<PAGE>
===============================================================================
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934 ( )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [_]
CHECK THE APPROPRIATE BOX:
[_] PRELIMINARY PROXY STATEMENT [_] CONFIDENTIAL, FOR USE OF
THE COMMISSION ONLY (AS
PERMITTED BY RULE 14a-
6(e)(2))
[X] DEFINITIVE PROXY STATEMENT
[_] DEFINITIVE ADDITIONAL MATERIALS
[_] SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 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] NO FEE REQUIRED.
[_] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(i)(1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
----------------------------------------------------------
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
----------------------------------------------------------
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION
COMPUTED PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE
AMOUNT ON WHICH THE FILING FEE IS CALCULATED AND STATE HOW IT
WAS DETERMINED):
----------------------------------------------------------
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
----------------------------------------------------------
(5) TOTAL FEE PAID:
----------------------------------------------------------
[_] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[_] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE
ACT RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING
FEE WAS PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY
REGISTRATION STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE
OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
----------------------------------------------------------
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
----------------------------------------------------------
(3) FILING PARTY:
----------------------------------------------------------
(4) DATE FILED:
----------------------------------------------------------
================================================================================
<PAGE>
[LETTERHEAD OF LABCORP LABORATORY CORPORATION OF AMERICA]
June 6, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 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, NC 27709, on
Wednesday, June 25, 1997 at 9:00 a.m., Eastern Daylight time.
The notice of the Annual Meeting and Proxy Statement which are attached
provide information concerning the matters to be considered at the meeting.
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 the Board of Directors' 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/ Thomas P. Mac Mahon
Thomas P. Mac Mahon
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
[LOGO]
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 1997 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, NC 27709, on Wednesday, June 25, 1997 at 9:00 a.m., Eastern
Daylight 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 amend Article Fourth of the
Company's Certificate of Incorporation to increase the authorized share
capital of the Company from 230,000,000 shares to 550,000,000 shares of
which 520,000,000 shares will be shares of common stock, par value $0.01
per share and 30,000,000 shares will be shares of preferred stock, par
value $0.10 per share.
3. To consider and vote upon a proposal to approve and adopt an amendment
to the Laboratory Corporation of America Holdings 1995 Stock Plan for Non-
Employee Directors to increase the number of authorized common shares
issuable thereunder by 300,000.
4. To consider and vote upon a proposal to approve and adopt the
Laboratory Corporation of America Holdings 1997 Stock Option Plan.
5. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
6. 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 June 11, 1997 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
June 6, 1997
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 1997
annual meeting of stockholders to be held at the Holiday Inn, 4810 New Page
Road, Research Triangle Park, NC 27709, on Wednesday, June 25, 1997 at 9:00
a.m., Eastern Standard time 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
June 6, 1997.
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, Jean-Luc Belingard, Wendy E. Lane, Robert
E. Mittelstaedt, Jr., James B. Powell, M.D., David B. Skinner, M.D. and Andrew
G. Wallace, M.D., (ii) to consider and vote upon a proposal to amend Article
Fourth of the Company's Certificate of Incorporation to increase the
authorized share capital of the Company from 230,000,000 shares to 550,000,000
shares of which 520,000,000 shares will be shares of common stock, par value
$0.01 per share and 30,000,000 shares will be shares of preferred stock, par
value $0.10 per share (the "Share Capital Amendment"), (iii) to consider and
vote upon a proposal to approve and adopt an amendment to the Laboratory
Corporation of America Holdings 1995 Stock Plan for Non-Employee Directors to
increase the number of common shares issuable thereunder by 300,000 (the
"Stock Plan Amendment"), (iv) to consider and vote upon a proposal to approve
and adopt the Laboratory Corporation of America Holdings 1997 Stock Option
Plan (the "1997 Option Plan") (v) to ratify the appointment of Price
Waterhouse LLP as the Company's independent auditors for the fiscal year
ending December 31, 1997, 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 Share Capital Amendment, the Stock
Plan Amendment, the 1997 Option Plan and the ratification of the appointment
of Price Waterhouse LLP as the Company's independent auditors for 1997. 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.
<PAGE>
Only holders of record of the common stock, par value $0.01 per share, of
the Company ("Common Stock") at the close of business on June 11, 1997 (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 122,935,080 shares of Common Stock.
A quorum for the Annual Meeting consists of a majority of the total number
of shares of Common Stock outstanding on the Record Date and entitled to vote,
present in person or represented by proxy. Directors of the Company will be
elected by a plurality vote of the shares of 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 Stock Plan
Amendment, the 1997 Option Plan and for the ratification of the appointment of
Price Waterhouse LLP as the Company's independent auditors for the fiscal year
ending December 31, 1997. The affirmative vote of a majority of the total
number of shares of Common Stock outstanding on the Record Date and entitled
to vote is required for approval and adoption of the Share Capital Amendment.
On any such item, an abstention or broker non-vote will have the same effect
as a negative vote except, a broker non-vote for the Stock Plan Amendment, the
1997 Option Plan or ratification of the appointment of independent auditors
will have no effect on the vote. As of June 1, 1997, the directors and
executive officers of the Company beneficially owned an aggregate of 738,358
shares of Common Stock, representing under 1% of the total number of shares of
Common Stock outstanding on the Record Date and entitled to vote.
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"). In the Merger, HLR was issued 49,008,538 shares of
Common Stock, and Roche Holdings, Inc., a Delaware Corporation ("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. At the time, HLR was a wholly owned subsidiary of
Hoffmann-La Roche. Hoffmann-La Roche is a wholly owned subsidiary of Holdings
which is in turn an indirect wholly owned subsidiary of Roche Holding Ltd, a
Swiss Corporation ("Roche Holding"). Holdings and its affiliates (other than
the Company and its subsidiaries) are collectively referred to herein as
"Roche." Subsequent to the Merger, all of the Common Stock owned by HLR was
transferred to Holdings. 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 filed with the Securities and Exchange Commission (the "Commission").
In connection with the Merger, the Company distributed a dividend consisting
of warrants to purchase an aggregate of 13,285,368 shares of Common Stock for
$22.00 (subject to adjustments) on April 28, 2000 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") In
addition, pursuant to the Merger Agreement, on April 28, 1995, Hoffmann-La
Roche purchased Warrants to purchase 8,325,000 shares of Common Stock (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"). In December 1996, HLR was merged with and into
Hoffmann-La Roche and the shares of Common Stock owned by HLR subsequently
transferred from Hoffmann-La Roche to Holdings. 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
2
<PAGE>
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 Share Capital Amendment, the Stock Plan Amendment, the 1997
Option Plan and the ratification of the appointment of Price Waterhouse LLP as
the Company's independent auditors for 1997.
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 SHARE CAPITAL AMENDMENT AND THE STOCK
PLAN AMENDMENT AND THE 1997 OPTION PLAN AND THE RATIFICATION OF THE APPOINTMENT
OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1997.
3
<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. All the nominees listed below
are currently serving as members of the Board of Directors. 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 designees of
Holdings (the "Roche Directors") and four Independent Directors (as defined
therein) nominated by the Nominating Committee of the Board of Directors. The
persons nominated to serve as Roche 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. James R. Maher would serve
as Chairman of the Board and Mr. Mac Mahon would serve as Vice Chairman of the
Board of the Company until April 28, 1996 ("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.
Mr. Maher then resigned from the Board of Directors in November 1996. 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 Roche 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 (50) 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 President and Chief
Executive Officer since January 1997. Mr. Mac Mahon was Senior Vice President
of Hoffmann-La Roche Inc. from 1993 to January 1997 and President of Roche
Diagnostics Group and a Director and member of the Executive Committee of
Hoffmann-La Roche from 1988 to January 1997. Mr. Mac Mahon was also a Director
of HLR until December 1996. As Senior Vice President of Hoffmann-La Roche Inc.
and President of Roche Diagnostics Group, Mr. Mac Mahon was responsible for
the management of all United States operations of the diagnostic business of
Hoffmann-La Roche. Mr. Mac Mahon is also Chairman of the Board of AutoCyte,
Inc. ("AutoCyte"). Mr. Mac Mahon 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 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 F. Hoffman-La 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 (46) has been a Director of the Company since November 1996.
Ms. Lane has been Chairman of Lane Holdings, Inc., an investment banking firm,
since 1992. Prior to forming Lane Holdings, Inc.,
4
<PAGE>
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) has been a Director of the Company since
November 1996. Mr. Mittlestaedt is Vice Dean of The Wharton School of the
University of Pennsylvania and 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.
JAMES B. POWELL, M.D. (58) has served as a Director of the Company since the
Merger. From the Merger to January 1997, Dr. Powell served as President and
Chief Executive Officer. Previously, Dr. Powell was President of RBL from 1982
until the Merger. Dr. Powell has been President, Chief Executive Officer and a
Director of AutoCyte since January 1997. Dr. Powell is a principal investor in
AutoCyte. He is a medical doctor and became certified in anatomic and clinical
pathology in 1969.
DAVID B. SKINNER, M.D. (62) 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. (62) 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.
The Audit Committee, currently consisting of Dr. Skinner, Dr. Wallace, and
Mr. Mittelstaedt, 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.
The Ethics and Quality Assurance Committee, currently consisting of Mr. Mac
Mahon, Ms. Lane, 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.
The Employee Benefits Committee, currently consisting of Mr. Belingard, Ms.
Lane and Dr. Skinner, makes recommendations to the Board regarding
compensation and benefit policies and practices and incentive 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.
5
<PAGE>
The Nominating Committee, currently consisting of Mr. Mac Mahon, Ms. Lane,
and Dr. Wallace, is responsible for recommending the nomination of directors.
