, as defined below, the "Warrants")
representing the right to purchase one newly issued share of Common Stock for
$22.00 (subject to adjustments) on April 28, 2000. In addition, pursuant to
the Merger Agreement, on April 28, 1995, Hoffmann-La Roche purchased 8,325,000
Warrants (the "Roche Warrants") from the Company for an aggregate purchase
price of $51,048,900.
In connection with the Merger, the Company, HLR, Hoffmann-La Roche and
Holdings entered into a stockholder agreement dated as of April 28, 1995 (the
"Stockholder Agreement"). The Stockholder Agreement contains certain
provisions relating to (i) the governance of the Company following the Merger,
including but not limited to the composition of the Board of Directors, (ii)
the issuance, sale and transfer of the Company's Equity Securities (as defined
in the Stockholder Agreement) by the Company and Roche, (iii) the acquisition
of additional Equity Securities of the Company by Roche and (iv) the
registration rights granted by the Company to Roche with respect to the
Company's Equity Securities. A copy of the Stockholder Agreement was included
as an exhibit to the current report on Form 8-K of the Company filed with the
Commission on May 12, 1995 in connection with the consummation of the Merger.
Roche has informed the Company that it will vote for the election of each of
the nominees to the Board of Directors identified herein, the approval and
adoption of the 1997 Employee Stock Purchase Plan and the ratification of the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
1996.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR OF THE COMPANY (AS
SPECIFIED BELOW), THE APPROVAL AND ADOPTION OF THE 1997 EMPLOYEE STOCK
PURCHASE PLAN AND THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP
AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1996.
2
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
All the Company's directors will be elected at the Annual Meeting to serve
until the next succeeding annual meeting of the Company and until their
successors are elected and shall have qualified. James R. Maher, a Director
since 1992 and Linda Gosden Robinson, a Director since 1990, will retire from
the Board of Directors at the Annual Meeting. Wendy E. Lane and Robert E.
Mittelstaedt, Jr. have been nominated by the Company's Nominating Committee to
replace Mr. Maher and Ms. Robinson. All the nominees listed below are
currently serving as members of the Board of Directors, with the exception of
Ms. Lane and Mr. Mittelstaedt. Except as herein stated, the proxies solicited
hereby will be voted FOR the election of such nominees unless the completed
proxy card directs otherwise.
The governance provisions of the Stockholder Agreement provide, among other
things, that the Board of Directors of the Company will (subject to specified
exceptions) be comprised of seven members, consisting of three HLR Directors
and four Independent Directors nominated by the Nominating Committee of the
Board of Directors. The persons nominated to serve as HLR Directors are Mr.
Mac Mahon, Dr. Powell and Mr. Belingard. The persons nominated to serve as
Independent Directors are Ms. Lane, Mr. Mittelstaedt, Dr. Skinner and
Dr. Wallace.
The Stockholder Agreement also provided that Mr. Maher would serve as
Chairman of the Board and Mr. Mac Mahon would serve as Vice Chairman of the
Board of the Company for a period of one year after April 28, 1995 ("the
Initial Period"). Following the Initial Period, Mr. Maher resigned as Chairman
of the Board, Mr. Mac Mahon became Chairman of the Board and the position of
Vice Chairman was eliminated. The Stockholder Agreement also provides that,
among other things, certain actions by the Company will require approval by a
majority of the entire Board of Directors of the Company, which majority must
include at least a majority of the HLR Directors and at least one Independent
Director (a "Special Majority Vote"). Included in these items is any change in
the size or composition of the Board of Directors or any committee thereof and
the establishment of a new committee of the Board of Directors.
The Board of Directors has been informed that all of the nominees listed
below are willing to serve as directors, but if any of them should decline or
be unable to act as a director, the individuals named in the proxies may vote
for a substitute designated by the Board of Directors. The Company has no
reason to believe that any nominee will be unable or unwilling to serve.
NOMINEES FOR ELECTION AS DIRECTORS
The name, age, principal occupation for the last five years, selected
biographical information and period of service as a director of the Company of
each nominee are set forth below.
THOMAS P. MAC MAHON (49) has served as Chairman of the Board and Director
since April 28, 1996. Prior to such date and since April 28, 1995 he served as
Vice Chairman and Director. Mr. Mac Mahon has been Senior Vice President of
Hoffmann-La Roche Inc. since 1993 and President of Roche Diagnostics Group and
a Director and member of the Executive Committee of Hoffmann-La Roche since
1988. Mr. Mac Mahon is also a Director of HLR. As Senior Vice President of
Hoffmann-La Roche Inc. and President of Roche Diagnostics Group, Mr. Mac Mahon
is responsible for the management of all United States operations of the
diagnostic business of Hoffmann-La Roche. Mr. Mac Mahon is also currently a
member of the Worldwide Diagnostics Executive Committee of Roche Holdings.
JAMES B. POWELL, M.D. (58) has served as President and Chief Executive
Officer and as a Director of the Company since the Merger. Previously, Dr.
Powell was President of RBL from 1982 until the Merger. He is a medical doctor
and became certified in anatomic and clinical pathology in 1969. Dr. Powell is
a member of the management committee of the Company.
JEAN-LUC BELINGARD (48) has served as a Director of the Company since the
Merger. Mr. Belingard is Director General of the Diagnostics Division and
member of the Executive Committee of F. Hoffmann-La Roche
3
<PAGE>
Ltd ("F. Hoffmann-La Roche"), Basel, Switzerland, a subsidiary of Roche
Holding. He joined F. Hoffmann- La Roche in 1982, and held various positions
prior to being named to his current positions in 1990. His current
responsibilities include the management of the worldwide diagnostic business
of Roche. Mr. Belingard is also a director of Perkin-Elmer Corporation,
Norwalk, Connecticut and a Foreign Trade Advisor to the French Government.
WENDY E. LANE (45) has been Chairman of Lane Holdings, Inc., a private
investment firm, since 1992. Prior to forming Lane Holdings, Inc., Ms. Lane
was a Principal and Managing Director of Donaldson, Lufkin & Jenrette, an
investment banking firm, serving in these and other positions from 1980 to
1992. Ms. Lane also serves as a director of Watts Industries, Inc.
ROBERT E. MITTELSTAEDT, JR. (53) is Vice Dean of The Wharton School of the
University of Pennsylvania, Director of the Aresty Institute of Executive
Education. Mr. Mittelstaedt has held these and other positions with the
Wharton school since 1973, with the exception of the period from 1985 to 1989
when he founded, served as President and Chief Executive Officer, and sold
Intellego, Inc., a company engaged in practice management, systems development
and service bureau billing operations in the medical industry. Mr Millelstaedt
is also a director of A.G. Simpson Automotive Systems, Inc and IS&S Inc.
DAVID B. SKINNER, M.D. (61) has served as a Director of the Company since
the Merger. Dr. Skinner has been President and Chief Executive Officer of New
York Hospital and Professor of Surgery at Cornell Medical School since 1987.
He was the Chairman of the Department of Surgery and Professor of Surgery at
the University of Chicago Hospitals and Clinics from 1972 to 1987.
ANDREW G. WALLACE, M.D. (61) has served as a Director of the Company since
the Merger. Dr. Wallace has served as both the Dean of Dartmouth Medical
School and Vice President for Health Affairs at Dartmouth College since 1990.
He was the Vice Chancellor for Health Affairs at Duke University and the Chief
Executive Officer of Duke Hospital from 1981 to 1990.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR LISTED ABOVE.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Audit Committee, an Employee Benefits
Committee, an Ethics and Quality Assurance Committee and a Nominating
Committee. Prior to the Merger in April 1995, the Board of Directors also had
an Executive Committee.
The Audit Committee, currently consisting of Dr. Skinner and Dr. Wallace,
makes recommendations, among other things, to the Board regarding the
engagement of the Company's independent auditors, reviews the plan, scope and
results of the audit, reviews with the auditors and management the Company's
policies and procedures with respect to internal accounting and financial
controls and reviews changes in accounting policy and the scope of the non-
audit services which may be performed by the Company's independent auditors.
Pursuant to the Stockholder Agreement, the Audit Committee is comprised
entirely of Independent Directors. Prior to the Merger in April 1995, the
Audit Committee consisted of Dr. Saul J. Farber, Anne Dibble Jordan and Dr.
Paul A. Marks.
The Ethics and Quality Assurance Committee, currently consisting of Mr.
Maher, Dr. Powell, Dr. Wallace and Dr. Skinner, is responsible for ensuring
that the Company adopts and implements procedures that require the Company's
employees to act in accordance with high ethical standards and to deliver high
quality services. Prior to the Merger, the Ethics and Quality Assurance
Committee consisted of Howard Gittis, Dr. Farber and Ms. Jordan.
The Employee Benefits Committee, currently consisting of Mr. Belingard, Ms.
Robinson and Dr. Skinner, makes recommendations to the Board regarding
compensation and benefit policies and practices and incentive
4
<PAGE>
arrangements for executive officers and key managerial employees of the
Company. The Employee Benefits Committee also considers and grants awards
under the Company's incentive plans, subject to a Special Majority Vote of the
Board as described above. Pursuant to the Stockholder Agreement, the Employee
Benefits Committee is comprised of a majority of Independent Directors. Prior
to the Merger, the Employee Benefits Committee consisted of Dr. Farber, Mr.
Gittis, David J. Mahoney, Ms. Robinson and Dr. Samuel O. Thier.
The Nominating Committee, currently consisting of Mr. Mac Mahon, Dr. Wallace
and Ms. Robinson, is responsible for recommending the nomination of directors.
Pursuant to the Stockholder Agreement, the Nominating Committee is comprised
of one HLR Director and two Independent Directors and acts by a majority vote
of the entire committee. Prior to the Merger in April 1995, the Nominating
Committee consisted of Ronald O. Perelman, Ms. Jordan, Ms. Robinson and Dr.
Thier.
Prior to the Merger, the Board had an Executive Committee, consisting of
Ronald O. Perelman, Mr. Gittis and Mr. Maher, which was empowered to exercise
all the powers and authority of the Board except as otherwise provided under
applicable Delaware corporation law. The Executive Committee was dissolved
immediately following the Merger.
During 1995, the Board of Directors held seven meetings and acted five times
by unanimous written consent of all members thereof, each in accordance with
the Company's By-laws and applicable Delaware corporation law. The Employee
Benefits Committee held two meetings; the Audit Committee held two meetings;
and the Ethics and Quality Assurance Committee held one meeting in 1995. The
Nominating Committee did not meet in 1995. During 1995, none of the directors
attended fewer than 75% of the meetings of the Board and the committees of
which he or she was a member.
