View:
10K405/A-The Company's Annual Report on Form 10-K for the year ended December
31, 1996 dated April 9, 1997 and filed with the Commission on April 11, 1997
(the "1996 Form 10-K") is hereby amended as set forth herein.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1996
--------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ------
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------ ----------------
Commission file number 1-11353
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LABORATORY CORPORATION OF AMERICA HOLDINGS
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3757370
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
358 SOUTH MAIN STREET, BURLINGTON, NORTH CAROLINA 27215
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
910-229-1127
- ----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
- -------------------------- ------------------------------------
Common Stock, $0.01 par value New York Stock Exchange
Common Stock Purchase Warrants New York Stock Exchange
Securities registered pursuant to Section 12(g)of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
State the aggregate market value of the voting stock held by non-affiliates
of the registrant, by reference to the price at which the stock was sold as
of a specified date within 60 days prior to the date of filing:
$215,620,388 at March 14, 1997.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 122,935,080
shares at March 14, 1997, of which 61,329,256 shares are held by indirect
wholly owned subsidiaries of Roche Holding Ltd. The number of warrants
outstanding to purchase shares of the issuer's common stock is 22,151,308 as
of March 15, 1997, of which 8,325,000 are held by an indirect wholly owned
subsidiary of Roche Holding Ltd.
The Company's Annual Report on Form 10-K for the year ended December 31,
1996 dated April 9, 1997 and filed with the Commission on April 11, 1997
(the "1996 Form 10-K") is hereby amended as set forth herein.
PART III
The information required by Part III, Items 10 through 13, of Form 10-K
contained in the Company's 1996 Form 10-K is hereby amended and restated in
its entirety as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth as of the date hereof the executive
officers of the Company.
Name Age Office
- ---- --- ------
Thomas P. Mac Mahon 50 Chairman of the Board, President and
Chief Executive Officer
Jean-Luc Belingard 48 Director
Wendy E. Lane 45 Director
Robert E. Mittelstaedt, Jr. 53 Director
James B. Powell, M.D. 58 Director
David B. Skinner, M.D. 61 Director
Andrew G. Wallace, M.D. 62 Director
Wesley R. Elingburg 40 Executive Vice President, Chief
Financial Officer and Treasurer
Larry L. Leonard 55 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 49 Executive Vice President
Ronald B. Sturgill 60 Executive Vice President
William M. Meilahn 56 Senior Vice President, Chief
Information Officer
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. ("Hoffmann-La Roche") 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 Holdings Inc. ("HLR") until
January 1997. 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.
JEAN-LUC BELINGARD 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 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., 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. 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. 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. 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. 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. 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.
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 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 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.
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.
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 HLR 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 South 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
additional, 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 shares of Company common stock, par value
$0.01 ("Common Stock"). In 1996, Messrs. Mac Mahon and Belingard and Drs.
Skinner and Wallace, earned 2,973 shares of Common Stock under the Director
Stock Plan. Ms. Lane and Mr. Mittlestaedt each earned 946 shares of Common
Stock under the Director Stock Plan. Dr. Powell was an employee of the
Company until January 6, 1997 and therefore received no shares under the
Director Stock Plan in 1996.
ITEM 11. EXECUTIVE COMPENSATION
The compensation paid by the Company during the year ended December 31,
1996 to certain executive officers is set forth below. The executive
officers named are the chief executive officer during the year, the four
other most highly compensated executive officers serving at year end, and
two officers who would have been included in the table had they not resigned
before year end.
Summary Compensation Table
| Long-Term |
| Compensa- |
| tion |
Annual Compensation | Awards |
----------------------- -----------
| | All
| Securities | Other
| Underlying | Compen-
Salary(1) Bonus(2)| Options/ | sation(3)
Name and Principal Position Year ($) ($ ) | SARs(#) | ($)
- ----------------------------------------------------------------- ---------
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 1994 - - | - | -
and 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 1995 116,667 61,250 | 30,000 | -
General 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 1995 500,000 150,000 | 50,000 | 2,531,658
President, Chief Financial 1994 263,014 225,000 | 331,250 | 870
Officer and Treasurer(7) | |
| |
David C. Weavil 1996 377,841 - | - | 513,783
Former Executive Vice 1995 221,667 113,750 | 50,000 | -
President and Chief 1994 - - | - | -
Operating Officer(5)(8)
- ------------------------
(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.
(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
$505,977 in connection with severance and termination benefits. This
amount is included under the caption "All Other Compensation."
STOCK OPTION TRANSACTIONS IN 1996
During 1996, there were no stock option grants to executive officers
named in the Summary Compensation Table.