Pursuant to the Stockholder Agreement, the Nominating Committee is comprised
of one Roche Director and two Independent Directors and acts by a majority
vote of the entire committee.
The Nominating Committee will consider suggestions for Board nominees made
by stockholders. A stockholder may recommend a person for nomination to the
Board at the 1998 annual meeting of stockholders by giving notice thereof and
providing certain information set forth in the Company's By-Laws, in writing,
to the Secretary of the Company at 358 S. Main Street, Burlington, NC 27215.
Such nominations must be received no later than January 2, 1998.
During 1996, the Board of Directors held eight meetings and acted once 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 three meetings; the Audit Committee held two meetings
and acted once by unanimous written consent of all members thereof; and the
Ethics and Quality Assurance Committee held no meetings in 1996. The
Nominating Committee held no meetings in 1996 but acted once by unanimous
written consent of all members thereof. During 1996, 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 with the exception of Dr. Wallace who attended
five of eight meetings of the Board of Directors in 1996 and did not attend
one of the two Audit Committee meetings held in 1996. In addition, Mr.
Mittlestaedt did not attend one of the two Board meetings held in 1996 after
he became a Director of the Company and did not attend the Audit Committee
meeting held in 1996 after he became a member of the Audit Committee.
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. Pursuant 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 1996, Messrs. Mac Mahon
and Belingard and Drs. Skinner and Wallace, earned 2,973 shares of Common
Stock under the Director Stock Plan. Ms. Lane and Mr. Mittlestaedt each earned
946 shares of Common Stock under the Director Stock Plan. Dr. Powell was an
employee of the Company until January 6, 1997 and therefore received no shares
under the Director Stock Plan in 1996.
6
<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>
Thomas P. Mac Mahon........ 50 Chairman of the Board, President and Chief
Executive Officer
Wesley R. Elingburg........ 40 Executive Vice President, Chief Financial
Officer and Treasurer
Larry L. Leonard........... 56 Executive Vice President
Richard L. Novak........... 56 Executive Vice President
Bradford T. Smith.......... 43 Executive Vice President, General Counsel,
Corporate Compliance Officer and Secretary
Stevan R. Stark............ 50 Executive Vice President
Ronald B. Sturgill......... 60 Executive Vice President
William M. Meilahn......... 56 Senior Vice President, Chief Information Officer
</TABLE>
THOMAS P. MAC MAHON 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 President and Chief Executive
Officer since January 1997. Mr. Mac Mahon was Senior Vice President of
Hoffmann-La Roche Inc. from 1993 to January 1997 and President of Roche
Diagnostics Group and a Director and member of the Executive Committee of
Hoffmann-La Roche from 1988 to December 1996. Mr. Mac Mahon was also a
Director of HLR until December 1996. As Senior Vice President of Hoffmann-La
Roche Inc. and President of Roche Diagnostics Group, Mr. Mac Mahon was
responsible for the management of all United States operations of the
diagnostic business of Hoffmann-La Roche. Mr. Mac Mahon is also Chairman of
the Board of AutoCyte. Mr. Mac Mahon 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. Mr. Elingburg is
responsible 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 Western
Operations of the Company which includes the Central, Great Lakes, Midlands,
Southwest and West Divisions. Dr. Leonard is a member of the management
committee of the Company.
RICHARD L. NOVAK has served as Executive Vice President of the Company since
March 1997. Previous to joining the Company, Mr. Novak was employed by
SmithKline Beecham Clinical Laboratories for more than the past five years
serving in a variety of senior management positions including Senior Vice
President, U.S. Operations and most recently President, International. Mr.
Novak oversees operations of the Company's Eastern Operations which includes
the Mid-Atlantic, Northeast, South and South Atlantic Divisions. Mr. Novak 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
7
<PAGE>
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 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.
RONALD B. STURGILL has served as Executive Vice President since October
1996. Mr. Sturgill oversees operations of the Company's South Atlantic
Division and certain corporate functions. 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.
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.
8
<PAGE>
EXECUTIVE COMPENSATION AND BENEFIT PLANS
EXECUTIVE COMPENSATION
The compensation paid by the Company during the year ended December 31, 1996
to certain executive officers is set forth below. The executive officers named
are the chief executive officer during the year, the four other most highly
compensated executive officers serving at year end, and two officers who would
have been included in the table had they not resigned before year end.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSA-
TION
ANNUAL COMPENSATION AWARDS
----------------------- ---------- ALL
SECURITIES OTHER
UNDERLYING COMPEN-
SALARY(1) BONUS(2) OPTIONS/ SATION(3)
NAME AND PRINCIPAL POSITION YEAR ($) ($) SARS(#) ($)
- --------------------------- ---- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
James B. Powell, M.D............. 1996 $525,000 $ -- -- $ 13,050
Former President and Chief 1995 350,000 367,500 100,000 --
Executive Officer(4) 1994 -- -- -- --
Wesley R. Elingburg.............. 1996 187,500 -- -- 5,928
Executive Vice President, 1995 110,212 50,000 30,000 --
Chief Financial Officer and 1994 -- -- -- --
Treasurer(5)
Larry L. Leonard, Ph.D........... 1996 331,250 162,500 -- 13,050
Executive Vice President 1995 325,000 162,500 30,000 651,958
1994 325,000 246,250 115,000 11,700
Bradford T. Smith................ 1996 210,227 -- -- 6,098
Executive Vice President, Gen- 1995 116,667 61,250 30,000 --
eral Counsel, Corporate 1994 -- -- -- --
Compliance Officer and
Secretary(5)
Stevan R. Stark.................. 1996 190,865 -- -- 13,711
Executive Vice President(6) 1995 -- -- -- --
1994 -- -- -- --
Haywood D. Cochrane, Jr.......... 1996 426,283 -- -- 4,500
Former Executive Vice President, 1995 500,000 150,000 50,000 2,531,658
Chief Financial Officer and 1994 263,014 225,000 331,250 870
Treasurer(7)
David C. Weavil.................. 1996 377,841 -- -- 513,783
Former Executive Vice President 1995 221,667 113,750 50,000 --
and Chief Operating Offi- 1994 -- -- -- --
cer(5)(8)
</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) 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 $2,494,627 for Mr. Cochrane and $640,258 for Dr. Leonard; (ii)
life insurance premiums of $8,550 in 1996 for Dr. Powell, $1,428 in 1996
for Mr. Elingburg, $8,550 in 1996, $7,200 in 1995 and 1994 for Dr.
Leonard, $1,598 in 1996 for Mr. Smith, $2,436 in 1996 for Mr. Stark, and
$3,306 in 1996 for Mr. Weavil; (iii) 401(a) and (k) contributions in 1996
of $4,500 for each individual named in the table, contributions of $4,500
in 1995 and 1994 for Dr. Leonard and $4,500 in 1995 for Mr. Cochrane; (iv)
relocation expenses in 1996 for Mr. Stark of $11,275.
9
<PAGE>
(4) Dr. Powell was appointed President and Chief Executive Officer effective
with the Merger on April 28, 1995. Dr. Powell's salary information from
the date of the Merger is included herein. Dr. Powell resigned his
position as President and Chief Executive Officer effective as of January
6, 1997.
(5) Messrs. Smith, Elingburg and Weavil began employment with the Company
effective with the Merger on April 28, 1995. The salary information for
these individuals from the date of Merger is included herein.
(6) Mr. Stark was appointed an executive officer of the Company in October
1996.
(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 18, 1996.
(8) Mr. Weavil resigned his position as Executive Vice President and Chief
Operating Officer on December 4, 1996. Mr. Weavil was paid $505,977 in
connection with severance and termination benefits. This amount is
included under the caption "All Other Compensation."
STOCK OPTION TRANSACTIONS IN 1996
During 1996, there were no stock option grants to executive officers named
in the Summary Compensation Table.
The following chart shows, for 1996, the number of stock options exercised
and the 1996 year-end value of the options held by the executive officers
named in the Summary Compensation Table:
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND YEAR-END 1996 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT YEAR-
AT YEAR-END END ($)(/1/)
SHARES ------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
James B. Powell, M.D.... 0 $ 0 66,667 $ 0
33,333 0
Wesley R. Elingburg..... 0 0 16,667 0
8,333 0
Larry L. Leonard, Ph.D.. 0 0 34,130 0
10,000 0
Bradford T. Smith....... 0 0 20,000 0
10,000 0
Stevan R. Stark......... 0 0 25,268 0
8,333 0
Haywood D. Cochrane, Jr. 0 0 0 0
0 0
David C. Weavil......... 0 0 0 0
0 0
</TABLE>
- --------
(1) Calculated using actual December 31, 1996 closing price per common share
on the NYSE Composite Tape of $2.875
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,
as supplemented by the Company's Pension Equalization Plan.
PENSION PLAN TABLE
JAMES B. POWELL, M.D., WESLEY R. ELINGBURG, BRADFORD T. SMITH
<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 $7,283 $10,811 $14,338 $17,866 $17,866
100,000 17,233 25,735 34,238 42,740 42,740
150,000 27,233 40,735 54,238 67,740 67,740
200,000 37,233 55,735 74,238 92,740 92,740
250,000 47,233 70,735 94,238 117,740 117,740
300,000 57,233 85,735 114,238 142,740 142,740
</TABLE>
PENSION PLAN TABLE
LARRY L. LEONARD, PH.D., STEVAN R. STARK
<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 $6,710 $10,065 $13,419 $16,774 $20,129
100,000 16,024 24,036 32,049 40,061 48,073
150,000 25,384 38,076 50,769 63,461 76,153
200,000 34,744 52,116 69,489 86,861 104,233
250,000 44,104 66,156 88,209 110,261 132,313
300,000 53,464 80,196 106,929 133,661 160,393
</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. 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.