COMPENSATION OF DIRECTORS
Directors who are currently not receiving compensation as officers or
employees of the Company are paid an annual retainer of $30,000, payable in
monthly installments, and a fee of $1,000 for each meeting of the Board of
Directors or of any Committee thereof they attend and receive reimbursement of
expenses they incur for attending any meeting. Subject to the Non-Employee
Director Stock Plan (the "Director Stock Plan") approved by the stockholders
of the Company, 50% of such annual retainer shall be payable in cash and 50%
shall be payable in Common Stock of the Company. In 1995, each Non-Employee
Director, as defined, received 1,023 shares of Common Stock under the Director
Stock Plan.
5
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth as of the date hereof the executive officers
of the Company.
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
James B. Powell, M.D.......... 58 President and Chief Executive Officer
Wesley R. Elingburg........... 40 Executive Vice President, Chief Financial
Officer and Treasurer
Larry L. Leonard.............. 55 Executive Vice President, Southwest and West
Divisions
Bradford T. Smith............. 43 Executive Vice President, General Counsel,
Corporate Compliance Officer and Secretary
Stevan R. Stark............... 49 Executive Vice President, Alliances and Sales
Coordination
Ronald B. Sturgill............ 60 Executive Vice President, Human Resources and
South Atlantic Division
David C. Weavil............... 45 Executive Vice President and Chief Operating
Officer
William M. Meilahn............ 55 Senior Vice President and Chief Information
Officer
</TABLE>
JAMES B. POWELL, M.D. has served as President and Chief Executive Officer
and as a Director of the Company since the Merger. Previously, Dr. Powell was
President of RBL from 1982 until the Merger. He is a medical doctor and became
certified in anatomic and clinical pathology in 1969. Dr. Powell is a member
of the management committee of the Company.
WESLEY R. ELINGBURG has served as Executive Vice President, Chief Financial
Officer and Treasurer since October 1996. Prior to this date and since the
Merger, Mr. Elingburg was Senior Vice President, Finance, with responsibility
for the day to day supervision of the finance function of the Company,
including treasury functions. Previously, Mr. Elingburg served as Senior Vice
President-Finance and Treasurer of RBL from 1988 through April 1995 and
Assistant Vice President of Hoffmann-La Roche from 1989 until the Merger in
April 1995. Mr. Elingburg is a member of the management committee of the
Company.
LARRY L. LEONARD has served as Executive Vice President of the Company since
1993. He joined the Company in 1978. Dr. Leonard, who holds a Ph.D. degree in
microbiology, was named Senior Vice President of the Company in 1991 and
previously was Vice President-Division Manager. Dr. Leonard oversees major
regional laboratories in Arizona, Texas, Colorado, California, Nevada,
Washington and Utah. Dr. Leonard is a member of the management committee of
the Company.
BRADFORD T. SMITH has served as Executive Vice President, General Counsel
and Secretary since the Merger. He was appointed Corporate Compliance Officer
in August 1996. Previously, Mr. Smith served as Assistant General Counsel of
HLR, Division Counsel of RBL and Assistant Secretary and member of RBL's
Senior Management Committee from 1988 until April 1995. Mr. Smith served as
Assistant Secretary of HLR from 1989 until the Merger and as an Assistant Vice
President of HLR during 1992 and 1993. Mr. Smith is a member of the management
committee of the Company.
STEVAN R. STARK was appointed Executive Vice President, Alliances and Sales
Coordination in October 1996 and was Senior Vice President, New York Division,
Cranford Region and Alliance/Hospital Division since the Merger in April 1995.
Mr. Stark oversees the Company's sales operations including business
alliances, managed care and new business development. Previously, Mr. Stark
was a Vice President and Division Manager from 1991 to 1995 and a Division
Manager from 1986 to 1991. He joined the Company in 1983. Mr. Stark is a
member of the management committee of the Company.
6
<PAGE>
RONALD B. STURGILL has served as Executive Vice President, Human Resources
since October 1996. Mr. Sturgill oversees human resources and major regional
laboratories in North and South Carolina. Prior to that date and since the
Merger, Mr. Sturgill served as Senior Vice President, South Atlantic Division.
Mr. Sturgill served as Senior Vice President, Administration of RBL from 1987
until the Merger where his duties included the supervision of Information
Systems, Human Resources, Sales Support and Training. Mr. Sturgill is a member
of the management committee of the Company.
DAVID C. WEAVIL has served as Executive Vice President since the Merger and
was appointed Chief Operating Officer in September 1995. Previously, Mr.
Weavil served as Senior Vice President and Chief Operating Officer of RBL
beginning in 1989. From 1988 through 1989, Mr. Weavil was Regional Senior Vice
President-Mid-Atlantic of RBL. Prior to that, he served as Senior Vice
President and Chief Financial Officer of RBL from 1982. Mr. Weavil is a member
of the management committee of the Company.
WILLIAM M. MEILAHN has served as Senior Vice President and Chief Information
Officer since December 1995. Previously, Mr. Meilahn was Executive Vice
President, MIS and a director of Eduserv Technologies, Inc. from 1993 through
1996, and was a Vice President in various capacities for Automatic Data
Processing, Inc. from 1983 through 1993. Mr. Meilahn is a member of the
management committee of the Company.
7
<PAGE>
EXECUTIVE COMPENSATION AND BENEFIT PLANS
EXECUTIVE COMPENSATION
The compensation paid by the Company during the year ended December 31, 1995
to certain executive officers is set forth below. The executive officers named
are the two who served as chief executive officer during the year, the four
other most highly compensated executive officers serving at year end, and an
officer who would have been one of such four had he not resigned before year
end.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ ------------
SECURITIES
UNDERLYING ALL OTHER
SALARY(1) BONUS(2) OPTIONS(3)/ COMPENSATION(4)
NAME AND PRINCIPAL POSITION YEAR ($) ($) SARS(#) ($)
- --------------------------- ---- --------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
James B. Powell, M.D.,.. 1995 $ 350,000 $ 367,500 100,000 $ --
President and Chief 1994 -- -- -- --
Executive Officer(5) 1993 -- -- -- --
Timothy J. Brodnik,.....
Former Executive Vice 1995 325,000 162,500 64,130 861,965
President, Sales and 1994 325,000 246,250 150,000 8,853
Marketing(6) 1993 325,000 262,500 50,000 11,334
Haywood D. Cochrane,
Jr.....................
Former Executive Vice
President, Chief 1995 500,000 150,000 50,000 2,531,658
Financial Officer and 1994 263,014 225,000 331,250 870
Treasurer(7) 1993 -- -- -- --
John F. Markus,.........
Former Executive Vice 1995 325,000 162,500 50,273 651,447
President, Corporate 1994 325,000 236,250 115,000 7,052
Compliance(6) 1993 325,000 252,500 50,000 9,586
Robert E. Whalen,.......
Former Executive Vice
President and Chief 1995 325,000 162,500 70,273 864,812
Administrative 1994 325,000 246,250 150,000 11,700
Officer(6) 1993 323,751 262,500 50,000 14,120
James R. Maher,.........
Former President and 1995 333,334 1,000,000 -- 5,362,662
Chief Executive 1994 1,000,001 450,000 350,000 20,066
Officer(8) 1993 1,000,000 500,000 -- 29,136
David C. Flaugh,........
Former Executive Vice 1995 312,491 187,500 95,273 2,181,779
President and Chief 1994 499,991 375,000 200,000 14,154
Operating Officer(9) 1993 507,683 400,000 125,000 13,865
</TABLE>
- --------
(1) Includes salary paid or accrued for each indicated year.
(2) Includes bonus accrued or paid for each indicated year and other payments,
excluding severance, made pursuant to employment agreements.
(3) In connection with the Merger in 1995, certain employee stock options were
canceled and reissued ("Roll-Over Options") according to a formula set
forth in the Merger Agreement. Roll-Over Options canceled and reissued in
1995 were 16,500 at $20.25 and 20,273 at $16.481, respectively, for Mr.
Whalen, 11,500 at $20.25 and 14,130 at $16.481, respectively, for Mr.
Brodnik, 16,500 at $20.25 and 20,273 at $16.481, respectively, for Mr.
Markus, and 16,500 at $20.25 and 20,273 at $16.481, respectively, for Mr.
Flaugh.
(4) Reflects the following: (i) payment of cash and the fair value of shares
of Common Stock of the Company issued for NHL employee stock options
canceled in connection with the Merger at the election of each individual
in 1995 of $2,348,162 for Mr. Maher, $2,494,627 for Mr. Cochrane, $853,112
for Mr. Whalen, $853,112 for Mr. Brodnik, $640,258 for Mr. Markus, and
$1,236,026 for Mr. Flaugh; (ii) life insurance
8
<PAGE>
premiums of $15,566 in 1994 and $8,060 in 1993 for Mr. Maher, $30,569 in
1995 and $870 in 1994 for Mr. Cochrane, $7,200 in 1995 and 1994 and $7,044
in 1993 for Mr. Whalen, $4,353 in 1995 and 1994 and $4,259 in 1993 for Mr.
Brodnik, $2,552 in 1995 and 1994, and $2,511 in 1993 for Mr. Markus and
$9,790 in 1995, $9,654 in 1994 and $6,790 in 1993 for Mr. Flaugh; (iii)
401(a) and (k) contributions in 1995 of $4,500 for each individual named in
the table, except Dr. Powell, contributions of $4,500 in 1994 and $7,075 in
1993 for each of Mr. Maher, Mr. Whalen, Mr. Brodnik, Mr. Markus and Mr.
Flaugh; (iv) relocation expenses in 1993 for Mr. Maher of $14,001, in 1995
of $1,962 for Mr. Cochrane and $4,137 for Mr. Markus.
(5) Dr. Powell was appointed President and Chief Executive Officer effective
with the Merger. Dr. Powell's salary from the date of the Merger is
included herein.
(6) Messrs. Brodnik, Markus and Whalen resigned their respective positions
effective August 12, 1996. See "Compensation Plan and Arrangements" below.
(7) Mr. Cochrane's employment with the Company commenced on June 23, 1994 in
connection with the acquisition of Allied. Mr. Cochrane resigned effective
October 24, 1996 but will continue to provide advisory services to the
Company on an as needed basis pending the completion of certain projects.
(8) Mr. Maher resigned his position as President and Chief Executive Officer
and his employment agreement was terminated with effect as of April 28,
1995. In connection with the termination of Mr. Maher's employment
agreement, a termination payment of $3,000,000 was paid to him and is
included under the caption "All Other Compensation."
(9) Mr. Flaugh resigned his position as Executive Vice President and Chief
Operating Officer and his employment agreement was terminated with effect
as of September 19, 1995. Mr. Flaugh had an employment agreement which
required payment, in monthly installments, of his annual salary and bonus
through December 31, 1996. Payments totaling $937,500 will be made to Mr.
Flaugh through such date. This amount is included under the caption "All
Other Compensation."
