SCHEDULE 14A
( RULE 14a-101 )
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[x] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
LABORATORY CORPORATION OF AMERICA HOLDINGS
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(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:
LOGO
Laboratory Corporation of America(R)
Holdings
358 South Main Street
Burlington, NC 27215
Telephone: 336-229-1127
April 26, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of Laboratory Corporation of America Holdings. The meeting will be
held at The Paramount Theater, 128 East Front Street, Burlington, NC 27215, on
Thursday, May 24, 2001 at 9:00 a.m., Eastern Daylight time.
The attached notice of the Annual Meeting and Proxy Statement provide
information concerning the matters to be considered at the meeting.
As set forth in the notice, one of the items of business to be addressed
at the Annual Meeting is to consider and act upon a proposal to amend the
Company's Certificate of Incorporation (the "Certificate of Incorporation") to
increase the number of authorized shares of the Company's Common Stock, par
value $0.10, from 52 million to 156 million and thus increase the total number
of authorized shares of capital stock from 82 million to 186 million.
The Board of Directors unanimously recommends that the Company's
stockholders approve each of the proposals set forth in the Notice. The
enclosed Proxy Statement sets forth more detailed information regarding these
proposals. Please carefully review the information in the Proxy Statement.
Whether or not you plan to attend the meeting in person, your shares
should be represented and voted at the meeting. Accordingly, after reading the
enclosed proxy statement, kindly mark the proxy card to indicate your vote,
date and sign the proxy card, and return it in the enclosed, postage-paid
envelope as soon as conveniently possible. If you desire to vote in accordance
with the Board of Directors' recommendations, you need not mark your votes on
the proxy card, but you do need to sign, date, and return it in the enclosed
postage-paid envelope in order to record your vote. Proxy voting via the
Internet or telephone is now available to many stockholders. Using the Internet
to vote results in substantial savings on return postage for the Company. Your
enclosed proxy card will indicate whether these voting options are available to
you and how to use them. 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,
LOGO/Signature
Thomas P. Mac Mahon
Chairman of the Board, President and
Chief Executive Officer
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 2001 Annual Meeting (the "Annual Meeting")
of the stockholders of Laboratory Corporation of America Holdings (the
"Company") will be held at The Paramount Theater, 128 East Front Street,
Burlington, NC 27215, on Thursday, May 24, 2001 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 approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
Common Stock, par value $0.10, from 52,000,000 to 156,000,000 and thus
increase the total number of authorized shares of capital stock from
82,000,000 to 186,000,000;
3. To approve an amendment to the Company's 1995 Stock Plan for
Non-Employee Directors to extend the term thereof to June 30, 2006;
4. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the year ending December 31, 2001;
and
5. 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 April 18, 2001 are entitled to notice of, and to vote at, the
Annual Meeting and at any adjournments thereof.
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 2000 has either preceded or accompanies this notice.
By Order of the Board of Directors
LOGO/Signature
Bradford T. Smith
Secretary
April 26, 2001
PLEASE COMPLETE, SIGN, AND DATE THE ACCOMPANYING PROXY CARD, AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL ENSURE THAT YOUR SHARES ARE
VOTED IN ACCORDANCE WITH YOUR WISHES.
LABORATORY CORPORATION OF AMERICA HOLDINGS
358 SOUTH MAIN STREET
BURLINGTON, NORTH CAROLINA 27215
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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
2001 annual meeting of stockholders to be held at The Paramount Theater, 128
East Front Street, Burlington, NC 27215, on Thursday, May 24, 2001 at 9:00
a.m., Eastern Daylight 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
April 27, 2001.
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 approve an amendment to the Company's
Certificate of Incorporation (the "Amendment") to increase the number of
authorized shares of the Company's common stock, par value $0.10 (the "Common
Stock"), from 52,000,000 to 156,000,000 and thus increase the total number of
authorized shares of capital stock from 82,000,000 to 186,000,000; (iii) to
approve an amendment to the Company's 1995 Stock Plan for Non-Employee Directors
to extend the term thereof to June 30, 2006 (the "Stock Plan Amendment); (iv) to
ratify the appointment of Pricewaterhouse Coopers LLP as the Company's
independent accountants for the year ending December 31, 2001; and (v) 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 of the Amendment, the Stock Plan Amendment, and the
ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for 2001. Any stockholder may revoke his/her 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
therefore. The expenses of the preparation of proxy materials and the
solicitation of proxies for the Annual Meeting will be paid by the Company. The
Company expects to reimburse banks, brokers, and other persons for their
reasonable, out-of-pocket expense in handling proxy materials for beneficial
owners.