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
11
<PAGE>
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, 1996, credited years of service under the retirement
plans for the following individuals are for Dr. Powell-26.6 years, Mr.
Elingburg-15.4 years, Mr. Leonard-25.8 years, Mr. Smith-13.9 years and Mr.
Stark-12 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 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 on October 24, 1996.
EMPLOYEE BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Employee Benefits Committee are Mr. Belingard, Ms. Lane,
and Dr. Skinner. Prior to November 1996, Ms. Linda Gosden Robinson was a
member of the Employee Benefits Committee. No member of the Employee Benefits
Committee was or is an officer or employee of the Company.
Certain Director Relationships. Robinson Lerer & Montgomery, the corporate
communications firm of which a former Director, Ms. Linda Gosden Robinson is
President and Chief Executive Officer, performs corporate communications
services for the Company. The amount paid to Robinson Lerer & Montgomery for
services to the Company in 1996 was $57,993.
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
1996, the Committee met three times to review and evaluate executive
compensation and benefit programs, including information provided to the
Company by independent compensation and benefit consultants.
12
<PAGE>
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,
which it continues to implement. 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 and continue to be 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"). The peer group was
chosen by the Company's independent compensation and benefit consultants and
includes some, but not all, of the members of the 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 1996 as
the Company did not achieve the corporate performance measures established by
the Committee. However, under an existing employment agreement with Dr.
Leonard, the Company paid him an annual bonus equal to a fixed percentage of
his base salary.
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.
13
<PAGE>
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. No
options were granted in 1996.
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. served as
President and Chief Executive Officer for all of the year ended December 31,
1996. He was paid $525,000 in base salary. 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. As such, Dr.
Powell did not receive annual incentive compensation or long-term incentive
compensation in 1996.
Limit on Deductibility of Compensation. The Omnibus Budget Reconciliation
Act of 1993 ("OBRA") limits the deductibility of compensation paid to the
chief executive officer and each of the four highest paid employees of public
companies to $1 million 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 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 to not be subject to the limit on deductibility.
The Employee Benefits Committee
Jean-Luc Belingard
Wendy E. Lane
David B. Skinner, M.D.
14
<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. The 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 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.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG COMPANY, S&P 500 INDEX AND PEER GROUP INDEX
<CAPTION>
Measurement period S&P 500 Peer Group
(Fiscal year Covered) Company Index Index
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
Measurement PT -
12/31/91 $ 100 $ 100 $ 100
12/31/92 $ 62 $ 107 $ 108
12/31/93 $ 51 $ 118 $ 112
12/31/94 $ 47 $ 120 $ 106
12/31/95 $ 32 $ 166 $ 140
12/31/96 $ 10 $ 203 $ 153
</TABLE>
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth as of June 1, 1997, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by (i)
each director of the Company who is a beneficial owner of any shares of common
stock, (ii) each person known to the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock, (iii) the officers named in the
summary compensation table set forth above and (iv) 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.
15 East North Street
Dover, DE 19901................................. 61,329,256(1) 49.9%
Ronald O. Perelman
35 East 62nd Street
New York, NY 10021.............................. 14,527,244(2) 11.8%
Thomas P. Mac Mahon.............................. 170,663(3) *
Jean-Luc Belingard............................... 3,996 *
Wendy E. Lane.................................... 946 *
Robert E. Mittelstaedt, Jr....................... 946 *
James B. Powell, M.D............................. -- *
David B. Skinner, M.D............................ 3,996 *
Andrew G. Wallace, M.D........................... 3,996 *
Larry L Leonard, Ph.D............................ 111,779(3) *
Bradford T. Smith................................ 98,334(3) *
Stevan R. Stark.................................. 103,701(3) *
Wesley R. Elingburg.............................. 95,000(3) *
Haywood D. Cochrane, Jr.......................... 107,735(3) *
David C. Weavil.................................. -- (3) *
All current directors and executive officers as a
group (14 persons).............................. 738,358(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. Roche Holdings Inc. is an indirect
wholly owned subsidiary 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, 1997, 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: Mr. Mac Mahon--
166,667; Dr. Leonard--104,130; Mr. Smith--98,334, Mr. Stark--103,601, Mr.
Elingburg--95,000; all directors and executive officers as a group (not
including Dr. Powell and Messrs. Cochrane and Weavil who are no longer
employed by the Company)--712,733.
16
<PAGE>
ITEM 2: PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
General. The stockholders of the Company are being asked to approve an
amendment to Article Fourth of the Certificate of Incorporation of the Company
to increase the authorized share capital of the Company from 230,000,000
shares to 550,000,000 shares, of which 520,000,000 shares will be shares of
common stock, par value $0.01 per share and 30,000,000 shares will be shares
of preferred stock, par value $0.10 per share.
The Board of Directors believes that it would be in the best interests of
both the Company and its stockholders to effect the foregoing Share Capital
Amendment. This amendment has been adopted by the Board of Directors subject
to approval of the Company's stockholders.
The Company is authorized to issue 220,000,000 shares of Common Stock, $.01
par value per share, of which 122,935,080 shares were issued and outstanding
at the close of business on the Record Date and 10,000,000 shares of preferred
stock, par value $.10 per share, of which no shares were issued and
outstanding at the close of business on the Record Date. As proposed and if
effected, the Share Capital Amendment would increase the authorized share
capital of the Company as set forth above.
To effect the foregoing amendment, stockholder approval is sought for the
Certificate of Amendment to the Certificate of Incorporation of the Company
attached as Annex I to this proxy statement. The summary of the terms thereof
contained herein is qualified by reference thereto.
Reasons for the Share Capital Amendment. In February 1997, the Company filed
a registration statement with the Securities and Exchange Commission relating
to the offering of convertible preferred stock with an aggregate liquidation
preference of $500 million issuable in two series pursuant to transferable
subscription rights granted on a pro rata basis to each stockholder of the
Company.
The subscription rights give the holder thereof the option until June 16,
1997 (unless extended) to purchase one of two series of preferred stock, each
of which is convertible at the option of the holder into Common Stock. One
series pays cash dividends and is exchangeable at the Company's option for
convertible subordinated notes due 2012. The other series pays dividends in
kind until 2003 and in cash thereafter and is not exchangeable for notes. The
Company currently has insufficient shares of Common Stock authorized to permit
conversion of all of the preferred stock to be issued upon the exercise of
rights or as dividends on the pay-in-kind preferred stock or to permit
conversion of any notes issued in exchange for preferred stock and
insufficient shares of preferred stock authorized to permit the payment of
dividends on the pay-in-kind preferred stock.
The increase in the portion of authorized shares that would be unissued
after the Share Capital Amendment (the "Increased Available Portion of
Shares") could be used for any proper corporate purpose approved by the Board
of Directors of the Company. The Increased Available Portion of Shares will
provide the Company with additional flexibility to issue additional shares in
connection with future financings. Additional shares could also be used for
employee benefit plans or in connection with acquisitions by the Company.
Because the Share Capital Amendment will result in the Increased Available
Portion of Shares, it may be construed as having an anti-takeover effect,
although neither the Board of Directors nor the management of the Company
views this proposal in that perspective. However, the Company could use the
Increased Available Portion of Shares to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company by, for example, privately
placing shares with purchasers who might side with the Board of Directors in
opposing a hostile takeover bid. Shares of Common Stock could also be issued
to a holder that would thereafter have sufficient voting power to assure that
any proposal to amend or repeal the By-Laws or certain provisions of the
Certificate of Incorporation would not receive the requisite vote. Such uses
of the Common Stock could render more difficult, or discourage, an attempt to
acquire control of the Company, if such transaction were opposed by the Board
of Directors. Further, the Increased Available Portion of Shares not otherwise
required to meet the Company's obligations under the preferred stock and notes
referred to above could be issued by the Company without further stockholder
approval, which could result in further dilution to the holders of Common
Stock.
17
<PAGE>
Approval. Under Delaware corporation law, the affirmative vote of a majority
of the total number of shares of Common Stock outstanding on the Record Date
and entitled to vote is required for approval and adoption of the Share
Capital Amendment. If a majority of the total number of shares of Common Stock
outstanding on the Record Date and entitled to vote is not voted in favor of
the Share Capital Amendment, the Company will be unable to fulfill its
obligations under the terms of the preferred stock and the notes.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THE SHARE CAPITAL AMENDMENT.
18
<PAGE>
ITEM 3: AMENDMENT TO THE LABORATORY CORPORATION OF AMERICA HOLDINGS 1995 STOCK
PLAN FOR NON-EMPLOYEE DIRECTORS
On May 19, 1997, the Board of Directors adopted the Stock Plan Amendment to
the Laboratory Corporation of America Holdings 1995 Non-Employee Director
Stock Plan (the "Plan"). The summary description herein of the principal
features of the Plan as amended by the Stock Plan Amendment is qualified by
reference to the Plan and the Stock Plan Amendment. The Stock Plan Amendment
is attached hereto as Annex II. The purpose of the Plan is to promote the
interests of the Company and its stockholders by increasing the proprietary
and vested interest of non-employee directors in the growth and performance of
the Company by granting such directors shares of Common Stock as part of their
annual retainer fee. The Stock Plan Amendment will extend the expiration date
of the Plan through June 30, 2001, revise the amendment provisions of the Plan
to take advantage of recent changes to Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, subject to shareholder
approval, increase by 300,000 the number of shares of Common Stock available
under the Plan.