STOCK OPTION TRANSACTIONS IN 1995
During 1995, the following grants, excluding options which were rolled over
in connection with the Merger, were made under the 1994 Stock Option Plan for
the executive officers named in the Summary Compensation Table:
OPTION/SAR GRANTS IN 1995
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
--------------------------------------------- ------------
PERCENTAGE
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE GRANT
UNDERLYING GRANTED TO OR BASE DATE
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(1) IN 1995 ($/SH) DATE VALUE ($)(2)
---- ------------ ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
James B. Powell, M.D.... 100,000 7% $13.00 5/08/05 $854,100
Timothy J. Brodnik...... 50,000 4 $13.00 5/08/05 $427,050
Haywood D. Cochrane,
Jr..................... 50,000 4 $13.00 5/08/05 $427,050
John F. Markus.......... 30,000 2 $13.00 5/08/05- $256,230
9/20/05
Robert E. Whalen........ 50,000 4 $13.00 5/08/05 $427,050
James R. Maher.......... -- -- $ -- -- $ --
David C. Flaugh(3)...... 75,000 5 $13.00 5/08/05 $ --
</TABLE>
- --------
(1) No tandem SARs were granted in 1995. For each grant of non-qualified
options made in 1995, the exercise price is equivalent to the fair market
price per share on the date of grant (as provided in the 1994 Stock Option
Plan). The options vested with respect to one third of the shares covered
hereby on the date of grant and an additional one third will vest on each
of the first and second anniversaries of such date, subject to their
earlier expiration or termination.
9
<PAGE>
(2) Valuation based upon the Black-Scholes option pricing model assuming a
volatility of 0.4243 (based on the weekly closing stock prices from May 1,
1995 to March 8, 1996); a risk free interest rate of 6.86% (the asking
yield on the 10-year U.S. Treasury Strip maturing May 2005); and a
dividend yield of 0.0%. The valuation assumptions have made no adjustments
for non-transferability.
(3) As provided in the 1994 Stock Option Plan, all unexercised options owned
by Mr. Flaugh were canceled on December 19, 1995, 90 days after the
effective date of his resignation.
The following chart shows, for 1995, the number of stock options exercised
and the 1995 year-end value of the options held by the executive officers
named in the Summary Compensation Table:
AGGREGATED OPTION/SAR EXERCISES IN 1995
AND YEAR-END 1995 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT YEAR-END YEAR-END ($)(1)
------------- ---------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C>
James B. Powell, M.D.... 0 $ 0 33,333 $ 0
66,667 0
Haywood D. Cochrane,
Jr..................... 0 0 16,667 0
33,333 0
Robert E. Whalen........ 0 0 36,940 0
33,333 0
Timothy J. Brodnik...... 0 0 28,167 0
33,333 0
John F. Markus.......... 0 0 30,273 0
20,000 0
James R. Maher.......... 0 0 0 0
David C. Flaugh......... 0 0 0 0
</TABLE>
- --------
(1) Calculated using actual December 29, 1995 closing price per common share
on the NYSE Composite Tape of $9.375
10
<PAGE>
RETIREMENT BENEFITS AND SAVINGS PLAN
The following table sets forth the estimated annual retirement benefits
payable at age 65 to persons retiring with the indicated average direct
compensation and years of credited service, on a straight life annuity basis
after Social Security offset, under the Company's Employees' Retirement Plan
or RBL's Employee Retirement Plan which was assumed by the Company in
connection with the Merger, as supplemented by the Company's Pension
Equalization Plan and RBL's Supplemental Employee Retirement Plan.
PENSION PLAN TABLE
JAMES B. POWELL, M.D.
<TABLE>
<CAPTION>
FIVE-YEAR
AVERAGE
COMPENSATION(1) 10 YEARS(2) 15 YEARS(2) 20 YEARS(2) 25 YEARS(2) 30 YEARS(2)
--------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 7,917 $11,676 $15,434 $19,193 $19,193
100,000 17,522 26,064 34,645 43,206 43,206
150,000 27,522 41,084 54,645 68,206 68,206
</TABLE>
PENSION PLAN TABLE
HAYWOOD D. COCHRANE, JR., TIMOTHY J. BRODNIK, JOHN F. MARKUS
<TABLE>
<CAPTION>
FIVE-YEAR
AVERAGE
COMPENSATION(1) 10 YEARS(2) 15 YEARS(2) 20 YEARS(2) 25 YEARS(2) 30 YEARS(2)
--------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 50,000 $1,413 $ 2,510 $ 3,882 $ 5,528 $ 7,174
100,000 2,626 5,021 7,764 11,056 14,348
150,000 4,239 7,531 11,646 16,584 21,522
200,000 5,652 10,041 15,528 22,112 28,695
250,000 7,065 12,551 19,409 27,639 35,869
300,000 8,477 15,061 23,291 33,167 43,043
</TABLE>
PENSION PLAN TABLE
ROBERT E. WHALEN
<TABLE>
<CAPTION>
FIVE-YEAR
AVERAGE
COMPENSATION(1) 10 YEARS(2) 15 YEARS(2) 20 YEARS(2) 25 YEARS(2) 30 YEARS(2)
--------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 6,790 $10,184 $ 13,579 $ 16,974 $ 20,369
100,000 16,130 24,195 32,268 40,325 48,390
150,000 25,490 38,235 50,980 63,725 76,470
200,000 34,850 52,275 69,700 87,125 104,550
250,000 44,210 66,315 88,420 110,525 132,630
300,000 53,570 80,355 107,140 133,925 160,710
</TABLE>
- --------
(1) Highest consecutive five-year average base compensation during final ten
years. Compensation considered for this five year average is reflected in
the Summary Compensation Table under the heading "salary." Under the
Equalization Plan, a maximum of $300,000 final average compensation is
considered for benefit calculation. Under the Supplemental Plan, a maximum
of $150,000 final average compensation is considered for benefit
calculation. No bonuses are considered.
(2) Under the plans, the normal form of benefit for an unmarried participant
is a life annuity with a guaranteed minimum payment of ten years. Payments
in other optional forms, including the 50% joint and survivor normal form
for married participants, are actuarially equivalent to the normal form
for an unmarried participant. The above tables are determined with regard
to a life only form of payment; thus, payment using a ten-year guarantee
would produce a lower annual benefit.
11
<PAGE>
The Retirement Plan, which is intended to qualify under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code"), is a defined benefit
pension plan designed to provide an employee having 30 years of credited
service with an annuity equal to 52% of final average compensation less 50% of
estimated individual Social Security benefits. Credited service is defined
generally as all periods of employment with the Company, a participating
subsidiary or with Revlon prior to 1992, or RBL after attainment of age 21 and
completion of one year of service. Final average compensation is defined as
average annual base salary during the five consecutive calendar years in which
base salary was highest out of the last ten years prior to normal retirement
age or earlier termination. The Employment Retirement Income Security Act of
1974, as amended, places certain maximum limitations upon the annual benefit
payable under all qualified plans of an employer to any one individual. Such
limitation for defined benefit pension plans was $120,000 for 1995 (except to
the extent a larger benefit had accrued as of December 31, 1982) and 1996, and
will be subject to cost of living adjustments for future years. In addition,
the Tax Reform Act of 1986 limits the amount of compensation that can be
considered in determining the level of benefits under qualified plans. The
applicable limit for 1995 and 1996 will remain at $150,000. The Company
believes that, with respect to certain employees, annual retirement benefits
computed in accordance with the Retirement Plan's benefit formula may be
greater than such qualified plan limitation. The Company's non-qualified,
unfunded, Equalization and Supplemental Plans are designed to provide for the
payment of the difference, if any, between the amount of such maximum
limitation and the annual benefit that would be payable under the Retirement
Plans but for such limitation.
As of December 31, 1995, credited years of service under the retirement
plans for the following individuals are for Dr. Powell--13 years, Mr.
Cochrane--none, Mr. Whalen--18 years, Mr. Brodnik--23 years and Mr. Markus--4
years.
COMPENSATION PLANS AND ARRANGEMENTS
On April 17, 1996, the Board of Directors approved the Master Executive
Severance Plan (the "Severance Plan"), which provides severance to certain key
employees. The Severance Plan, which became effective August 1, 1996, provides
for severance payments of two times annual salary and targeted bonus then in
effect for the President and Chief Executive Officer and the Executive Vice
Presidents of the Company and severance payments of one times annual salary
and targeted bonus then in effect for Senior Vice Presidents upon the
occurrence of a qualifying termination. Qualifying termination is generally
defined as involuntary termination without cause or voluntary termination with
good reason, as defined. Good reason ("Good Reason") is defined as a reduction
in base salary or targeted bonus as a percentage of salary, relocation to an
office location more than seventy-five (75) miles from the employee's current
office without consent of the employee or a material reduction in job
responsibilities or transfer to another job without the consent of the
employee. Good Reason shall not include a reduction in base salary or targeted
bonus where such reduction is pursuant to a Company-wide reduction of base
salaries and/or targeted bonuses. In addition, the Severance Plan may not be
amended or terminated within thirty-six (36) months of a change in control, as
defined. A copy of the Severance Plan was included as an exhibit to the
current report on Form 8-K of the Company filed with the Commission October
24, 1996.
The Company had amended employment agreements with Robert E. Whalen and
Timothy J. Brodnik, which provided for each of them to be employed as an
Executive Vice President through December 31, 1996 at an annual salary of
$325,000 with an annual bonus equal to 50% of the annual salary then in effect
and an additional discretionary bonus as may be awarded at the discretion of
the Board of Directors. The employment agreements also provided that the
duties assigned to Mr. Whalen and Mr. Brodnik would be performed primarily at
the offices of the Company in San Diego, California and Fairfax County,
Virginia, respectively. If the respective employment agreement was terminated
by Mr. Whalen or Mr. Brodnik for certain specified reasons, including, (i) the
assignment of duties materially inconsistent with the status of the office of
Executive Vice President of the Company or resulting in an adverse alteration
in the nature of the responsibilities associated therewith, (ii) a reduction
by the Company in the annual salary or annual bonus or a failure by the
Company to pay any such amount when due or (iii) a material breach of any of
the terms of the employment agreement by the Company, then the Company would
be required to pay, in monthly installments, (i) the annual salary and annual
bonus Mr. Whalen and Mr. Brodnik would have otherwise received during the
remainder of their respective
12
<PAGE>
employment periods and (ii) for a period of one year following the respective
dates of expiration of their respective employment terms, in consideration of
the performance of specified non-competition obligations, an amount equal to
one-half the annual salary at the rate in effect on the date of expiration of
their respective employment terms. Messrs. Brodnik and Whalen resigned their
positions with the Company effective August 12, 1996. Pursuant to the terms
and conditions of the Severance Plan discussed above, Messrs. Brodnik and
Whalen will receive two times their annual salary and bonus in two payments
each of $487,500. The first payment was made at the time of resignation and
the second payment is due within 30 days following the one-year anniversary of
their resignation. Messrs. Brodnik and Whalen agreed to the performance of
specified non-competition and non-solicitation obligations and a release of
their rights under their employment agreements discussed above and other
Company obligations.