The following chart shows, for 1996, the number of stock options
exercised and the 1996 year-end value of the options held by the executive
officers named in the Summary Compensation Table:
Aggregated Option/SAR Exercises in 1996
and Year-End 1996 Option/SAR Values
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at Year-
at Year-End End ($)(1)
Shares ----------- -------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized($) Unexercisable Unexercisable
- ----------------- ------------ ----------- ------------- -------------
James B. Powell, M.D. 0 $ 0 66,667 $ 0
33,333 0
Wesley R. Elingburg 0 0 20,000 0
10,000 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
_____________________________
(1) Calculated using actual December 31, 1996 losing price per common share
on the NYSE Composite Tape of $2.875
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
-------------------------------------------------------------
Five-year
average
Compensation(1) 10 Years(2) 15 Years(2) 20 Years(2) 25 Years(2) 30 Years(2)
- ------------ -------- -------- -------- -------- --------
$ 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
Pension Plan Table
Larry L. Leonard, Ph.D., Stevan R. Stark
----------------------------------------
Five-year
average
Compensation(1) 10 Years(2) 15 Years(2) 20 Years(2) 25 Years(2) 30 Years(2)
- ------------ -------- -------- -------- -------- --------
$ 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
(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 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth as of April 15, 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.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
- ---------------- ---------- ------
Roche Holdings, Inc. 61,329,256 (1) 49.9%
15 East North Street
Dover, DE 19901
Ronald O. Perelman 14,527,244 (2) 11.8%
35 East 62nd Street
New York, NY 10021
Thomas P. Mac Mahon 170,663 (3) *
James B. Powell, M.D. - *
Jean-Luc Belingard 3,996 *
Wendy E. Lane 946 *
Robert E. Mittelstaedt, Jr. 946 *
David B. Skinner, M.D. 3,996 *
Andrew G. Wallace, M.D. 3,996 *
Larry L.. Leonard, Ph.D. 51,779 (3) *
Bradford T. Smith 30,000 (3) *
Stevan R. Stark 33,601 (3) *
Wesley R. Elingburg 30,000 (3) *
Haywood D. Cochrane, Jr. 107,735 (3) *
David C. Weavil - (3) *
All current directors and executive 354,923 (3) *
officers as a group (14 persons)
- --------------------------------
* Less than 1%
(1) As reported on the Schedule 13D filed with the Commission on May
8, 1995, on behalf of Roche Holdings, Inc., 49,008,538 of these shares
are directly held by HLR, and 12,320,718 of these shares are directly
held by Roche Holdings, Inc. ("Holdings"). Both HLR and Holdings are
indirect wholly owned subsidiaries of Roche Holding Ltd a Swiss
Corporation ("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 - 44,130; Mr. Smith - 30,000, Mr.
Stark - 33,601, Mr. Elingburg - 30,000; 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) - 329,398.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE STOCKHOLDER AGREEMENT
In connection with the Merger, the Company, HLR, Holdings and Hoffmann-
La Roche entered into a stockholder agreement dated as of April 28, 1995
(the "Stockholder Agreement"). The Stockholder Agreement contains certain
provisions relating to (i) the governance of the Company following the
Merger, including but not limited to the composition of the Board of
Directors, (ii) the issuance, sale and transfer of the Company's Equity
Securities (as defined 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 HLR, 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 designees of HLR and Holdings (the "Roche
Directors") and four Independent Directors (as defined therein) 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 HLR
and Holdings are offered the opportunity to purchase an amount of such stock
necessary to maintain their interest.
Pursuant to the Stockholder Agreement, HLR, Holdings and their
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, HLR, Holdings and their 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 HLR, Holdings and their 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 HLR, Holdings and their
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 HLR, Holdings or their 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
HLR, 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"). HLR, 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, HLR or one of its affiliates (such party, a
"Purchaser") (other than the Company) may exercise the right, which right
may only be exercised once, to purchase all, but not less than all, the
shares of Common Stock then owned by NHCG, Mafco or any of their controlled
affiliates. The Sharing and Call Option Agreement provides that the
Purchaser, will, if it elects to exercise this purchase right, pay a price
per share for the shares to be purchased equal to 102% of the average
closing price per share of such security as reported on the principal
national securities exchange on which such shares are listed, or if not so
listed, as reported on the National Association of Securities Dealers, Inc.
Automated Quotation System - National Market System, for the 30 trading days
before the date of such exercise.
In addition, in accordance with the Sharing and Call Option Agreement,
the Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") which has been declared effective by the
Commission and includes a resale prospectus that permits NHCG (or any of its
pledgees) to sell shares of Common Stock and Warrants received by NHCG in
the Merger without restriction. The Company has agreed to use its best
efforts to prepare and file with the Commission such post-effective
amendments to the Registration Statement or other filings as may be
necessary to keep such Registration Statement continuously effective for a
period ending on the third anniversary of the date of the Sharing and Call
Option Agreement and during such period to use its best efforts to cause the
resale prospectus to be supplemented by any required prospectus supplement.