The Plan provides for the automatic payment of 50% of the annual retainer
fee (currently $30,000) for directors of the Company who are not employees of
the Company ("Eligible Directors") in the number of shares of Common Stock
that results from dividing 50% of the retainer by the fair market value of
such shares on the date or dates such retainer is to be paid. The maximum
number of shares of Common Stock available under the Plan as proposed to be
amended, will be 300,796, subject to adjustment as described below. The shares
of Common Stock to be delivered under the Plan will be made available from the
authorized but unissued shares of Common Stock or from treasury shares and
prior to delivery will be registered by the Company with the Commission on
Form S-8 and upon registration will be freely tradable, subject to applicable
restrictions under Section 16 of the Exchange Act.
The Plan is administered by the Board of Directors. Subject to the
provisions of the Plan, the Board shall be authorized to interpret the Plan,
to establish, amend, and rescind any rules and regulations relating to it and
to make all other determinations necessary or advisable for its
administration; provided, however, that the Board shall have no discretion
with respect to the selection of directors to receive shares of Common Stock
or the timing or pricing of grants of shares of Common Stock. The
determinations of the Board in the administration of the Plan, as described
herein, shall be final and conclusive. The Secretary of the Company shall be
authorized to implement the Plan in accordance with its terms and to take such
actions of a ministerial nature as shall be necessary to effectuate the intent
and purpose thereof.
In the event of a stock split, stock dividend, subdivision or combination of
the shares of Common Stock or other change in corporate structure affecting
the shares of Common Stock, the number of shares of common Stock authorized by
the Plan shall be increased or decreased proportionately, as the case may be.
No award may be granted under the Plan after June 30, 2001.
The Plan may be amended by the Board as it shall deem advisable or to
conform to any change in any law or regulation applicable thereto; provided,
that the Board may not, except in the limited circumstances described above,
without the authorization and approval of shareholders in any respect make any
amendment that would require stockholder approval under Rule 16b-3 of the
Exchange Act or state law.
On June 1, 1997, the closing price per share of Common Stock on the New York
Stock Exchange Composite Tape was $2.625.
19
<PAGE>
Set forth below is a summary of the awards expected to be made with respect
to 1997 pursuant to the Plan:
NEW PLAN BENEFITS
LABORATORY CORPORATION OF AMERICA
NON-EMPLOYEE DIRECTOR STOCK PLAN
AS AMENDED
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS
----------------- ---------------- ------------------
<S> <C> <C>
Non-Executive Director Group................ $7,500 not yet determined
</TABLE>
The Plan is not subject to any provision of ERISA and is not qualified under
Section 401(a) of the Code.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE STOCK PLAN AMENDMENT.
20
<PAGE>
ITEM 4: PROPOSAL TO APPROVE AND ADOPT THE LABORATORY CORPORATION OF AMERICA
HOLDINGS 1997 EMPLOYEE STOCK OPTION PLAN
On May 19, 1997, the Board of Directors approved the Laboratory Corporation
of America Holdings' 1997 Employee Stock Option Plan (the "1997 Option Plan")
which had been approved by the Employee Benefits Committee on May 19, 1997.
The summary description herein of the principal features of the 1997 Option
Plan is qualified by reference to the 1997 Option Plan, which is attached
hereto as Annex III. The purpose of the 1997 Option Plan is to attract and
retain the best available employees for the Company and to encourage the
highest level of performance by such employees, thereby enhancing the value of
the Company for the benefit of its stockholders. The 1997 Option Plan is also
intended to motivate employees to contribute to the Company's future growth
and profitability and to reward their performance in a manner that provides
them with a means to increase their holdings of Common Stock and aligns their
interests with the interests of the stockholders of the Company.
Subject to certain modifications required by changes in law and regulation
and except as otherwise described herein, the Company's 1997 Option Plan is
substantially identical to its 1994 Stock Option Plan. The 1997 Option Plan
will be administered by the Employee Benefits Committee appointed by the
Company's Board of Directors. During the ten-year period ending on the tenth
anniversary of the adoption of the 1997 Option Plan, the Employee Benefits
Committee will have authority, subject to the terms of the 1997 Option Plan,
to determine when and to whom to make grants under the plan, the number of
shares to be covered by the grants, the types and terms of options and SARs
granted and the exercise price of the shares of common stock covered by
options and SARs, and to prescribe, amend and rescind rules and regulations
relating to the 1997 Option Plan.
Under the terms of the 1997 Option Plan, incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options ("NQSOs"), and SARs may be
granted by the Employee Benefits Committee in its discretion to key employees
(including officers and directors who are employees) of the Company and any of
its affiliates, except that ISOs may be granted only to employees of the
Company and its parent company and any subsidiary corporation. Due to the
provision of the 1997 Option Plan which permits awards in the discretion of
the Employee Benefits Committee, it is not possible to determine how many
employees of the Company and its affiliates may be eligible for grants of
options and SARs. The 1997 Option Plan generally provides that no individual
employee may be granted options or SARs representing an aggregate of more than
750,000 shares of Common Stock in any year. The aggregate number of shares of
Common Stock as to which options and SARs may be granted under the 1997 Option
Plan will not exceed 6,000,000.
The exercise price of an ISO or a NQSO ("Option Price") may not be less than
one hundred percent (100%) of the fair market value of the shares of Common
Stock on the date of grant, except that, in the case of an ISO granted to an
individual who, at the time the ISO is granted, owns shares possessing more
than ten percent of the total combined voting power of all classes of Common
Stock, such Option Price may not be less than one hundred ten percent (110%)
of such fair market value. The Option Price of, and the number of shares
covered by, each option will not change during the life of the option, except
for adjustments to reflect stock dividends, splits, other recapitalizations or
reclassifications or changes affecting the number or kind of outstanding
shares.
The shares of Common Stock purchased upon the exercise of an option are to
be paid for in cash (including cash that may be received from the Company at
the time of exercise as additional compensation) or through the delivery of
other shares of Common Stock with a value equal to the total Option Price or
in a combination of cash and such shares, or with money lent by the Company to
the optionee in compliance with applicable law and on terms and conditions to
be determined by the Company.
No option may be transferred by an optionee during his lifetime. If the
employment of an optionee terminates for any reason (other than by reason of
death, disability or retirement) the optionee may, within the three-month
period following such termination, exercise such options to the extent he was
entitled to exercise
21
<PAGE>
such option at the date of termination. If an optionee dies while employed (or
within three months after termination of employment) or terminates employment
by reason of disability or retirement, all previously granted options (whether
or not then exercisable), may, unless earlier terminated in accordance with
their terms, be exercised by the person or persons to whom the optionee's
rights pass within one year after the optionee's death or by the optionee
within one year after the optionee's disability or retirement.
The Employee Benefits Committee may also grant SARs either alone ("Free
Standing Rights") or in conjunction with all or part of an option ("Related
Rights"). Upon the exercise of a SAR, a holder is entitled, without payment to
the Company, to receive cash, unrestricted shares of Common Stock or any
combination thereof, as determined by the Employee Benefits Committee, in an
amount equal to the excess of the fair market value of one share of Common
Stock over the option price specified in the related option (or in the case of
a Free Standing Right, the price per share specified in such right) multiplied
by the number of shares in respect of which the SAR is exercised.
The Company is required to charge earnings at the close of each accounting
period during which the SARs are outstanding. The charge will be equal to the
amount by which the fair market value of the shares of stock subject to the
SARs exceeds the price for which the SARs may be exercised, less the tax
deduction to which the Company may be entitled if the SARs were exercised and
less any portion of such amount charged to earnings in prior periods. In the
event that the stock subject to the SARs has depreciated in market value since
the last accounting period, there will be a credit to earnings.
Under the 1997 Option Plan, the exercisability of options and Related Rights
will be accelerated upon a Change in Control of the Company (as defined in the
1997 Option Plan). If the exercisability of an option or SAR is so
accelerated, payments made with respect to such option or SAR may constitute
an "excess parachute payment" that is not deductible by the Company in whole
or in part under Section 280G of the Code. Such acceleration may also subject
the holder of such option or SAR to a 20% federal excise tax under Section
4999 of the Code on all or a portion of the value conferred on such holder by
reason of the Change in Control. Option agreements may provide that the
Company will reimburse such holder for the full amount of any such excise tax
imposed.
Unless terminated by action of the Board of Directors or the Employee
Benefits Committee, no options may be granted under the 1997 Option Plan after
May 19, 2007. The 1997 Option Plan may be amended or terminated at any time by
the Board of Directors, except that no amendment may be made without
shareholder approval if the Employee Benefits Committee determines that such
approval is necessary to comply with any tax or regulatory requirement,
including any approval requirement which is a prerequisite for exemptive
relief from Section 16 of the 1934 Act, for which or with which the Employee
Benefits Committee determines that it is desirable to qualify or comply. The
Employee Benefits Committee may amend the terms of any option granted,
retroactively or prospectively, but no amendment may adversely affect any
vested option without the holder's consent.
In the event of a stock split, stock dividend, subdivision or combination of
the shares of Common Stock or other change in corporate structure affecting
the shares of Common Stock, the Employee Benefits Committee may make such
adjustments to the number of shares authorized under the 1997 Option Plan and
to outstanding awards thereunder as it deems necessary.
The Plan is not subject to any provision of ERISA and is not qualified under
Section 401(a) of the Code.
Federal Tax Consequences
Generally, when an optionee exercises a NQSO, the difference between the
Option Price and any higher fair market value of the shares of Common Stock on
the date of exercise will be ordinary income to the optionee and will be
generally allowed as a deduction for federal income tax purposes to the
employer.
22
<PAGE>
Any gain or loss realized by an optionee on disposition of the Common Stock
acquired upon exercise of a NQSO will generally be capital gain or loss to
such optionee, long-term or short-term depending on the holding period, and
will not result in any additional tax consequences to the employer. The
optionee's basis in the shares of Common Stock is determined generally at the
time of exercise.