The Company had an amended employment agreement with John F. Markus which
provided for him to be employed as an Executive Vice President through
December 31, 1996 at an annual salary of $325,000 with an annual bonus equal
to 50% of the annual salary then in effect and an additional discretionary
bonus as may be awarded at the discretion of the Board of Directors. If the
employment agreement was terminated by Mr. Markus for certain specified
reasons, including, (i) the assignment of duties materially inconsistent with
the status of the office of Executive Vice President of the Company or
resulting in an adverse alteration in the nature of the responsibilities
associated therewith, (ii) a reduction by the Company in the annual salary or
annual bonus or a failure by the Company to pay any such amount when due or
(iii) a material breach of any of the terms of the employment agreement by the
Company, then the Company would be required to pay, in monthly installments,
(i) the annual salary and annual bonus Mr. Markus would have otherwise
received during the remainder of his employment period and (ii) for a period
of one year following the date of expiration of his employment term, in
consideration of the performance of specified non-competition obligations, an
amount equal to one-half the annual salary at the rate in effect on the date
of expiration of his employment term. Mr. Markus resigned his position with
the Company effective August 12, 1996. Pursuant to the terms and conditions of
the Severance Plan discussed above, Mr. Markus will receive two times his
annual salary and bonus in two payments of $487,500. The first payment was
made at the time of resignation and the second payment is due within 30 days
following the one-year anniversary of his resignation. Mr. Markus has agreed
to the performance of specified non-competition and non-solicitation
obligations and a release of his rights under his employment agreement
discussed above and other Company obligations.
The Company had an amended employment agreement with David C. Flaugh which
provided for his employment as Executive Vice President and Chief Operating
Officer of the Company through December 31, 1996 at an annual salary of
$500,000 with an annual bonus of 50% of the annual salary then in effect and
an additional discretionary bonus to be awarded at the discretion of the Board
of Directors. The employment agreement also provided that the duties assigned
to Mr. Flaugh would be performed primarily at the offices of the Company in
San Diego County, California. If the employment agreement was terminated by
Mr. Flaugh for certain specified reasons ("Good Reason") including (i) the
assignment of duties materially inconsistent with Mr. Flaugh's status as
Executive Vice President and Chief Operating Officer, (ii) a reduction by the
Company in the annual salary or annual bonus or a failure by the Company to
pay any such amount when due or (iii) a material breach of any of the terms of
the employment agreement by the Company, then the Company would be required to
pay, in monthly installments, (i) the annual salary Mr. Flaugh would have
otherwise received during the remainder of the employment period and (ii) for
a period of one year following the date of the expiration of the employment
term, in consideration of the performance of specified noncompetition
obligations, an amount equal to one-half the annual salary at the rate in
effect on the date of expiration of the employment term. The Company had
acknowledged that the change to Mr. Flaugh's position following the Merger
constituted an event of Good Reason. Mr. Flaugh had agreed not to terminate
his employment prior to December 31, 1995 due to his new position. However, on
September 19, 1995, Mr. Flaugh decided to terminate his employment agreement
and therefore the Company is required to pay in monthly installments, the
amounts as described above.
13
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On the basis of reports and representations submitted by the directors and
officers of the Company, all Forms 3, 4, and 5 showing ownership of and
changes of ownership in the Company's equity securities during 1995 were
timely filed with the Securities and Exchange Commission as required by
Sections 16(a) of the Securities and Exchange Act of 1934, except that Dr.
Skinner sold 720 shares of Common Stock on December 22, 1995, which should
have been reported on Form 4 but which instead was reported on Form 5 for
year-end 1995.
EMPLOYEE BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Employee Benefits Committee prior to the Merger on April
28, 1995 were Saul J. Farber, M.D., Howard Gittis, David J. Mahoney, Ms.
Robinson and Samuel O. Thier, M.D. Subsequent to the Merger, the members of
the Employee Benefits Committee are Mr. Belingard, Ms. Robinson, and Dr.
Skinner. No member of the Employee Benefits Committee is an officer or
employee of the Company.
Certain Director Relationships. Robinson Lerer Sawyer Miller, the corporate
communications firm of which Ms. Robinson is President and Chief Executive
Officer, performs corporate communications services for the Company. The
amount paid to Robinson Lerer Sawyer Miller for services to the Company in
1995 was $151,207.
EMPLOYEE BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Employee Benefits Committee of the Board of Directors (for the purposes
of this section, the "Committee") makes recommendations to the Board of
Directors regarding compensation and benefit policies and practices and
incentive arrangements for executive officers and key managerial employees of
the Company. The Committee also considers and grants awards under the
Company's incentive plans, subject to a Special Majority Vote of the Board as
described above under "Item 1: Election of Directors."
The Committee is comprised of a majority of Independent Directors. During
1995, the Committee met two times to review and evaluate executive
compensation and benefit programs, including information provided to the
Company by independent compensation and benefit consultants.
Executive Officer Compensation Policies. The Committee's executive
compensation policies are designed to (a) attract and retain the best
individuals critical to the success of the Company, b) motivate and reward
such individuals based on corporate business unit and individual performance,
and (c) align executives' and stockholders' interests through equity-based
incentives.
Compensation for executives is based on the following principles: variable
compensation should comprise a significant part of an executive's
compensation, with the percentage at-risk increasing at increased levels of
responsibility; employee stock ownership aligns the interest of employees and
stockholders; compensation must be competitive with that offered by companies
that compete with the Company for executive talent; and differences in
executive compensation within the Company should reflect differing levels of
responsibility and/or performance.
In addition, the Committee adopted policies in 1995 relating to the
integration of the compensation programs of the two companies in the Merger.
The Committee determined that salaries would not be reduced as a result of the
Merger. The Committee also decided that rather than renewing existing
employment contracts, it would continue RBL's policy of motivating and
retaining key employees with awards of incentive compensation and the adoption
of a severance program. (See "--Compensation Plans and Arrangements" above for
a description of the severance program.) Moreover, consummation of the Merger
and achievement of planned Merger synergies were designated as important bases
for incentive awards.
A key determinant of overall levels of compensation is the pay practices of
ten public companies in the medical supply and medical service industry with
revenue comparable to the Company's (the "peer group").
14
<PAGE>
The peer group was chosen by the Company's independent compensation and
benefit consultants and includes some of the members of the 1995 Peer Group
used for stock price comparisons (see "--Common Stock Performance" below).
There are three components to the Company's executive compensation program:
base salary, annual incentive compensation and long-term incentive
compensation. The more senior the position, the greater the portion of
compensation that varies with performance.
Base salaries are set by the Committee and are designed to be competitive
with the peer group companies described above. Generally, the Committee
targets salary levels in the second and third quartile of the peer group,
adjusted to reflect the individual's job experience and responsibility.
Changes in base salaries are based on the peer group's practices, the
Company's performance, the individual's performance and increases in cost of
living indexes. The corporate performance measures used in determining
adjustments to executive officers' base salaries are the same performance
measures used to determine annual and long-term incentive compensation
discussed below. Base salaries are reviewed and adjusted annually.
Under the Company's Annual Bonus Incentive Plan, adopted by the stockholders
in 1995, annual incentive compensation is paid in the form of a cash bonus and
is generally based on the attainment of specified corporate performance
measures, which are established by the Committee at the beginning of the year.
The measures used are EBITDA, return of capital, return on equity, earnings
per share and net income. No benefits were received under the plan for 1995 as
it was not adopted until September. For 1995, discretionary annual bonuses
were based primarily on an executive's role in closing the Merger and
successfully integrating the two companies. In addition, under existing
employment agreements with certain executive officers, the Company paid
certain officers annual bonuses equal to a fixed percentage of their base
salary. Principles of internal equity, therefore, also affected the annual
incentive bonus compensation paid to other executive officers.
Long-term incentive compensation is paid in part in the form of stock
options granted under the 1994 Stock Option Plan. The Committee believes that
grants of stock options align stockholder value and executive officer
interests. Stock options are granted in amounts that are directly related to
the level of responsibility of the grantees as compared with their peer group
counterparts. The number of options granted is established after determining
the projected value of such options as derived from the Black-Scholes option
pricing model. The size of previous grants and the number of shares held by an
executive are not considered in determining annual award levels.
As provided in the 1994 Stock Option Plan, stock options are granted with an
exercise price equal to the fair market value per share on the date of grant.
One-third of the options granted vest on the date of grant, with the remainder
vesting in annual equal increments through the second anniversary of the date
of grant. No stock option awards are made in the absence of satisfactory
performance which is evaluated by the Committee based on the executive's
individual contribution to the long-term health and growth of the Company.
Options for executive officers in 1995 were granted in May, shortly after the
Merger.
Long-term incentive compensation will also be paid in cash under the
Company's Performance Unit Plan, which was adopted by the stockholders in
1995. The Performance Unit Plan is designed to motivate senior executives to
achieve the planned synergies of the Merger over a period from May 1, 1995 to
April 30, 1997. No amounts are payable under the plan until the end of the
performance period.
Chief Executive Officer Compensation. James B. Powell, M.D. was appointed
President and Chief Executive Officer effective with the Merger on April 28,
1995. For the remainder of the year, he was paid $350,000 in base salary,
$367,500 in annual incentive compensation and 100,000 stock options (then
valued at $854,100 under the Black-Scholes option pricing model) in long-term
incentive compensation. Dr. Powell's base salary, annual incentive
compensation and long-term incentive compensation were determined in the same
manner as described above for other executive officers. Dr. Powell's total
compensation was in the second quartile of the total compensation of the peer
group CEOs.
15
<PAGE>
James R. Maher served as President and Chief Executive Officer through the
closing of the Merger on April 28, 1995. Prior to the Merger, the Company had
an employment agreement with Mr. Maher, which provided for his employment as
President and Chief Executive Officer through December 31, 1995 at an annual
salary of $1,000,000 with an annual bonus of $500,000 and an additional
discretionary bonus to be awarded by the Board of Directors. Effective April
28, 1995, Mr. Maher resigned his position as President and Chief Executive
Officer and the employment agreement between the Company and Mr. Maher was
terminated. Pursuant to the agreement, Mr. Maher received the amounts due to
him but unpaid as annual salary and annual bonus and a termination payment of
$3,000,000 less applicable taxes. In addition, Mr. Maher also received a
special bonus of $1,000,000 in connection with the consummation of the Merger.
Pursuant to a letter agreement, the Company retained Mr. Maher as an
independent contractor to provide certain consulting services to the Company
for a one-year period beginning April 28, 1995. Mr. Maher was paid an annual
retainer of $160,000 under this agreement. This agreement was not renewed.