The Company has also agreed to pay all of the Registration Expenses (as
defined therein) arising from exercise of the registration rights set forth
in the Sharing and Call Option Agreement. A copy of the Sharing and Call
Option Agreement was filed with the Commission by the Company as an exhibit
to the 1994 10-K.
REGISTRATION RIGHTS AGREEMENT
In addition to those registration rights granted to NHCG under the
Sharing and Call Option Agreement, the Company and NHCG also are parties to
a registration rights agreement dated as of April 30, 1991 (the
"Registration Rights Agreement") pursuant to which the Company is obligated,
upon the request of NHCG, to file registration statements ("Demand
Registration Statements") from time to time with the Commission covering the
sale of any shares of Common Stock owned by NHCG upon the completion of
certain public offerings by the Company of shares of Common Stock in 1991.
Such Demand Registration Statements may also cover the resale from time to
time of any shares of Common Stock that NHCG may purchase in the open market
at a time when it is deemed to be an affiliate (as such term is defined
under Rule 144 under the Securities Act of 1933, as amended), and certain
securities issued in connection with a combination of shares,
recapitalization, reclassification, merger or consolidation, or other pro
rata distribution. NHCG will also have the right to include such Common
Stock and other securities in any registration statement filed by the
Company for the underwritten public offering of shares of Common Stock
(whether or not for the Company's account), subject to certain reductions in
the amount of such Common Stock and securities if the managing underwriters
of such offering determine that the inclusion thereof would materially
interfere with the offering. The Company agreed not to effect any public or
private sale, distribution or purchase of any of its securities which are
the same as or similar to the securities covered by any Demand Registration
Statement during the 15-day period prior to, and during the 45-day period
beginning on, the closing date of each underwritten offering under such
registration statement and NHCG agreed to a similar restriction with respect
to underwritten offerings by the Company. NHCG's rights under the
Registration Rights Agreement are transferable as provided therein.
Until the third anniversary of the Sharing and Call Option Agreement,
when the Company's obligation to keep the Registration Statement effective
expires, the registration rights granted to NHCG pursuant to the
Registration Rights Agreement are substantially duplicative of those granted
pursuant to the Sharing and Call Option Agreement. After such date and only
to the extent that NHCG still holds shares of Common Stock or Warrants that
it held as of or received in the Merger, NHCG will continue to be entitled
to the registration rights described in the preceding paragraph, unless the
Registration Rights Agreement has been otherwise amended or terminated.
TAX ALLOCATION ARRANGEMENT
Until May 7, 1991, the Company was included in the consolidated federal
income tax returns, and in certain state income tax returns, of Mafco, M&F
Holdings, Revlon Group 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 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.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this amendment to its
report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
LABORATORY CORPORATION OF AMERICA HOLDINGS
-------------------------------------------
Registrant
By:/s/ THOMAS P. MAC MAHON
-----------------------------------
Thomas P. Mac Mahon
Chairman of the Board, President
and Chief Executive Officer
Dated: April 29, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this amendment to the Company's report on Form 10-K has been signed by the
following persons on April 29, 1997 in the capacities indicated.
Signature Title
--------- -----
/s/ THOMAS P. MAC MAHON Chairman of the Board,
- -------------------------------------- President and Chief
Thomas P. Mac Mahon Executive Officer
(Principal Executive Officer)
/s/ WESLEY R. ELINGBURG Executive Vice President,
- -------------------------------------- Chief Financial Officer
Wesley R. Elingburg and Treasurer
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ JEAN-LUC BELINGARD* Director
- --------------------------------------
Jean-Luc Belingard
/s/ WENDY E. LANE* Director
- --------------------------------------
Wendy E. Lane
/s/ ROBERT E. MITTELSTAEDT, JR.* Director
- --------------------------------------
Robert E. Mittelstaedt, Jr.
/s/ JAMES B. POWELL, M.D.* Director
- --------------------------------------
James B. Powell, M.D.
/s/ DAVID B. SKINNER, M.D.* Director
- --------------------------------------
David B. Skinner, M.D.
/s/ ANDREW G. WALLACE, M.D.* Director
- --------------------------------------
Andrew G. Wallace, M.D.
- ------------------------------
* Bradford T. Smith, by his signing his name hereto, does hereby sign this
report on behalf of the directors of the Registrant after whose typed names
asterisks appear, pursuant to powers of attorney duly executed by such
directors and filed with the Securities and Exchange Commission.
By:/s/ BRADFORD T. SMITH
--------------------------------------
Bradford T. Smith
Attorney-in-fact