When an optionee exercises an ISO while employed by the Company or a
subsidiary or within three months (one year for disability) after termination
of employment by reason of retirement or death, no ordinary income will be
recognized by the optionee at that time, but the excess (if any) of the fair
market value of the shares of Common Stock acquired upon such exercise over
the Option Price will be an adjustment to taxable income for purposes of the
federal alternative minimum tax applicable to individuals. If the shares of
Common Stock acquired upon exercise of the ISO are not disposed of prior to
the expiration of one year after the date of acquisition and two years after
the date of grant of the option, the excess (if any) of the sales proceeds
over the aggregate Option Price of such shares of Common Stock will be long-
term capital gain, but the employer will not be entitled to any tax deduction
with respect to such gain. Generally, if the shares of Common Stock are
disposed of prior to the expiration of such periods (a "Disqualifying
Disposition"), the excess of the fair market value of such shares at the time
of exercise over the aggregate Option Price (but not more than the gain on the
disposition if the disposition is a transaction on which a loss, if realized,
would be recognized) will be ordinary income at the time of such Disqualifying
Disposition (and the employer will generally be entitled to a federal income
tax deduction in a like amount). Any gain realized by the optionee as the
result of a Disqualifying Disposition that exceeds the amount treated as
ordinary income will be capital in nature, long-term or short-term depending
on the holding period. If an ISO is exercised more that three months (one year
for disability) after termination of employment, the tax consequences are the
same as described above for NQSOs.
Special rules may apply to a participant who is subject to Section 16 of the
1934 Act. Certain additional special rules apply if the exercise price for an
option is paid in shares of Common Stock previously owned by the optionee
rather than in cash.
The foregoing discussion summarizes the federal income tax consequences of
the 1997 Option Plan based on current provisions of the Code, which are
subject to change. This summary does not cover any state or local tax
consequences of participation in the 1997 Option Plan.
NEW PLAN BENEFITS
The amounts of awards that may be granted under the 1997 Option Plan in 1997
are not yet determinable. No awards were granted under the Company's existing
stock option plans in 1996.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE 1997 OPTION PLAN.
23
<PAGE>
ITEM 5: RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed Price Waterhouse LLP to audit the accounts of the Company for the
fiscal year ending December 31, 1997. The Audit Committee undertook a
solicitation of bids for the 1997 audit and appointed Price Waterhouse LLP
("Price Waterhouse"). For the year ended December 31, 1996 and for more than
the past five years the Company's accounts were audited by KPMG Peat Marwick
LLP ("KPMG").
On April 21, 1997, the Company advised KPMG that it was discontinuing KPMG's
services as the Company's independent accountants and was engaging Price
Waterhouse as the Company's independent accountants. The decision to
discontinue KPMG and to engage Price Waterhouse was approved by the Audit
Committee of the Board of Directors.
KPMG's reports on the financial statements of the Company for the years
ended December 31, 1996 and 1995 did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
To the knowledge of the management and Audit Committee of the Board of
Directors of the Company, in connection with audits of the Company's financial
statements for each of the two years ended December 31, 1995 and 1996, there
were no disagreements with KPMG on any matters of accounting principles or
practices, financial statement disclosure or auditing scope and procedure
which, if not resolved to the satisfaction of KPMG, would have caused KPMG to
make reference to the matter in its reports.
Representatives of Price Waterhouse LLP and KPMG Peat Marwick LLP 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 Price Waterhouse 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 Price Waterhouse LLP as the Company's independent auditors for
the year ending December 31, 1997 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 PRICE WATERHOUSE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR 1997.
24
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE STOCKHOLDER AGREEMENT
In connection with the Merger, the Company, HLR, Holdings and Hoffmann-La
Roche entered into the Stockholder Agreement dated as of April 28, 1995. In
December 1996, HLR was merged with and into Hoffmann-La Roche and the shares
of Common Stock owned by HLR subsequently transferred from Hoffmann-La Roche
to Holdings. 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 therein) by the
Company and Hoffmann-La Roche, (iii) the acquisition of additional Equity
Securities and (iv) the registration rights granted by the Company to Holdings
and Hoffmann-La Roche with respect to the Company's Equity Securities.
Pursuant to the Stockholder Agreement, the Board of Directors of the Company
will (subject to specified exceptions) be comprised of seven members,
consisting of three "Roche Directors" and four Independent Directors nominated
by the Nominating Committee of the Board of Directors.
The Stockholder Agreement also provides that, among other things, certain
actions by the Company will require approval by a majority of the Roche
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, and with certain exceptions, the issuance of
securities by the Company.
The Stockholder Agreement also provides that, except under certain
circumstances, which include the issuance of Common Stock pursuant to a public
offering, the Company may not issue any equity securities unless Holdings is
offered the opportunity to purchase an amount of such stock necessary to
maintain its interest.
Pursuant to the Stockholder Agreement, Holdings and its affiliates (other
than the Company and its subsidiaries) have the right to acquire Equity
Securities (as defined therein) to the extent that, after giving effect
thereto, their Total Voting Power would not exceed 75%. Moreover, Holdings and
its affiliates (other than the Company and its subsidiaries) may acquire
additional Equity Securities notwithstanding the fact that after giving effect
thereto, their Total Voting Power would exceed 75%, if Holdings and its
affiliates (other than the Company and its subsidiaries) or any one of them
offers, prior to consummation of such purchase, to purchase all outstanding
Equity Securities and holders of Equity Securities totaling more than 50% of
the outstanding Equity Securities (excluding Equity Securities held by
Holdings and its affiliates (other than the Company and its subsidiaries))
accept such offer. After the third anniversary of the Merger, the Stockholder
Agreement does not restrict purchases by Holdings or its affiliates of Equity
Securities.
In addition, the Stockholder Agreement contains a Demand Registration
provision pursuant to which the Company is obligated, upon the request of
Holdings, or Hoffmann-La Roche, to file registration statements with the
Commission covering any shares of Common Stock owned by those parties which
are restricted securities within the meaning of Rule 144(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act"). Holdings and
Hoffmann-La Roche will also have the right to include such securities in any
registration statement filed by the Company offering securities for its own
account or for the account of any holder other than Mafco or any of its
affiliates, subject to certain reductions if the managing underwriter
determines that the size of the offering or the combination of securities
offered would materially interfere with the offering.
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, Hoffmann-La Roche (the successor to HLR as discussed
25
<PAGE>
above) 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 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.
26
<PAGE>
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 and 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
In December 1996, the Company received a loan from Roche Holdings of $187.0
million to fund the Settlement Payment in the form of a promissory note which
bears interest at 6.625% per annum. In March 1997, the original maturity of
March 31, 1997 of such note was extended to March 31, 1998.
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
$18.7 million in 1996. 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 $2.4 million in 1996. 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. The
Company paid Roche a total of $267,000 in 1996 for these services. 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.
CERTAIN TRANSACTIONS WITH AUTOCYTE, INC.
The Company has certain on-going arrangements with AutoCyte for the purchase
by the Company of certain products with an aggregate value of approximately
$2.2 million in 1996.
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 1998 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,
27
<PAGE>
Burlington, North Carolina 27215, no later than January 2, 1998. This date was
calculated based on a planned meeting date in early June 1998.
Holders of Common Stock who want to have proposals submitted for
consideration at future meetings of 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 1996 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 June 11,
1997, 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
June 6, 1997
28
<PAGE>
ANNEX I
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LABORATORY CORPORATION OF AMERICA HOLDINGS
Laboratory Corporation of America Holdings, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
First: That at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted declaring advisable proposed amendments of the
Certificate of Incorporation of the Corporation as follows:
Resolved, that the first paragraph of Article Fourth of the Certificate
of Incorporation of the Corporation be amended by substituting in lieu
thereof the paragraph:
"The total number of shares of stock which the Corporation shall have
authority to issue is five hundred fifty million (550,000,000) shares of
which five hundred twenty million (520,000,000) shares will be shares of
common stock each having a par value of $0.01, and thirty million
(30,000,000) shares will be shares of preferred stock each having a par
value of $0.10 per share."
Second: That the holders of a majority of the issued and outstanding shares
of the Common Stock, par value $.01 per share, of the Corporation, have voted
in favor of the foregoing amendment in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
Third: That said amendment was duly adopted in accordance with the
provisions of Sections 222 and 242 of the General Corporation Law of the State
of Delaware.
In Witness Whereof, Laboratory Corporation of America Holdings has caused
this Certificate to be signed by Thomas P. Mac Mahon, its President, Chief
Executive Officer and Director this 26th day of June, 1997.
By: _________________________________
I-1
<PAGE>
ANNEX II
FIRST AMENDMENT
TO
LABORATORY CORPORATION OF AMERICA HOLDINGS
1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
This First Amendment ("Amendment") to the Laboratory Corporation of America
Holdings 1995 Stock Plan for Non-Employee Directors (the "Plan") made this
19th day of May, 1997 by Laboratory Corporation of America Holdings (the
"Company"). All capitalized terms in this Amendment not otherwise defined
shall have their respective meanings under the Plan.
Whereas, the Company wishes to amend the Plan to increase by 300,000 the
number of shares which may be available thereunder;
Whereas, the Company wishes to extend the expiration date of the Plan;
Whereas, the Company wishes to amend the amendment provisions of the Plan to
take advantage of recent changes to the regulations issued pursuant to Section
16(b) of the Exchange Act.