Limit on Deductibility of Compensation. The Omnibus Budget Reconciliation
Act of 1993 ("OBRA") limits the deductibility of "non-performance based"
compensation paid to the chief executive officer or any of the other four
highest paid employees of public companies to $1,000,000 for fiscal years
beginning on or after January 1, 1994. Certain types of compensation
arrangements entered into prior to February 17, 1993 are excluded from the
limitation. The Company's general policy is to preserve the tax deductibility
of compensation paid to its executive officers. OBRA recognizes stock option
plans as performance-based if such plans meet certain requirements. The
Company's 1994 Stock Option Plan is structured to meet the requirements of
OBRA. In future years, the Committee will consider taking such steps as it
deems necessary to qualify compensation so as not to be subject to the limit
on deductibility.
The Employee Benefits Committee
Jean-Luc Belingard
Linda Gosden Robinson
Andrew G. Wallace, M.D.
16
<PAGE>
COMMON STOCK PERFORMANCE
The Commission requires a five-year comparison of stock performance for the
Company with stock performance of appropriate similar companies. The Common
Stock is traded on the New York Stock Exchange, Inc. (the "NYSE"). Set forth
below is a line graph comparing the yearly percentage change in the cumulative
total stockholder return on the Common Stock and the cumulative total return
on the Standard & Poor's Composite-500 Stock Index and the weighted average
cumulative total return (based on stock market capitalization) on the stock of
each of the members of a peer group of companies. In 1995, as a result of the
Merger, the Company selected a new peer group (the "1995 Peer Group"). The
1995 Peer Group includes seven publicly traded medical service and medical
supply companies with sales ranging from approximately $1.1 billion to $3.9
billion. Direct competitors of the Company are either substantially smaller
than the Company or are subsidiaries of much larger diversified corporations
and are therefore not believed to be appropriate peer companies. The 1995 Peer
Group includes: Allergen, Inc., C.R. Bard Inc., Magellan Health Services Inc.,
Fisher Scientific International Inc., Thermo Electron Corporation, Bausch &
Lomb Inc., and FHP International Corporation. In 1994, the peer group (the
"1994 Peer Group") of companies included sixteen companies selected by the
Company. One of these is a medical service laboratory like the Company: Unilab
Corporation. Other direct competitors of the Company are subsidiaries of much
larger diversified corporations, which were not believed to be appropriate
peer companies. The remaining fifteen companies in the 1994 Peer Group are all
publicly traded medical service and medical supply companies with sales
ranging from approximately $500 million to $2.5 billion: Continental Medical
Systems, Inc., Universal Health Services, Inc., Magellan Health Services Inc.,
Allergan, Inc., C.R. Bard, Inc., Pall Corporation, Thermo Electron
Corporation, United States Surgical Corporation, Bausch & Lomb Incorporated,
Millipore Corporation, Amsco International, Inc., Beckman Instruments, Inc.,
FHP International Corporation and Fisher Scientific International Inc.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
[CHART APPEARS HERE]
Laboratory Corporation of America Holdings
Total shareholder return
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Company 100 269 167 136 127 90
S & P 500 100 130 140 154 156 215
1995 Peer Group 100 182 168 148 143 192
1994 Peer Group 100 194 176 140 143 --
</TABLE>
* Reflects the return on $100 invested in December 31, 1990 including the
reinvestment of dividends
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth as of October 18, 1996, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by each
director of the Company, by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, by the
officers named in the summary compensation table set forth above and by all
current directors and executive officers as a group. The number of shares
owned are those "beneficially owned," as determined under the rules of the
Commission, and such information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which a person has sole or shared voting power or
investment power and any shares of Common Stock which the person has the right
to acquire within 60 days through the exercise of any option, warrant or
right, through conversion of any security, or pursuant to the automatic
termination of power of attorney or revocation of trust, discretionary account
or similar arrangement.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
---------------- ----------------- ----------
<S> <C> <C>
Roche Holdings, Inc.............................. 61,329,256(1) 49.9%
15 East North Street
Dover, DE 19901
Ronald O. Perelman............................... 14,527,244(2) 11.8%
35 East 62nd Street
New York, NY 10021
Thomas P. Mac Mahon.............................. 2,820 *
James B. Powell, M.D............................. 66,667(3) *
Jean-Luc Belingard............................... 2,820 *
David B. Skinner, M.D............................ 2,820 *
Andrew G. Wallace, M.D........................... 2,820 *
Timothy J. Brodnik............................... 47,464(3) *
Haywood D. Cochrane, Jr.......................... 141,069(3) *
James R. Maher................................... 205,030 *
John F. Markus................................... 66,256(3) *
Robert E. Whalen................................. 53,607(3) *
David C. Flaugh.................................. -- *
All current directors and executive officers as a
group (17 persons).............................. 234,997(3) *
</TABLE>
- --------
* Less than 1%
(1) As reported on the Schedule 13D filed with the Commission on May 8, 1995,
on behalf of Roche Holdings, Inc., 49,008,538 of these shares are directly
held by HLR, and 12,320,718 of these shares are directly held by Roche
Holdings, Inc. Both HLR and Roche Holdings, Inc. are indirect wholly owned
subsidiaries of Roche Holding. Dr. h.c. Paul Sacher, an individual and
citizen of Switzerland has, pursuant to an agreement, the power to vote a
majority of the voting shares of Roche Holding.
(2) As reported in the Schedule 13G/A filed with the Commission on February
13, 1996, on behalf of Mafco Holdings Inc. ("Mafco"), all shares are owned
by National Health Care Group, Inc. ("NHCG"), an indirect wholly owned
subsidiary of Mafco. All of the capital stock of Mafco is owned by Mr.
Ronald O. Perelman.
(3) Beneficial ownership by officers of the Company includes shares of common
stock which such officers have the right to acquire upon the exercise of
options which either are vested or which may vest within 60 days. The
number of shares of common stock included in the table as beneficially
owned which are subject to such options is as follows: Dr. Powell--66,667;
Mr. Cochrane--33,334; Mr. Whalen--53,607, Mr. Brodnik--47,464; Mr.
Markus--36,940; all directors and executive officers as a group (not
including Messrs. Brodnik, Cochrane, Flaugh, Markus and Whalen who are no
longer employed by the Company)--216,068.
18
<PAGE>
ITEM 2: LABORATORY CORPORATION OF AMERICA HOLDINGS 1997 EMPLOYEE STOCK
PURCHASE PLAN
The Board of Directors recommends approval by the shareholders of the 1997
Employee Stock Purchase Plan (the "Plan"). The text of the Plan is set forth
as Exhibit A to this Proxy Statement, and this description thereof is
qualified by reference thereto. The Plan is designed to give all eligible
employees an increased personal interest in the success and progress of the
Company by encouraging their ownership of Common Stock of the Company. The
maximum number of shares of the Company's Common Stock subject to the Plan
will be 3,500,000 shares, with proportionate adjustments of such amount in the
case of stock dividends, stock splits or other stock changes.
The Plan provides for the granting of options to all eligible employees of
the Company and its subsidiaries, both officers and non-officers, entitling
them to purchase shares of the Common Stock of the Company at a discounted
price. All employees of the Company or its subsidiaries will be eligible to
participate in the Plan, except part-time and temporary employees and
employees owning 5% or more of the total voting power or value of all classes
of stock of the Company. Under the Plan, only those directors and nominees for
director who are full-time employees of the Company or a subsidiary will be
eligible to receive options.
For each six-month period (an "Offering Period") commencing January 1 or
July 1 (the "Offering Date") during the term of the Plan, each eligible
employee will receive an option to purchase up to the largest whole number of
shares obtained by dividing (i) between one and ten percent (as specified by
the employee) of such employee's compensation for the Offering Period by (ii)
the Option Price (as defined below). At the end of an Offering Period, on
either June 30 or December 31 (the "Exercise Date"), the amount deducted from
each eligible employee's compensation during the Offering Period will be used
to purchase shares of the Company's Common Stock for the benefit of that
employee. The price at which the shares will be purchased (the "Option Price")
will be 85% of the fair market value of a share of Common Stock on the
Offering Date or the Exercise Date, whichever is lower. Generally, fair market
value will be the average of the high and low sales prices of the Common Stock
on that date.
Prior to the Exercise Date, the amounts deducted from an employee's salary
may be used by the Company for general corporate purposes but will be recorded
as being in separate accounts ("Purchase Accounts") for each employee.
Participating employees can avoid purchasing Common Stock on an Exercise Date
and the funds designated for their Purchase Accounts will be paid to them if
they so elect by written notice to the Company on or before the Exercise Date.
Other than terminating their participation, employees may not change the level
of their participation with respect to an Offering Period during such Offering
Period. The aggregate fair market value of all shares of the Company and its
subsidiaries which an employee has an option to purchase under employee stock
option plans may not exceed $25,000 in any calendar year.
The Plan provides that if an employee's employment terminates for any reason
other than death, then such employee's options terminate immediately and all
funds deducted from the employee's compensation during the current Offering
Period will be paid to the employee. Options will not be transferable except
by will or by the laws of descent and distribution, and will be exercisable,
during the employee's lifetime, only by such employee.
The Plan provides that options will become immediately exercisable in full
upon the occurrence of certain events involving a change in control of the
Company. Such events include: the adoption of a plan of merger or similar
transaction involving the Company in which the Company's stockholders would
receive less than 50% of the voting stock of the surviving corporation; the
approval by the Board of Directors of the sale or transfer by the Company of a
majority of the stock of a significant subsidiary of the Company or
substantially all of the Company's or such a subsidiary's assets; certain
acquisitions of more than 20% of the Common Stock by any person or group other
than a person or group who beneficially owned, as of the Offering Date, more
than 5% of the Common Stock unless prior approval of the Board of Directors is
received; certain significant changes in the membership of the Board of
Directors; or any other transaction that would constitute a change in control
required to be reported by the Company in a proxy statement. In addition, upon
the approval of the dissolution or
19
<PAGE>
liquidation of the Company, all options shall become exercisable in full. Upon
the occurrence of the dissolution or liquidation of the Company, or upon the
consummation of a merger or consolidation in which the Company's stockholders
do not receive at least 50% of the voting stock of the resulting corporation,
all options not exercised shall terminate, but the participating employees
will have the option of purchasing the shares or being paid the amount
designated in their Purchase Accounts prior to such occurrence.
The Board of Directors has set the date for the initial grant of options
under the Plan as January 1, 1997. The Plan will terminate December 31, 2006
and will be administered by the Employee Benefits Committee of the Board of
Directors of the Company. The Committee will be able to prescribe rules and
regulations for such administration and to decide questions with respect to
the interpretation or application of the Plan. In addition, the Committee will
have the authority to alter, amend, suspend or discontinue the Plan at any
time without notice, except that no such action may adversely affect the
rights of any participating employee. In addition, the Committee may not
increase the number of shares of Common Stock issuable under the Plan, change
the formula determining the price at which options may be exercised or
increase the maximum number of shares an eligible employee may purchase under
the Plan. Furthermore, the Plan is designed to meet the requirements of
Rule 16b-3 under the Exchange Act with respect to participation by insiders of
the Company, and, in accordance therewith, certain amendments may require the
approval of the Company's stockholders.