Only holders of record of the common stock, par value $0.10 per share, of
the Company ("Common Stock") at the close of business on April 18, 2001 (the
"Record Date") will be entitled to notice of, and to vote at, the Annual
Meeting. At the close of business on March 30, 2001, there were issued and
outstanding 35,003,334 shares of Common Stock.
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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. 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 is required for the approval of the Amendment. An
abstention or broker non-vote on the proposal to approve the Amendment will
have the same effect as a negative vote. The affirmative vote of a majority of
shares of Common Stock represented at the Annual Meeting and entitled to vote
is requested for approval of the Stock Plan Amendment and the ratification of
the appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants for the year ending December 31, 2001. An abstention or broker
non-vote will have no effect on the vote to approve and adapt the Stock Plan
Amendment and to ratify the appointment of independent accountants. As of March
30, 2001, the directors and executive officers of the Company beneficially
owned an aggregate of 386,560 shares of Common Stock, representing
approximately 1.1% of the total number of shares of Common Stock outstanding
(after excluding Restricted Shares, which have no voting rights until
fully-vested) on the Record Date and entitled to vote.
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 of the Amendment, the Stock Plan Amendment, and
the ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for 2001.
Beneficial Ownership
As of October 30, 2000 Roche Holdings, Inc., an affiliate of Roche
Holdings Ltd ("Roche"), owned 11,352,537 shares of Common Stock, representing
approximately 32.4% of the number of shares of Common Stock outstanding as of
March 30, 2001.
In 1995, the Company and affiliates of 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, 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, and (iii) 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 Company's report on Form 8-K filed with the
Commission on May 12, 1995. The Stockholder Agreement is further described
below under "Certain Relationships and Related Transactions - Beneficial
Ownership by Roche."
Roche has informed the Company that it will vote for the election of each
of the nominees to the Board of Directors identified herein, for approval of
the Amendment and the Stock Plan Amendment, and for ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants for 2001.
ITEM ONE: ELECTION OF DIRECTORS
All of 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 of 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 Roche (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
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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 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 as of April 26, 2001, 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 (54) has served as Chairman of the Board and a
Director since April 28, 1996. Prior to such date and since April 28, 1995, the
date of the merger of Roche Biomedical Laboratories ("RBL") and the Company (the
"Merger"), he served as the Vice Chairman and a Director. Mr. Mac Mahon has been
President and Chief Executive Officer and a member of the Executive and
Management Committees of the Company 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. until December
1996. As Senior Vice President of Hoffmann-La Roche 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.
MacMahon is a Director of Express Scripts, Inc. and was formerly a Director
of Tripath Imaging, Inc.
Jean-Luc Belingard (52) has served as a Director of the Company since the
Merger, April 28, 1995. Mr. Belingard has served as Chief Executive Officer of
Pierre Fabre S.A., a diversified French health care holding company, since
January 1999. His current responsibilities include the management of the
worldwide pharmaceutical, cosmetic and communication business of Pierre Fabre
S.A. Prior to this position, Mr. Belingard was 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.
He joined F. Hoffmann-La Roche in 1982, and held various positions prior to
joining Pierre Fabre S.A. Mr. Belingard is also a Director of Applera
Corporation, Norwalk, Connecticut and a Foreign Trade Advisor to the French
Government.
Wendy E. Lane (49) has been a Director of the Company since November 1996.
Ms. Lane has been Chairman of Lane Holdings, Inc., an investment firm, since
1992. Prior to forming Lane Holdings, Inc., Ms. Lane was a Principal and
Managing Director of Donaldson, Lufkin & Jenrette, an investment banking firm,
serving in these and other positions from 1980 to 1992. Ms. Lane serves as a
director of Tyco International, Ltd.
Robert E. Mittelstaedt, Jr. (57) has been a Director of the Company since
November 1996. Mr. Mittlestaedt is Vice Dean, Executive Education of The
Wharton School of the University of Pennsylvania, Adjunct Associate Professor
of Management, and Director of the Aresty Institute of Executive Education. Mr.
Mittelstaedt has served with the Wharton school since 1973, with the exception
of the period from 1985 to 1989 when he founded, served as President and Chief
Executive Officer, and sold Intellego, Inc., a company engaged in practice
management, systems development, and service bureau billing operations in the
medical industry. Mr. Mittelstaedt also serves as a Director of Innovative
Solutions & Support, Inc., A.G. Simpson Automotive, Inc., and HIP Foundation,
Inc.