Now Therefore, subject to shareholder approval, the Board of Directors
hereby adopts this Amendment upon the following terms and conditions
1. The first sentence of Section 5 shall be deleted and replaced with the
following sentence:
Subject to adjustment as provided in Section 7, upon shareholder approval
of the First Amendment to the Plan, an aggregate of 300,796 Shares shall be
available for grant under the Plan.
2. The second sentence of Section 11 shall be deleted and replaced with the
following sentence:
The Plan shall terminate on June 30, 2001, unless the Plan is extended or
terminated at an earlier date by shareholders or by exhaustion of the
Shares available for issuance thereunder.
3. The last sentence of Section 10 shall be deleted.
Witness the signature of the undersigned officer of Laboratory Corporation
of America Holdings.
Laboratory Corporation of America
Holdings
Bradford T. Smith
By __________________________________
Executive Vice President and General
Counsel
II-1
<PAGE>
ANNEX III
LABORATORY CORPORATION OF AMERICA HOLDINGS
1997 STOCK OPTION PLAN
1. PURPOSE; RESTRICTIONS ON AMOUNT AVAILABLE UNDER THE PLAN.
This 1997 Stock Option Plan ("Plan") is intended to encourage stock
ownership by employees of Laboratory Corporation of America Holdings (the
"Company") and employees of Affiliated Corporations (as defined in Section
2(a) hereof), so that they may acquire or increase their proprietary interest
in the Company, and to encourage such employees to remain in the employ of the
Company and to put forth maximum efforts for the success of the business. It
is further intended that options granted by the Committee pursuant to Section
6 of this Plan shall constitute "incentive stock options" ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of
1986, as thereafter amended, and the regulations issued thereunder (the
"Code"), and options granted by the Committee pursuant to Section 7 of this
Plan shall constitute "nonqualified stock options" ("Nonqualified Stock
Options"). Grants under this Plan may consist of Incentive Stock Options,
Nonqualified Stock Options (collectively, "Options") or stock appreciation
rights ("Rights"), which Rights may be either granted in conjunction with
Options ("Related Rights") or unaccompanied by Options ("Free Standing
Rights"), as hereinafter set forth.
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Affiliate Corporation" or "Affiliate" shall mean any corporation,
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with the Company.
(b) "Change in Control" shall mean circumstances under which Roche
Holding Ltd. or any corporation directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
Roche Holding Ltd. ceases to maintain "beneficial ownership" (as defined in
Rule 13d-3 of the Exchange Act), individually or in the aggregate, of
securities of the Company representing five percent (5%) or more of the
combined voting power of the Company's then outstanding securities.
(c) "Disability" shall mean an optionee's inability to engage in any
substantial gainful activity by reason of medically determinable physical
or mental impairment that can be expected to result in death or that has
lasted or can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than twelve (12)
months.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(e) "Fair Market Value" per share as of a particular date shall mean (i)
the closing sales price per share of Common Stock (as defined in Section 5
hereof) on a national securities exchange for the last preceding date on
which there was a sale of such Common Stock on such exchange, or (ii) if
the shares of Common Stock are then traded on an over-the-counter market,
the average of the closing bid and asked prices for the shares of Common
Stock in such over-the-market for the last preceding date on which there
was a sale of such Common Stock in such market, or (iii) if the shares of
Common Stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Committee in its
discretion may determine.
(f) "Parent Corporation" shall mean any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if,
at the time of granting an Option , each of such corporations (other than
the Company) owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(g) "Retirement" shall mean an optionee's termination of employment in
accordance with the provisions of the Company's Employee Retirement Plan at
such Optionee's Normal Retirement Date, as defined in such plan.
III-1
<PAGE>
(h) "Subsidiary Corporation" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company
if, at the time of granting an option, each of such corporations other than
the last corporation in the unbroken chain owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
(i) "Ten Percent Stockholder" shall mean an Optionee who, at the time an
Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or of its Parent Corporation or Subsidiary corporations.
3. ADMINISTRATION.
The Plan shall be administered by a committee (the "Committee") appointed by
the Board of Directors of the Company (the "Board"), which shall be comprised
of three or more persons, each of whom shall qualify as a "Non-Employee
Director" as described in Rule 16b-3(b)(3)(i) promulgated under the Exchange
Act.
The Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to
it under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options; to determine
which Options shall constitute Incentive Stock Options and which Options shall
constitute Nonqualified Stock Options; to determine which Rights (if any)
shall be granted in conjunction with Options; to determine the purchase price
of the shares of Common Stock covered by each Option (the "Option Price"); to
determine the persons to whom, and the time or times at which, Options shall
be granted; to determine the number of shares to be covered by each Option; to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the agreements
(which need not be identical) entered into in connection with Options and/or
Rights granted under the Plan ("Option Agreements"); and to make all other
determinations deemed necessary or advisable for the administration of the
Plan. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as may be deemed advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan.
No member of the Board of Directors or Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan or
any Option or Right granted hereunder.
4. ELIGIBILITY.
Options, Rights, or both Options and Rights may be granted to key employees
(including, without limitation, officers and directors who are employees) of
the Company or its present or future Affiliate Corporations, except that
Incentive Stock Options shall be granted only to individuals who, on the date
of such grant, are employees of the Company or a Parent Corporation or a
Subsidiary Corporation. In determining the persons to whom Options and/or
Rights shall be granted and the number of shares to be covered by each option
and any Rights, the Committee shall take into account the duties of the
respective persons, their present and potential contributions to the success
of the Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan. A person to whom an
Option has been granted hereunder is sometimes referred to herein as an
"Optionee."
An Optionee shall be eligible to receive more than one grant of an Option
during the term of the Plan, but only on the terms and subject to the
restrictions hereinafter set forth.
5. STOCK.
The stock subject to Options and Rights hereunder shall be shares of the
Company's common stock, par value $0.01 per share ("Common Stock"). Such
shares may, in whole or in part, be authorized but unissued
III-2
<PAGE>
shares or shares that shall have been or that may be reacquired by the
Company. The aggregate number of shares of Common Stock as to which Options
and Rights may be granted from time to time under the Plan shall not exceed
6,000,000. No person may be granted Options or Rights under the Plan
representing an aggregate of more than 750,000, shares of Common Stock in any
year. The limitations established by the preceding two sentences shall be
subject to adjustment as provided in Section 8(i) hereof.
To the extent that (1) any Option expires or is terminated without being
exercised or surrendered, (2) any option is surrendered on exercise of a Right
for cash or the issuance of fewer shares of Common Stock than issuable under
such surrendered Option or (3) any Free Standing Right expires or is
terminated without being exercised, the shares of Common Stock issuable
thereunder, less such shares issued, shall become available for grants of
options or Rights.
6. INCENTIVE STOCK OPTIONS.
Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms
and conditions, in addition to the general terms and conditions specified in
Section 8 hereof.
(a) Value of Shares. The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which Options granted under this Plan and all other option plans of
the Company, any Parent Corporation and any Subsidiary Corporation become
exercisable for the first time by an optionee during any calendar year shall
not exceed $100,000.
(b) Ten Percent Stockholders. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one hundred ten percent (110%) of the Fair Market Value of a share of
Common Stock of the Company on the date of grant of such Incentive Stock
Option, and (ii) the exercise period shall not exceed five (5) years from the
date of grant of such Incentive Stock Option.
7. NONQUALIFIED STOCK OPTIONS.
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Sections 5 and 8 hereof.
8. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted pursuant to the Plan shall be evidenced by a written
Option Agreement between the Company and the optionee, which agreement shall
comply with and be subject to the following terms and conditions:
(a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option agreement shall specifically identify the
portion, if any, of the option which constitutes an Incentive Stock Option
and the portion, if any, which constitutes a Nonqualified Stock Option.
(c) Option Price. Each Option Agreement shall state the Option Price per
share of Common Stock, which shall be not less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock of the Company
on the date of grant of the Option and which, in the case of Incentive
Stock Options, shall be further subject to the limitation described in
Section 6(b) hereof. The Option Price shall be subject to adjustment as
provided in Section 8(i) hereof. The date on which the Committee adopts a
resolution expressly granting an option shall be considered the day on
which such option is granted.
(d) Medium and Time of Payment. The Option Price shall be paid in full,
at the time of exercise, in cash or in shares of Common Stock having a Fair
Market Value equal to such Option Price or in a combination of cash and
such shares, and may be effected in whole or in part, at the discretion of
the
III-3
<PAGE>
Committee (i) with monies received from the Company at the time of exercise
as a compensatory cash payment, or (ii) with monies borrowed from the
Company pursuant to repayment terms and conditions as shall be determined
from time to time by the Committee, in its discretion separately with
respect to each exercise of options and each optionee; provided, however,
that each such method and time for payment and each such borrowing and
terms and conditions of security, if any, and repayment shall be permitted
by and be in compliance with applicable law.
(e) Term and Exercise of Options. Options shall be exercised over the
exercise period as and at the times and upon the conditions that the
Committee may determine, as reflected in the Option Agreement; provided,
however, that the Committee shall have the authority to accelerate the
exercisability of any outstanding option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be determined by the Committee; provided, however,
that in the case of any Incentive Stock Option, such exercise period shall
not exceed ten (10) years from the date of grant of such Incentive Stock
Option and such exercise period shall be further limited in circumstances
described in Section 6(b) hereof. The exercise period shall be subject to
earlier termination as provided in Section 8(f) and 8(g) hereof. An Option
may be exercised as to any or all full shares of Common Stock as to which
the Option has become exercisable, by giving written notice of such
exercise to the Committee; provided, however, that an Option may not be
exercised at any one time as to fewer than one hundred (100) shares (or
such number of shares as to which the Option is then exercisable if such
number of shares is less than one hundred (100)).