Options will be granted on the condition that a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Common Stock to be issued subject to such option has become effective and
a copy of the prospectus has been delivered to each participant.
Options under the Plan will be statutory stock options of the kind
recognized by Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). For federal income tax purposes, neither the grant nor the
exercise of the options will be a taxable event to the participants. The
disposition, however, of the shares acquired through the exercise of the
options will be a taxable event. The tax consequences of such a disposition
will depend upon the respective holding periods of the options and options
shares. The statutory holding period for the Plan is the later of two years
after the Offering Date or one year from the date of transfer of the stock to
the employee.
If a disposition of the shares is made after the end of the holding period,
a portion of the gain, if any, will be taxed as ordinary income, which portion
will be determined by subtracting the option price from the lesser of (a) the
fair market value of the shares on the date the option was granted or (b) the
fair market value of the shares on the disposition date. The remaining portion
of the gain, if any, will be taxed as capital gain for federal income tax
purposes. When the holding period described above is met, the Company is not
allowed to deduct any amount for federal income tax purposes with respect to
the issuance or exercise of the options or the sale of the underlying shares.
If a disposition of the shares is made before the end of the holding period,
the amount of the gain which will be taxed as ordinary income will be
determined by subtracting the option price from the fair market value of the
shares on the date on which the option was exercised. The amount treated as
ordinary income would be added to the employee's basis in calculating whether
any capital gain or loss is to be recognized on the disposition. In the year
of such early disposition, the Company will generally be entitled to a
business deduction for federal income tax purposes in an amount equal to the
ordinary income.
The Plan is not qualified under the provisions of Section 401(a) of the Code
and is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
The number of shares of the Company's Common Stock that will be purchased
under the Plan by its employees if it is approved cannot be estimated by the
Company, nor can the Company determine the number of shares that would have
been purchased by the employees if the Plan had been in effect for fiscal year
1995.
20
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
ITEM 3: RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed KPMG Peat Marwick LLP to audit the accounts of the Company for the
fiscal year ending December 31, 1996. KPMG Peat Marwick LLP has audited the
consolidated financial statements of the Company for more than the past five
years. KPMG Peat Marwick LLP representatives will be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions.
Stockholder ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors is not required by the Company's bylaws or
otherwise. The Board of Directors has elected to seek such ratification as a
matter of good corporate practice. Should the stockholders fail to ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
the year ending December 31, 1996 the Board of Directors will consider whether
to retain that firm for such year.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR 1996.
21
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT
Certain provisions of the Merger Agreement and the Stockholder Agreement
which describe certain relationships and transactions between the Company and
Roche are described above under "General Information" and "Item 1: Election of
Directors."
THE SHARING AND CALL OPTION AGREEMENT
In connection with the Merger Agreement, HLR, Mafco Holdings, Inc.
("Mafco"), a Delaware corporation and indirect wholly owned subsidiary of M&F
Holdings, National Health Care Group, Inc. ("NHCG"), and the Company entered
into the Sharing and Call Option Agreement dated as of December 13, 1994 (the
"Sharing and Call Option Agreement"). The Sharing and Call Option Agreement
provides, among other things, that at any time after the third anniversary of
the Merger, HLR or one of its affiliates (such party, a "Purchaser") (other
than the Company) may exercise the right, which right may only be exercised
once, to purchase all, but not less than all, the shares of Common Stock then
owned by NHCG, Mafco or any of their controlled affiliates. The Sharing and
Call Option Agreement provides that the Purchaser, will, if it elects to
exercise this purchase right, pay a price per share for the shares to be
purchased equal to 102% of the average closing price per share of such
security as reported on the principal national securities exchange on which
such shares are listed, or if not so listed, as reported on the National
Association of Securities Dealers, Inc. Automated Quotation System--National
Market System, for the 30 trading days before the date of such exercise.
In addition, in accordance with the Sharing and Call Option Agreement, the
Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") which has been declared effective by the
Commission and includes a resale prospectus that permits NHCG (or any of its
pledgees) to sell shares of Common Stock and Warrants received by NHCG in the
Merger without restriction. The Company has agreed to use its best efforts to
prepare and file with the Commission such post-effective amendments to the
Registration Statement or other filings as may be necessary to keep such
Registration Statement continuously effective for a period ending on the third
anniversary of the date of the Sharing and Call Option Agreement and during
such period to use its best efforts to cause the resale prospectus to be
supplemented by any required prospectus supplement. The Company has also
agreed to pay all of the Registration Expenses (as defined therein) arising
from exercise of the registration rights set forth in the Sharing and Call
Option Agreement. A copy of the Sharing and Call Option Agreement was filed
with the Commission by the Company as an exhibit to the 1994 10-K.
REGISTRATION RIGHTS AGREEMENT
In addition to those registration rights granted to NHCG under the Sharing
and Call Option Agreement, the Company and NHCG also are parties to a
registration rights agreement dated as of April 30, 1991 (the "Registration
Rights Agreement") pursuant to which the Company is obligated, upon the
request of NHCG, to file registration statements ("Demand Registration
Statements") from time to time with the Commission covering the sale of any
shares of Common Stock owned by NHCG upon the completion of certain public
offerings by the Company of shares of Common Stock in 1991. Such Demand
Registration Statements may also cover the resale from time to time of any
shares of Common Stock that NHCG may purchase in the open market at a time
when it is deemed to be an affiliate (as such term is defined under Rule 144
under the Securities Act of 1933, as amended), and certain securities issued
in connection with a combination of shares, recapitalization,
reclassification, merger or consolidation, or other pro rata distribution.
NHCG will also have the right to include such Common Stock and other
securities in any registration statement filed by the Company for the
underwritten public offering of shares of Common Stock (whether or not for the
Company's account), subject to certain reductions in the amount of such Common
Stock and securities if the managing underwriters of such offering determine
that the inclusion thereof would materially interfere with the offering. The
Company agreed not to effect any public or private sale, distribution or
purchase of any of its securities which are the same as or similar to the
securities covered by any Demand Registration Statement during the 15-day
period prior to, and during
22
<PAGE>
the 45-day period beginning on, the closing date of each underwritten offering
under such registration statement and NHCG agreed to a similar restriction
with respect to underwritten offerings by the Company. NHCG's rights under the
Registration Rights Agreement are transferable as provided therein.
Until the third anniversary of the Sharing and Call Option Agreement, when
the Company's obligation to keep the Registration Statement effective expires,
the registration rights granted to NHCG pursuant to the Registration Rights
Agreement are substantially duplicative of those granted pursuant to the
Sharing and Call Option Agreement. After such date and only to the extent that
NHCG still holds shares of Common Stock or Warrants that it held as of or
received in the Merger, NHCG will continue to be entitled to the registration
rights described in the preceding paragraph, unless the Registration Rights
Agreement has been otherwise amended or terminated.
TAX ALLOCATION ARRANGEMENT
Until May 7, 1991, the Company was included in the consolidated federal
income tax returns, and in certain state income tax returns, of Mafco, M&F
Holdings, Revlon Group Incorporated ("Revlon Group") and Revlon Holdings Inc.
("Revlon"). As a result of the reduction of M&F Holdings' indirect ownership
interest in the Company on May 7, 1991, the Company is no longer a member of
the Mafco consolidated tax group. For periods subsequent to May 7, 1991, the
Company files its own separate federal, state and local income tax returns.
Nevertheless, the Company will remain obligated to pay to M&F Holdings (or
other members of the consolidated group of which M&F Holdings is a member) any
income taxes the Company would have had to pay (in excess of those which it
has already paid) if it had filed separate income tax returns for taxable
periods beginning on or after January 1, 1985 (but computed without regard to
(i) the effect of timing differences (i.e., the liability or benefit that
otherwise could be deferred will be, instead, includible in the determination
of current taxable income) and (ii) any gain recognized on the sale of any
asset not in the ordinary course of business). In addition, despite the
reduction of M&F Holdings' indirect ownership of the Company, the Company will
continue to be subject under existing federal regulations to several liability
for the consolidated federal income taxes for any consolidated return year in
which it was a member of any consolidated group of which Mafco, M&F Holdings,
Revlon Group or Revlon was the common parent. However, Mafco, M&F Holdings,
Revlon Group and Revlon have agreed to indemnify the Company for any federal
income tax liability (or any similar state or local income tax liability) of
Mafco, M&F Holdings, Revlon Group, Revlon or any of their subsidiaries (other
than that which is attributable to the Company or any of its subsidiaries)
that the Company would be required to pay.
CERTAIN OTHER TRANSACTIONS WITH ROCHE
The Company has certain on-going arrangements with Roche for the purchase by
the Company of certain products and the licensing by the Company from Roche of
certain diagnostic technologies, with an aggregate value of approximately $9.1
million in 1995. The Company provides certain diagnostic testing and support
services to Roche in connection with Roche's clinical pharmaceutical trials,
with an aggregate value of approximately $2.3 million in 1995. In addition, in
connection with the Merger, the Company and Roche have entered into a
transition services agreement for the provision by Roche to the Company of
certain payroll and other corporate services for a limited transition period
following the Merger. These services are charged to the Company based on the
time involved and the Roche personnel providing the service. Each of these
arrangements was entered into in the ordinary course of business, on an arm's-
length basis and on terms which the Company believes are no less favorable to
it than those obtainable from unaffiliated third parties. The Company paid
Roche a total of $214,597 in 1995 for these services.
CONSULTING AGREEMENT
Pursuant to a letter agreement, the Company retained Mr. Maher as an
independent contractor to provide certain consulting services to the Company
for a one-year period beginning from April 28, 1995. Mr. Maher was paid a
retainer of $160,000 under this agreement. This agreement was not renewed.
23
<PAGE>
STOCKHOLDER PROPOSALS
Under the rules and regulations of the Commission as currently in effect,
any holder of at least $1,000 in market value of Common Stock who desires to
have a proposal presented in the Company's proxy material for use in
connection with the annual meeting of stockholders to be held in 1997 must
transmit that proposal (along with his name, address, the number of shares of
Common Stock that he holds of record or beneficially, the dates upon which the
securities were acquired and documentary support for a claim of beneficial
ownership) in writing as set forth below. Proposals of stockholders intended
to be presented at the next annual meeting must be received by Bradford T.
Smith, Secretary, Laboratory Corporation of America Holdings, 358 South Main
Street, Burlington, North Carolina 27215, no later than January 3, 1997. This
date was chosen based on a planned meeting date in early June 1997.
Holders of Common Stock who want to have proposals submitted for
consideration at future meetings of the stockholders should consult the
applicable rules and regulations of the Commission with respect to such
proposals, including the permissible number and length of proposals and other
matters governed by such rules and regulations.