3
James B. Powell, M.D. (62) has served as a Director of the Company since
the Merger, April 28, 1995. From the Merger to January 1997, Dr. Powell served
as President and Chief Executive Officer of the Company. Previously, Dr. Powell
was President of RBL from 1982 until the Merger. Dr. Powell was President and
Chief Executive Officer of TriPath Imaging, Inc. a developer of analytical
systems for cytology and pathology, from January 1997 to June 2000. He is a
medical doctor and became certified in anatomic and clinical pathology in 1969.
Dr. Powell serves as a Director of U.S. Trust Co. of N.C., Mid-Carolina Bank,
New Century Finance, and Pathology Partners.
David B. Skinner, M.D. (65) has served as a Director of the Company since
the Merger, April 28, 1995. Dr. Skinner is President Emeritus of the New York -
Presbyterian Hospital and the New York - Presbyterian Healthcare System, and
was President and Chief Executive Officer of New York Hospital and Professor of
Surgery at Cornell Medical School from 1987 to 2000, and Vice Chairman of New
York Hospital from 1997 to 2000. 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. (66) has served as a Director of the Company since
the Merger, April 28, 1995. Dr. Wallace has served as both the Dean of
Dartmouth Medical School and Vice President for Health Affairs at Dartmouth
College from 1990 to 1998. He was the Vice Chancellor for Health Affairs at
Duke University and the Chief Executive Officer of Duke Hospital from 1981 to
1990. Dr. Wallace also serves as a Director for Welch Allyn, Inc. and Dorothy
Rider Poole Trust.
The Board of Directors of the Company recommends that stockholders vote
"FOR" the election of each of the nominees for director listed above.
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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, Mr.
Mittelstaedt, and Ms. Lane, makes recommendations, among other things, to the
Board regarding the engagement of the Company's independent accountants,
reviews the plan, scope and results of the audit, reviews with the accountants
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 accountants. 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, Dr. Powell, Dr. Skinner, and Dr. Wallace, 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. Mittelstaedt, makes recommendations to the Board regarding
compensation and benefit policies and practices and incentive arrangements for
the 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 Ms. Lane, Mr. Mac Mahon,
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 2002 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, 2002.
During 2000, the Board of Directors held eleven meetings, each in
accordance with the Company's By-Laws and applicable Delaware corporation law.
The Employee Benefits Committee held two meetings; the Audit Committee held
five meetings and acted once by unanimous written consent; and the Ethics and
Quality Assurance Committee held one meeting in 2000. The Nominating Committee
held no meetings in 2000, but did act once by unanimous written consent. During
2000, none of the directors attended fewer than 82% of the total meetings of
the Board of Directors and the committees of which he or she was a member with
the exception of Mr. Belingard who attended seven of eleven meetings of the
Board of Directors and 100% of the committee meetings of which he was a member.
Compensation of Directors
Directors who are currently not receiving compensation as officers or
employees of the Company are paid an annual retainer of $30,000, payable in
monthly installments, and a fee of $1,000 for each meeting of the Board of
Directors or of any Committee thereof that they attend, and receive
reimbursement of expenses they incur for attending any meeting. Pursuant to the
Non-Employee Directors Stock Plan (the "Directors 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 2000, Messrs.
Mittelstaedt and Belingard, Drs. Skinner, Powell and Wallace,
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and Ms. Lane each earned 247 shares of Common Stock under the Directors Stock
Plan. Non-employee directors will automatically be granted annual option awards
with respect to shares having a Fair Market Value equal to $65,000 at the time
of grant.
EXECUTIVE OFFICERS
The following table sets forth as of the date hereof the Executive
Officers of the Company.