(f) Termination of Employment. Except as provided in this Section 8(f)
and in Section 8(g) hereof, an Option may not be exercised unless the
Optionee is then in the employ of (1) the Company, (2) an Affiliate
Corporation or (3) a corporation issuing or assuming the Option in a
transaction to which Section 424 of the Code applies or a parent
corporation or subsidiary corporation of the corporation described in this
Clause 3, and unless the Optionee has remained continuously so employed
since the date of grant of the Option. In the event that the employment of
an Optionee shall terminate (other than by reason of death, Disability or
Retirement), all options of such Optionee that are exercisable at the time
of such termination may, unless earlier terminated in accordance with their
terms, be exercised within three (3) months after such termination. Nothing
in the Plan or in any Option or Right granted pursuant hereto shall confer
upon an individual any right to continue in the employ of the Company or
any of its Affiliate Corporations or interfere in any way with the right of
the Company or any such Affiliate Corporation to terminate such employment
at any time.
(g) Acceleration of Benefits Upon Death, Disability or Retirement of
Optionee or a Change in Control. If (i) an Optionee shall die while
employed by the Company or an Affiliate Corporation thereof, (ii) an
Optionee shall die within three (3) months after the termination of such
Optionee's employment, (iii) the Optionee's employment shall terminate by
reason of Disability or Retirement, or (iv) there is a Change in Control,
then in any such case all options theretofore granted to such Optionee
(whether or not then exercisable) may, unless earlier terminated or expired
in accordance with their terms, be exercised by the Optionee or by the
Optionee's estate or by a person who acquired the right to exercise such
Option by bequest or inheritance or otherwise by reason of the death or
Disability of the Optionee, at any time within one year after the date of
death, Disability or Retirement of the Optionee or the Change in Control.
(h) Nontransferability of Options. Options granted under the Plan shall
not be transferable otherwise than by will or by the laws of descent and
distribution, and Options may be exercised, during the lifetime of the
Optionee, only by the Optionee or by his guardian or legal representative.
(i) Effect of Certain Changes.
(1) If there is any change in the number of outstanding shares of
Common Stock by reason of any stock dividend, a stock split,
recapitalization, combination, exchange of shares, merger,
consolidation, liquidation, split-up, spin-off or other similar change
in capitalization, any distribution to common shareholders, including a
rights offering, other than cash dividends, or any like change, then
the number of shares of Common Stock available for Options and Rights,
the number of such shares covered by outstanding Options and Rights,
and the price per share of such Options or the
III-4
<PAGE>
applicable market value of Rights, shall be proportionately adjusted by
the Committee to reflect such change or distribution; provided,
however, that any fractional shares resulting from such adjustment
shall be eliminated.
(2) In the event of a change in the Common Stock of the Company as
presently constituted, which is limited to a change of all of its
authorized share with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning
of the Plan.
(3) To the extent that the foregoing adjustment relate to stock or
securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive, provided that each Inventive Stock Option granted
pursuant to this Plan shall not be adjusted in a manner that causes
such option to fail to continue to qualify as an Incentive Stock Option
within the meaning of Section 422 of Code.
(j) Rights as a Stockholder. An Optionee or a transferee of an Option
shall have not rights as a stockholder with respect to any shares covered
by the Option until the date of the issuance of a stock certificate to him
for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distribution of other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 8(i)
hereof.
(k) Other Provisions. The Option Agreements authorized under the Plan
shall contain such other provisions, including, without limitation, (i) the
granting of Rights, (ii) the imposition of restrictions upon the exercise
of an Option, and (iii) in the case of an Incentive Stock Option, the
inclusion of any condition not inconsistent with such Option qualifying as
an Incentive Stock Option, as the Committee shall deem advisable.
9. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. In the case of a Nonqualified Stock Option, Related
Rights may be granted either at or after the time of the grant of such Option.
In the case for an Incentive Stock Option, related Rights may be granted only
at the time of the grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted with respect to a
given Option shall terminate and no longer be exercisable upon the termination
or exercise of the related Option, except that, unless otherwise provided by
the Committee at the time of grant, a Related Right granted with respect to
less than the full number of shares covered by a related Option shall only be
reduced if and to the extent that the number of shares covered by the exercise
or termination of the related Option exceeds the number of shares not covered
by the Right.
A Related Right may be exercised by an Optionee, in accordance with
paragraph (b) of this Section 9, by surrendering the applicable portion of the
related Option. Upon such exercise and surrender, the Optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(b) of this Section 9. Options which have been so surrendered, in whole or in
part, shall no longer be exercisable to the extent the Related Rights have
been exercised.
(b) Terms and Conditions. Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee and as evidenced by a written
Option Agreement between the Company and the Optionee, including the
following:
(1) Related Rights shall be exercisable only at such time or times and to
the extent that the Options to which they relate shall be exercisable in
accordance with the provisions of Section 6, 7, 8 and this Section 9 of the
Plan; provided, however, that any related right shall not be exercisable
during the first six (6) months of the term of the Related Right, except
that this additional limitation shall not apply in the event of death of
the Optionee prior to the expiration of the six (6) month period.
(2) Upon the exercise of a Related Right, an Optionee shall be entitled
to receive up to, but not more than, an amount in cash or shares of Common
Stock equal in value to the excess of the Fair Market Value
III-5
<PAGE>
of one (1) share of Common Stock over the option price per share specified
in the related Option multiplied by the number of shares in respect of
which the Related Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(3) Related Rights shall be transferable only when and to the extent that
the underlying Option would be transferable under paragraph (h) of Section
8 of the Plan.
(4) A Related Right granted in connection with an Incentive Stock Option
may be exercised only if and when the market price of the Common Stock
subject to the Incentive Stock Option exceeds the exercise price of such
Option.
(5) Free Standing Rights shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the
Committee at or after grant; provided, however, that Free Standing Rights
shall not be exercisable during the first (6) six months of the term of the
Free Standing Right, except that this limitation shall not apply in the
event of death of the recipient of the Free Standing Right prior to the
expiration of the six-month period.
(6) The term of each Free Standing Right shall be fixed by the Committee,
but no Free Standing Right shall be exercisable more than ten (10) years
after the date such right is granted.
(7) Upon the exercise of a Free Standing Right, a recipient shall be
entitled to receive up to, but not more than, an amount in cash or shares
of Common Stock equal in value to the excess of the Fair Market Value of
one share of Common Stock over the price per share specified in the Free
Standing Right (which shall be no less than one hundred percent (100%) of
the Fair Market Value of the Common Stock on the date of grant) multiplied
by the number of shares in respect of which the right is being exercised,
with the Committee having the right to determine the form of payment.
(8) No Free Standing Right shall be transferable by the recipient
otherwise than by will or by the laws of descent and distribution, and all
such rights shall be exercisable, during the recipient's lifetime, only by
the recipient or his legal guardian or legal representative.
(9) In the event of the termination of employment of a recipient of a
Free Standing Right, such right shall be exercisable to the same extent
that an Option would have been exercisable in the event of the termination
of employment of an Optionee.
10. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES.
If the Committee shall so require, as a condition of exercise, each Optionee
shall agree that:
(a) no later than the date of exercise of any Option or Right granted
hereunder, the Optionee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any federal, state or
local taxes of any kind required by law to be withheld upon the exercise of
such Option or Right (any such tax, a "Withholding Tax"); and
(b) the Company shall, to the extent permitted or required by law, have
the right to deduct any Withholding Tax from any payment of any kind
otherwise due to the Optionee.
11. GROSS-UP FOR EXCISE TAX.
An Option Agreement may provide that in the event that an Optionee becomes
entitled by reason of a Change of Control to the accelerated vesting of an
Option, if such Optionee will be subject to the excise tax (the "Excise Tax")
under Section 4999 of the Code, the Company shall pay to such Optionee as
additional compensation an amount (the "Gross-Up Payment") which, after taking
into account any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 10, shall be equal to the amount of such
Excise Tax. For purposes of determining whether an Optionee will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any other payments or
benefits received or to be received by such Optionee in connection with a
Change in Control of the Company or the Optionee's termination of employment
(whether pursuant to the terms of the Option Agreement or any other plan,
arrangement or agreement with the Company, any entity whose actions result in
a Change in Control of the Company or any entity affiliated with the Company
III-6
<PAGE>
or such entity) shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Optionee such other
payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of Section 280G(b)(4)(A) of the Code, or such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, or are otherwise not subject to the Excise Tax,
(ii) the amount of payments or benefits treated as subject to the Excise Tax
shall be equal to the lesser of (A) the total amount of payments or benefits
conferred on such Optionee by reason of the Change of Control or (B) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
of the Code (after applying clause (i), above), and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Optionee shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Optionee's residence on the date on which the Excise Tax is incurred, net of
the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder, the Optionee shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Optionee with respect to such excess) at
the time that the amount of such excess finally is determined. The Optionee
and the Company each shall reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax.
12. TERMINATION AND AMENDMENT.
Unless terminated by action of the Board of Directors or the Committee, no
options may be granted under the Plan after May 19, 2007. The Plan may be
amended or terminated at any time by the Committee, except that no amendment
may be made without shareholder approval if the Committee determines that such
approval is necessary to comply with any tax or regulatory requirement,
including any approval requirement which is a prerequisite for exemptive
relief from Section 16 of the 1934 Act, for which or with which the Committee
determines that it is desirable to qualify or comply. The Committee may amend
the terms of any option granted, retroactively or prospectively, but no
amendment may adversely affect any vested option without the holder's consent.
13. EFFECTIVENESS; APPROVAL OF STOCKHOLDERS.
The Plan shall take effect upon its adoption by the Board of Directors, but
its effectiveness and the exercise of any Options or Rights shall be subject
to the approval of the holders of a majority of the voting shares of the
Company, which approval must occur within twelve (12) months after the date
the Plan is adopted by the Board.