ADDITIONAL INFORMATION
THE COMPANY WILL MAKE AVAILABLE A COPY OF THE 1995 FORM 10-K AND ANY
QUARTERLY REPORTS ON FORM 10-Q FILED THEREAFTER, WITHOUT CHARGE, UPON WRITTEN
REQUEST TO THE SECRETARY, LABORATORY CORPORATION OF AMERICA HOLDINGS, 358
SOUTH MAIN STREET, BURLINGTON, NORTH CAROLINA 27215. EACH SUCH REQUEST MUST
SET FORTH A GOOD FAITH REPRESENTATION THAT, AS OF THE RECORD DATE (OCTOBER 18,
1996), THE PERSON MAKING THE REQUEST WAS A BENEFICIAL OWNER OF COMMON STOCK
ENTITLED TO VOTE.
In order to ensure timely delivery of such document prior to the annual
meeting, any request should be received by the Company promptly.
OTHER BUSINESS
The Company knows of no other matters which may come before the Annual
Meeting. However, if any such matters properly come before the Annual Meeting,
the individuals named in the proxies will vote on such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Bradford T. Smith
BRADFORD T. SMITH
Secretary
October 25, 1996
24
<PAGE>
ANNEX I
LABORATORY CORPORATION OF AMERICA HOLDINGS
1997 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I. PURPOSES:
This Laboratory Corporation of America Holdings 1997 Employee Stock Purchase
Plan (hereinafter called the "Plan") is intended to be an employment incentive
and to encourage stock ownership by all eligible employees, including
officers, of Laboratory Corporation of America Holdings (hereinafter called
the "Corporation") and its subsidiary corporations (the "Subsidiaries"), as
that term is defined in (S)424(f) of the Internal Revenue Code of 1986, as now
in force or hereafter amended (the "Code"), in order to increase their
proprietary interest in the Corporation's success and to encourage them to
remain in the employ of the Corporation or a Subsidiary. It is further
intended that options issued pursuant to this Plan (hereinafter called
"Options") shall constitute options issued pursuant to an "employee stock
purchase plan" within the meaning of (S)423 of the Code and that the Plan
shall satisfy the requirements of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
ARTICLE II. ADMINISTRATION:
The Plan shall be operated by the Employee Benefits Committee of the Board
of Directors of the Corporation (the "Committee"), who may appoint a third-
party administrator to maintain the Plan (the "Administrator"). No member of
the Board of Directors who is not otherwise employed by the Corporation shall
be eligible to receive an Option. The Committee shall at all times be composed
of "disinterested persons" within the meaning of Rule 16b-3 of the Exchange
Act. Subject to the provisions of the Plan, the Committee may, from time to
time, prescribe rules and regulations for the administration of the Plan and
may decide questions which may arise with respect to the interpretation or
application of said Plan.
ARTICLE III. ELIGIBILITY:
Each employee who has been employed by the Corporation or a Subsidiary for
at least six (6) months (including officers) as of the first day of any
Offering Period (an "Offering Date"), shall have an Option under this Plan to
purchase the Corporation's authorized but unissued par value $.01 Common Stock
(herein called "Common Stock") during an Offering Period, except that there
shall be excluded: (i) employees whose customary employment is under twenty
(20) hours per week; (ii) employees whose customary employment is for not more
than five (5) months in any calendar year; and (iii) any employee who, if
having received an Option hereunder, would own, immediately after the Option
was granted, stock possessing five percent (5%) or more of the total combined
voting power or value of any classes of stock of the Corporation, or of any of
its Subsidiaries. For purposes of determining stock ownership of an employee
under (iii) hereof, the rules of (S)424(d) of the Code and (S)1.423-2(d) of
the Treasury Regulations thereunder shall apply, and Common Stock which the
employee may purchase under any outstanding options shall be treated as owned
by the employee.
If an Optionee goes on a leave of absence, such Optionee shall have the
right to elect (a) to withdraw the balance in such Optionee's Purchase
Account, (b) to discontinue contributions to the Plan but remain a participant
in the Plan until the next following Exercise Date, or (c) remain a
participant in the Plan during such leave of absence until the next following
Exercise Date, authorizing the deductions made pursuant to Article V(c) hereof
to be made from payments made by the Corporation to the Optionee during such
leave of absence and undertaking to make such cash payments to the Plan at the
end of each payroll period to the extent that amounts payable by the
Corporation to such Optionee are insufficient to meet such Optionee's
authorized deductions to the Optionee's Purchase Account. However, the
Corporation shall not advance funds to an Optionee if the Optionee's
deductions and cash payments during the Optionee's leave of absence are
insufficient to fund the Optionee's Purchase Account. An Optionee who has been
on leave of absence for more than 30 days and who thereafter ceases to be an
employee of the Corporation for the purpose of the Plan shall not be entitled
I-1
<PAGE>
to participate in the Plan and such Optionee shall be deemed to have withdrawn
from the Plan, and all funds then on deposit in the Optionee's Purchase
Account will be paid to the Optionee under Article V(g) hereof.
ARTICLE IV. STOCK:
The stock subject to the Options to be issued hereunder shall be Common
Stock. The maximum number of such shares to be issued upon the exercise of the
Options hereby granted shall be an aggregate of three million five hundred
thousand (3,500,000) shares of Common Stock (the "Available Shares").
For each Offering Period hereunder, an eligible employee (hereinafter called
"Optionee") shall have an option to purchase up to the largest number of whole
and fractional shares available at the Option Price (as described in Article
V(a)) obtained by having deducted from such Optionee's Compensation for each
payroll period during an Offering Period an amount not less than one percent
(1%) or more than ten percent (10%) of such Optionee's Compensation for the
payroll period. The term "Compensation" as used herein includes regular base
pay (including any shift differentials) at the rate in effect on the Offering
Date, but excludes any bonus, overtime payment, sales commission, contribution
to any Code (S)125 or 401(k) plan or other form of extra compensation.
If in any Offering Period the total number of shares of Common Stock for
which Options are exercised exceeds the number of Available Shares remaining
under the Plan, the Administrator shall make a pro rata allocation of the
Available Shares in as nearly a uniform manner as shall be practicable and as
it shall deem to be equitable, and the balance of payroll deductions credited
to the Purchase Account of each Optionee shall be returned to each Optionee as
promptly as possible.
Except as expressly provided otherwise in Article III hereof, payment for
Common Stock purchased under the Option shall be made only by payroll
deductions over a designated Offering Period.
Notwithstanding the foregoing provisions of this Plan, no Option shall
permit an Optionee to purchase in any single calendar year a number of shares
which, together with all other shares in the Corporation and any Subsidiaries
which such Optionee may be entitled to purchase in such year pursuant to
options issued under any employee stock purchase plan, has an aggregate fair
market value (determined in each case as of the date such options are granted)
in excess of $25,000. This limitation applies only to options granted under
"employee stock purchase plans" as defined by (S)423 of the Code, and does not
limit the amount of stock which an Optionee may purchase under any other stock
option or bonus plans then in effect.
ARTICLE V. TERMS AND CONDITIONS OF OPTIONS:
Options granted hereunder shall be evidenced by a notice to each Optionee
from the Administrator, which notice shall: (i) be in such form as the
Committee shall determine; (ii) incorporate, by reference, the terms and
provisions of this Plan; (iii) be issued to each Optionee on or about the
first Offering Date following the date an employee becomes an Optionee; and
(iv) continue in effect for subsequent Offering Periods unless revoked by the
Optionee.
Subject always to the requirement that, except as otherwise specified in
Article IV hereof, all Optionees shall have the same rights and privileges,
such Options shall be subject to the following terms and conditions:
(a) Option Price: The price of shares purchased during each Offering
Period hereunder (an "Option Price") shall be an amount equal to the lesser
of (i) eighty-five (85%) percent of the fair market value of a share of
Common Stock on the Offering Date or (ii) eighty-five (85%) percent of the
fair market value of a share of Common Stock on the Exercise Date. For so
long as shares of the Common Stock of the Corporation are listed on the New
York Stock Exchange ("NYSE"), "fair market value" as of a given date shall
mean, for purposes of this Plan, the mean between the high and low sales
prices of the Common Stock on that date, said mean to be based on the sale
of a minimum of 100 shares of said stock; or if less
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than 100 shares of said stock are sold on such date or if no sales prices
are quoted, "fair market value" shall mean the average of the closing bid
and asked prices for the Common Stock on the NYSE.
(b) Offering Periods: Each Option shall extend for a period of six (6)
months commencing on an Offering Date of January 1 or July 1 and concluding
with the "Exercise Date" of June 30 or December 31 which is six (6) months
thereafter, the said period being hereinafter called an "Offering Period."
(c) Purchase Account: Each Optionee shall notify the Corporation, on such
forms as shall be provided by the Corporation, within seven (7) days
following actual receipt by the Optionee of such forms, of the percentage
of Compensation which the Optionee wishes to have withheld from the
Optionee's Compensation by the Exercise Date for the Offering Period.
Except as provided in subsection (g) of this Article V, each Optionee shall
authorize the Corporation and its Subsidiaries to withhold from the Optionee's
after-tax compensation, beginning as soon as practicable following the making
of the election described above and continuing throughout the duration of the
Offering Period. Such withheld amounts may be used by the Corporation for
general corporate purposes, but the Corporation or, if designated by the
Committee, the Administrator, shall maintain a record of each Optionee's funds
as a "Purchase Account." Such funds so accumulated within said Purchase
Account may be returned to an Optionee or applied toward the Purchase Price of
Common Stock only pursuant to the provisions contained in this Plan.
(d) Dates on Which Option Shall be Exercised: Except as provided in
subsections (f), (g) and (h) of this Article V, each Option which is
exercised shall be exercised as of each Exercise Date.
(e) Exercise of Option: Unless an Optionee withdraws from the Plan as
provided in subsection (f) of this Article V, each Optionee's Option shall
be exercised automatically on the Exercise Date of each Offering Period,
and the maximum number of full and fractional shares of Common Stock will
be purchased for each Optionee with the entire proceeds of each Optionee's
Purchase Account. As promptly as practical after the Exercise Date of each
Offering Period, the Corporation shall arrange the delivery to the
Administrator of a certificate representing the shares of Common Stock
purchased upon the exercise of such Option, and the Administrator shall
deliver (or cause to deliver) such certificate to each Optionee.
(f) Termination of Option: An Optionee may at any time on or before an
Exercise Date terminate the Option in its entirety by written notice of
such termination delivered in the manner set forth in Article XI hereof.
Such termination shall become effective upon receipt of such notice by the
Corporation or Administrator. As soon as practical following such notice,
all funds then in the Optionee's Purchase Account shall be paid to the
Optionee and the Optionee's Purchase Account closed, and all rights and
privileges of the Optionee granted pursuant to this Plan and the Option
granted hereunder shall be terminated until the next available Option Date
at which such Optionee again elects to participate in the Plan pursuant to
this Article V.
(g) Termination of Employment: In the event that an Optionee's employment
by the Corporation or a Subsidiary is terminated, all rights and privileges
of Optionee granted pursuant to the Plan and of the Option granted
hereunder shall terminate, and all funds then on deposit on the Optionee's
Purchase Account shall be paid to the Optionee (or to such Optionee's
personal representative or beneficiary, in the case of such Optionee's
death) and the Optionee's Purchase Account closed.