14. EFFECT OF HEADINGS.
The section and subsection headings contained herein are for convenience
only and shall not affect the construction hereof.
III-7
<PAGE>
STOCK OPTION AGREEMENT
This Agreement dated as of the between Laboratory Corporation of
America Holdings, a Delaware corporation (the "Company") and (the
"Employee").
W I T N E S S E T H
In consideration of the mutual promises and covenants made herein and the
mutual benefits to be derived herefrom, the parties hereto agree as follows:
1. Grant of Options.
Subject to the provisions of this Agreement and to the provisions of the
Laboratory Corporation of America Holdings 1997 Stock Option Plan (the
"Plan"), the Company hereby grants to the Employee the right and option (the
"Option") to purchase all or any part of the number of shares of common stock,
par value $0.01 per share ("Common Stock") of the Company, set forth on
Schedule A attached hereto at the price per share and on the other terms set
forth on Schedule A.
2. Exercisability of Options.
All of the shares subject to the Options may be purchased by Employee
pursuant to exercise of the Options on or after [insert grant date], subject
to the prior expiration or sooner termination of the Options provided,
however, that Options may not be exercised at any one time as to fewer than
100 shares (or such number of shares as to which the Options are then
exercisable if such number of shares is less than 100).
3. Method of Exercise of the Options.
(a) The Options as to which the Employee is vested shall be exercisable by
delivery to the Company of a written notice stating the number of shares to be
purchased pursuant to this Agreement and accompanied by payment for the full
purchase price of the shares to be purchased. Fractional share interest shall
be disregarded except that they may be accumulated.
(b) The exercise price shall be paid in cash or by certified check or bank
draft payable to the order of the Company, or by exchange of Common Stock of
the Company having an aggregate fair market value equal to the aggregate
exercise price, or by a combination of the foregoing.
4. Termination of Employment.
Except as provided in Paragraph 4 and in Paragraph 5 hereof, Options may not
be exercised unless the Employee is then in the employ of (i) the Company,
(ii) an affiliated corporation or (iii) a corporation issuing or assuming the
Options in a transaction to which Section 424 of the Internal Revenue Code of
1986 applies or a parent corporation or subsidiary corporation of the
corporation described in the clause (iii), and unless the Employee has
remained continuously so employed since the date of grant of the Options. In
the event that the employment of the Employee shall terminate (other than by
reason of death, disability or retirement), all Options of such Employee that
are exercisable at the time of such termination may, unless earlier terminated
in accordance with their terms, be exercised within three (3) months after
such termination.
Nothing in this Agreement or the Plan shall confer upon the Employee any
right to continue in the employ of the Company or any of its affiliate
corporations or interfere in any way with the right of the Company or any such
affiliate corporation to terminate such employment at any time.
5. Acceleration of Benefits Upon Death, Disability or Retirement of Employee
or Change in Control.
If (i) Employee shall die while employed by the Company or an affiliate
corporation thereof, (ii) the Employee shall die within three (3) months after
the termination of the Employee's employment, (iii) the
III-8
<PAGE>
Employee's employment shall terminate by reason of Disability or Retirement
(as defined in the Plan) or (iv) there is a Change in Control (as defined in
the Plan), all Options granted pursuant to this Agreement which are vested and
which have not been exercised may, unless earlier terminated in accordance
with their terms, be exercised by the Employee or by the Employee's estate or
by a person who acquired the right to exercise such Options by bequest or
inheritance or otherwise by reason of the death or disability of the Employee,
at any time within one (1) year after the date of Death, Disability or
Retirement of the Employee or the Change in Control.
6. Nontransferability of Options.
The Options are non-transferrable by the Employee other than by will or the
laws of descent and distribution, and Options may be exercised during the
lifetime of the Employee only by the Employee or by his guardian or legal
representative.
7. Effect of Certain Changes.
(a) If there is any change in the number of outstanding shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination, exchange of shares, merger, consolidation, liquidation, split-up,
spin-off or other similar change in capitalization, any distribution to common
shareholders, including a rights offering, other than cash in dividends, or
any like change, the number of shares covered by outstanding Options granted
pursuant to this Agreement, and the price per share of such Options, shall be
proportionately adjusted by the Committee to reflect any such change or
distributing provided, however, that any fractional shares resulting from such
adjustment shall be eliminated.
(b) In the event of a change in the Common Stock of the Company as presently
constituted, which is limited to a change of all of its authorized shares with
par value into the same number of shares with different par value or without
par value, the shares resulting from any such change shall be deemed to be
Common Stock within the meaning of this Agreement and the Plan.
(c) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive.
8. Rights As a Stockholder.
An Employee or a transferee of Options shall have no rights as a stockholder
with respect to any shares covered by such Options until the date of the
issuance of a stock certificate to such individual for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution of other rights for which
the record date is prior to the date a stock certificate is issued, except as
provided in Paragraph 7 of this Agreement.
9. Payment of Transfer Taxes, Fees, and Other Expenses.
The Company agrees to pay any and all original issue taxes and stock
transfer taxes that may be imposed on the issuance of shares acquired pursuant
to exercise of the Options, together with any and all the fees and expenses
necessarily incurred by the Company in connection therewith.
10. Other Restrictions.
The exercise of each Option shall be subject to the requirement that, if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon
any securities exchange or under any state or federal law, or (ii) the consent
or approval of any government regulatory body, or (iii) an agreement by the
Employee with respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition of, or in connection with, such exercise
or the delivery or purchase of shares pursuant thereto, then in any such
event, such exercise shall not be effective unless such
III-9
<PAGE>
listing, registration, qualification, consent, approval or agreement shall
have been effected or obtained free of any conditions not acceptable to the
Committee.
11. Taxes and Withholding.
No later than the date of exercise of any Options granted hereunder, the
Employee shall pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Options and the
Company shall, to the extent permitted or required by law, have the right to
deduct from any payment of any kind otherwise due to the Employee, federal,
state and local taxes of any kind required by law to be withheld upon the
exercise of such Options.
12. Notices.
Any notices to be given under the terms of this Agreement shall be in
writing and addressed to the Company at 358 South Main Street, Burlington,
North Carolina 27215, Attention: General Counsel and to the Employee at the
address set forth on schedule A, or at such other address as either party may
hereafter designate in writing to the other.
13. Effect of Agreement.
Except as otherwise provided hereunder, this Agreement shall be binding upon
and shall inure to the benefit of any successor or successors of the Company.
14. Laws Applicable to Construction.
The Options have been granted, executed and delivered in the State of New
York, and the interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of New York, as supplied to
contracts executed in and performed wholly within the State of New York.
15. Conflicts and Interpretation.
If there is any conflict between this Agreement and the Plan, or if there is
any ambiguity in this Agreement, any term which is not defined in this
Agreement, or any matter as to which this Agreement is silent, in any such
case the Plan shall govern including, without limitation, the provisions
thereof pursuant to which the Committee has the power, among others, to (i)
interpret the Plan, (ii) prescribe, amend and rescind rules and regulations
relating to the Plan and (iii) make all other determinations deemed necessary
or advisable for the administration of the Plan.
16. Headings.
The headings of paragraphs herein are included solely for convenience of
reference and shall not affect the meaning or interpretation of any of the
provisions of this Agreement.
17. Amendment.
This Agreement may not be modified, amended or waived in any manner except
by an instrument in writing signed by both parties hereto. The waiver by
either party of compliance with any provision of this Agreement shall not
operate or be continued as a waiver of any other provision of this Agreement,
or of any subsequent breach by such party of a provision of this Agreement.
18. Gross Up for Excise Tax.
In the event that the Employee becomes entitled by reason of a Change in
Control to the accelerated vesting of the Option, if the Employee will be
subject to the excise tax (the "Excise Tax") under Section 4999 of the
III-10
<PAGE>
Code, the Company shall pay to the Employee as additional compensation an
amount (the "Gross-Up Payment") which, after taking into account any Federal,
state and local income tax and Excise Tax upon the payment provided for by
this Section 18, shall be equal to the amount of such Excise Tax as calculated
under the Plan, and subject to adjustment under procedures described in the
Plan.
In Witness Whereof, the Company has caused this Agreement to be executed on
its behalf by a duly authorized officer and the Employee has hereunto set this
hand.
Laboratory Corporation of America
Holdings
By: _________________________________
Title: ______________________________
Employee
By: _________________________________
Title: ______________________________
III-11
<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, June 25, 1997, at 9:00 a.m., Eastern Daylight 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, ITEM 3, ITEM 4, AND ITEM 5. 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 rcommends that you vote "FOR" all the nominees listed
under Item No. 1 and "FOR" Item No. 2, Item No. 3, and Item No. 4, and Item No.
5.
FOR all WITHHOLD AUTHORITY
1. Election of all nominees for all nominees
the members [_] [_]
of the
Company's
Board of
Directors.
NOMINEES: 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.
For, except vote withheld from the following nominee(s).
- ---------------------------------------------------------
2. Approval to amend Article Fourth of the Certificate of Incorporation to
increase the number of authorized shares to 520,000,000 shares of common
stock and 30,000,000 shares of preferred stock.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Approval and adoption of an amendment to the Laboratory Corporation of
America Holdings 1995 Stock Plan for Non-Employee Directors to increase the
number of common shares issuable by 300,000.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Approval and adoption of the Laboratory Corporation of America Holdings 1997
Stock Option Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. Ratification of the appointment of Price Waterhouse LLP as the Company's
independent auditors for 1997.
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 are held jointly, each stockholder should sign.
Date and promptly return the card in the envelope provided.