(h) Adjustment of Options; Exercisability Upon Certain Events: In the
event of reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, offering of rights or any
other change in the structure of shares of Common Stock of the Corporation,
the total amount of shares on which options may be granted under the Plan
and options rights (both as to the number of shares and the option price)
shall be appropriately adjusted for any increase or decrease in the number
of outstanding shares of Common Stock.
In the event of (i) the adoption of a plan of merger, consolidation, share
exchange or similar transaction of the Corporation with any other corporation
as a result of which the holders of the Common Stock of the Corporation in the
aggregate would receive less than 50% of the voting capital stock of the
surviving or resulting
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corporation; (ii) the approval by the Board of Directors of an agreement
providing for the sale or transfer (other than as security for obligations of
the Corporation) by the Corporation of a majority of the stock of a
significant subsidiary of the Corporation or substantially all of the assets
of the Corporation or of a significant subsidiary of the Corporation; (iii)
the acquisition of more than 20% of the Corporation's voting capital stock by
any person within the meaning of Section 13(d)(3) of the Exchange Act, other
than a person, or group including a person, who beneficially owned, as of the
most recent Offering Date, more than 5% of the Corporation's securities, in
the absence of a prior expression of approval of the Board of Directors of the
Corporation; (iv) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the
Corporation cease for any reason to constitute at least a majority thereof
unless the election, or the nomination for election by the Corporation's
shareholders, of each new director was approved by the vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of the period; or (v) any other change in control of the Corporation
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, then any Option granted
hereunder during the then-current Option Period shall become immediately
exercisable as to the Optionee and shall remain exercisable until the Exercise
Date of the then-current Option Period, subject to all of the terms hereof not
inconsistent with subsection (i) of this Article V.
Anything contained herein to the contrary notwithstanding, upon the
dissolution or liquidation of the Corporation or the consummation of a merger
or consolidation in which the shareholders of the Corporation receive less
than 50% of the voting capital stock of the surviving or resulting
corporation, each Option granted under the Plan shall terminate, but the
Optionee shall have the right, following the adoption of a plan of dissolution
or liquidation or a plan of merger or consolidation and in any event prior to
such dissolution, liquidation, merger or consolidation, to exercise his Option
to purchase Common Stock on the Exercise Date of the then-current Option
Period, subject to all of the other terms hereof not inconsistent with this
Article V.
The grant of an Option pursuant to this Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge
or consolidate, or to dissolve, liquidate or sell, or transfer all or any part
of the business or assets.
(i) Assignability: No Option granted hereunder may be pledged nor shall
any Option be assignable or transferable except by will or by the laws of
descent and distribution and shall be exercisable, during the lifetime of
Optionee, only by said Optionee.
(j) Designation of Beneficiary: Each Optionee may file a written
designation of beneficiary who is to receive any stock or cash in the event
that such Optionee dies after the end of an Offering Period but before the
issuance of the shares or during an Offering Period but before the
respective Exercise Date.
(k) Rights as a Shareholder: No Optionee shall have any rights as a
shareholder with respect to shares purchased pursuant to the Options to be
granted hereunder until full payment has been made for such shares and a
stock certificate for such shares has been actually issued to said
Optionee. No adjustment will be made for dividends or other rights for
which the record date is prior to the date of such issuance. Stock to be
delivered to an Optionee under the Plan will be registered in the name of
the Optionee.
(l) Registration: Each Option under the Plan shall be granted on the
condition that a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Common Stock subject
to such Option has become effective and a copy of the Prospectus has been
delivered to the Optionee.
ARTICLE VI. TERM OF PLAN:
The term of said Plan shall be for a period of ten (10) years commencing on
January 1, 1997, and ending on December 31, 2006, unless terminated earlier by
the exhaustion of the Available Shares or pursuant to Article VIII.
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ARTICLE VII. CONDITIONS UPON ISSUANCE OF SHARES OF COMMON STOCK:
Shares of Common Stock shall not be issued with respect to an Option unless
the exercise of such Option and the issuance and deliverance of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic
or foreign, including without limitation, the Exchange Act, the Securities Act
(and the rules and regulations promulgated thereunder), and the requirement of
any stock exchange upon which the shares of Common Stock may then be listed,
and shall further be subject to the approval of counsel for the Corporation
with respect to such compliance.
As a condition to the exercise of an Option, the Corporation may require the
person exercising such Option to represent that, at the time of any such
exercise, the shares are being purchased only for an investment and without
any present intention to sell or distribute such shares if, in the opinion of
counsel for the Corporation, such representation is required by any of the
aforementioned applicable provisions of law.
ARTICLE VIII. AMENDMENT AND TERMINATION BY THE COMMITTEE:
The Committee may, from time to time, alter, amend, suspend or discontinue
the Plan at any time without notice, including the right to revoke future
Offering Periods, provided that no Optionee's existing rights in the then-
current Offering Period are adversely affected thereby; provided further, upon
any such amendment or modification, all Optionees shall continue to have the
same rights and privileges as other Optionees (except as otherwise provided
for in Article IV hereof); and provided further, that no such amendment of the
Plan shall, except as provided in subsection (h) of Article V hereof: (a)
increase above three million five hundred thousand (3,500,000) the Available
Shares which may be offered under the Plan; (b) change the formula by which
the price for which the Common Stock shall be sold is determined; or (c)
increase the maximum number of shares which any Optionee may purchase. The
Board of Directors shall submit any amendments to the shareholders of the
Corporation for approval to the extent necessary to maintain compliance with
the requirements of Rule 16b-3 of the Exchange Act.
ARTICLE IX. APPLICATION OF FUNDS:
The proceeds received by the Corporation from the sale of its Common Stock
pursuant to Options granted under this Plan, except as otherwise provided
herein, will be used for general corporate purposes.
ARTICLE X. OBLIGATION TO PURCHASE SHARES:
The granting of an Option pursuant to this Plan shall impose no obligation
upon the Optionee to purchase any shares covered by such Option until the
Exercise Date for each Offering Period.
ARTICLE XI. NOTICES:
Any notice which the Corporation or Optionee may be required or permitted to
give to each other shall be in writing and shall be deemed given when
delivered personally or deposited in the U.S. Mail, first class postage
prepaid, addressed as follows: Chief Financial Officer, Laboratory Corporation
of America Holdings, 358 South Main Street, Burlington, North Carolina 27215,
with a copy to General Counsel, Laboratory Corporation of America Holdings,
358 South Main Street, Burlington, North Carolina 27215, and at such other
address, including that of the Administrator, as the Corporation, by notice to
the Optionee, may designate in writing from time to time; and to the Optionee,
at the address shown on the records of the Corporation, or at such other
address as the Optionee, by notice to the Corporation or the Administrator,
may designate in writing from time to time.
ARTICLE XII. CLOSING OF PURCHASE ACCOUNT:
In the event that under any provision hereof an Optionee's Purchase Account
is to be closed and any balance not applied to the purchase of Common Stock,
payment to such Optionee shall be made within thirty (30) days following the
date that the right to such payment accrues.
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<PAGE>
ARTICLE XIII. THE RIGHT OF THE COMPANY TO TERMINATE EMPLOYMENT:
Nothing contained in the Plan or in any Option granted pursuant to the Plan
shall confer upon any Optionee any right to be continued in the employment of
the Company or one of its Subsidiaries, or shall interfere in any way with the
right of the Company or any of its Subsidiaries, as the case may be, to
terminate his or her employment at any time for any reason.
ARTICLE XIV. GOVERNING LAW:
The law of the State of Delaware will govern all matters relating to this
Plan except to the extent it is superseded by the laws of the United States of
America.
ARTICLE XV. EFFECTIVENESS OF THE PLAN:
The Plan shall become effective only if:
(a) The Plan shall have been adopted by the Board of Directors of the
Corporation; and
(b) The Plan shall have been approved within twelve (12) months after the
Plan is adopted under subsection (a) by the affirmative vote of the holders
of at least a majority of shares of Common Stock present, or represented,
and entitled to vote at the shareholders' meeting at which the Plan is
considered.
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<PAGE>
STOCKHOLDERS'S PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
LABORATORY CORPORATION OF AMERICA HOLDINGS
To: Laboratory Corporation of America Holdings
I appoint Bradford T. Smith and Wesley R. Elingburg individually and
together, as my proxies, with power of substitution, to vote all of my
LABORATORY CORPORATION OF AMERICA HOLDINGS common stock at the Annual Meeting of
stockholders of LABORATORY CORPORATION OF AMERICA HOLDINGS to be held at The
Holiday Inn, 4810 New Page Road, Research Triangle Park, N.C. 27709 on
Wednesday, November 20, 1996, at 9:00 a.m., Eastern Standard time, and at any
adjournment or postponement of the meeting.
MY PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY AS DIRECTED ON
THE OTHER SIDE OF THIS CARD, BUT IN THE ABSENCE OF ANY INSTRUCTIONS FROM ME, MY
PROXIES WILL VOTE "FOR" THE ELECTION OF ALL THE NOMINEES LISTED UNDER ITEM 1 AND
"FOR" ITEM 2 AND ITEM 3. MY PROXIES MAY VOTE ACCORDING TO THEIR DISCRETION ON
ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING. I MAY REVOKE THIS
PROXY PRIOR TO ITS EXERCISE.
PLEASE SIGN AND DATE THE OTHER SIDE OF THE CARD.
(Please fill in the appropriate boxes on the other side.)
<PAGE>
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL THE NOMINEES LISTED
UNDER ITEM NO. 1 AND "FOR" ITEM NO. 2 AND ITEM NO. 3.
1. Election of all the members of the Company's Board of Directors.
[_] FOR all nominees
[_] WITHHOLD AUTHORITY FOR ALL NOMINEES
NOMINEES:
Thomas P. MacMahon, James B. Power, M.D., Jean-Luc Belingard, Wendy E.
Lane, Robert E. Mittelstaedt, Jr., David B. Skinner, M.D. and Andrew G.
Wallace, M.D.
2. Approval and adoption of the Laboratory Corporation of America Holdings 1997
Employee Stock Purchase Plan.
[_] FOR
[_] AGAINST
[_] ABSTAIN
3. Ratification of the appointment of KPMG Peat Marwick LLP as Laboratory
Corporation of America Holdings' independent auditors for 1996.
[_] FOR
[_] AGAINST
[_] ABSTAIN
Signature(s)_________ Date:___________ Signature(s)__________ Date:__________
NOTE:
Please sign exactly as name(s) appear(s) above. If acting as an executor,
administrator, trustee, guardian, etc. you should so indicate in signing. If the
stockholder is a corporation, please sign the full corporate name, by duly
authorized officer. If shares ar held jointly, each stockholder should sign.
Date and promptly return the card in the envelope provided.