Name Age Office
Thomas P. Mac Mahon .......... 54 Chairman of the Board, President,
and Chief Executive Officer
Wesley R. Elingburg........... 44 Executive Vice President, Chief
Financial Officer, and Treasurer
Myla P. Lai-Goldman, M.D. ... 43 Executive Vice President, Chief
Scientific Officer, and Medical
Director
Richard L. Novak ............. 60 Executive Vice President and Chief
Operating Officer
Bradford T. Smith ............ 47 Executive Vice President of Public
Affairs, Human Resources, Law,
and Compliance, and Secretary
Stevan R. Stark............... 53 Executive Vice President of Sales
and Marketing
Thomas P. Mac Mahon has served as Chairman of the Board and a Director
since April 28, 1996. Prior to such date and since the Merger on April 28,
1995, he served as Vice Chairman and a Director. Mr. Mac Mahon has been
President and Chief Executive Officer and a member of the Executive and
Management Committees of the Company since January 1997. Mr. Mac Mahon was
Senior Vice President of 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 December 1996. Mr. Mac Mahon was
also a Director of HLR Holdings, Inc. until December 1996. As Senior Vice
President of Hoffmann-La Roche 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 a Director of
Express Scripts, Inc. and was formerly a Director on the Board of TriPath
Imaging, Inc.
Wesley R. Elingburg has served as Executive Vice President, Chief
Financial Officer, and Treasurer since October 1996. Mr. Elingburg is a member
of the Executive and Management Committees of the Company. Prior to October
1996, and since April 28, 1995, 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.
Myla P. Lai-Goldman, M.D. was appointed Executive Vice President, Chief
Scientific Officer, and Medical Director in April 1998. Dr. Goldman manages the
Center for Molecular Biology and Pathology at the Company's Research Triangle
Park, N.C. facility and National Genetics Institute, Inc. in Los Angeles, CA.
Dr. Goldman is Board Certified in Anatomic and Clinical Pathology and serves as
a member of the Executive and Management Committees of the Company. Dr.
Goldman, who holds a medical degree from Columbia University, was named Senior
Vice President of the Company in 1997 and has held the position of Medical
Director for the Center for Molecular Biology and Pathology since 1991 (with
RBL and subsequently the Company). Dr. Goldman joined RBL in 1990.
Richard L. Novak has served as Executive Vice President and Chief
Operating Officer of the Company since January 1999. Prior to this date and
since his hire in March 1997, Mr. Novak served as Executive Vice President
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and oversaw the Company's Eastern Operations which included the Mid-Atlantic,
Northeast, South, Florida, and South Atlantic Divisions. Mr. Novak is a member
of the Executive and Management Committees of the Company. Prior to joining the
Company, Mr. Novak was employed by SmithKline Beecham Clinical Laboratories
serving in a variety of senior management positions including Senior Vice
President, U.S. Operations and most recently President, International.
Bradford T. Smith has served as Executive Vice President, General Counsel,
and Secretary since the Merger. He was appointed Compliance Officer in August
1996. Mr. Smith also oversees the Company's Public Affairs, Human Resources and
Law operations. Mr. Smith is a member of the Executive and Management
Committees of the Company. Previously, Mr. Smith served as Assistant General
Counsel of Hoffmann-La Roche, 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 Hoffmann-La Roche from 1989 until the
Merger and as an Assistant Vice President of Hoffmann-La Roche during 1992 and
1993. He has served as a Director of Gensys Software, Inc. since August 2000.
Stevan R. Stark has served as Executive Vice President since October 1996
and was Senior Vice President, New York Division, Cranford Division, and
Alliance/Hospital Division since the Merger in April 1995. Mr. Stark oversees
the Company's sales and marketing operations including business alliances,
managed care, and new business development. Mr. Stark is a member of the
Executive and Management Committees of the Company. Previously, Mr. Stark was a
Vice President and Division Manager from 1991 to 1995 and a Division Manager
from 1986 to 1991. Mr. Stark served as a Director for Universal Standard
Healthcare; the directorship ended on March 30, 1999.
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EXECUTIVE COMPENSATION AND BENEFIT PLANS
Executive Compensation
The compensation paid by the Company during the year ended December 31,
2000 to certain Executive Officers is set forth below. The Executive Officers
named are the Chief Executive Officer during the year and the four other most
highly compensated Executive Officers serving at year end.
Summary Compensation Table
Long-Term
Compensation
Name and Principal Position Annual Compensation(4) Awards
--------------------------- ---------------------- ------
Securities
Restricted Underlying
Stock Options/
Year Salary(1)($) Bonus(2)($) Awards(3)($) SARs(#)
---- ------------ ----------- ------------ -------
Thomas P. Mac Mahon .............. 2000 $ 741,667 $ 726,311 $ 3,462,344 90,600
President and Chief Executive 1999 $ 683,333 $ 496,832 $ 1,100,000 --
Officer 1998 $ 600,000 $ 382,328 -- 100,000
Richard L. Novak.................. 2000 $ 391,667 $ 427,200 $ 1,695,219 34,600
Executive Vice President and 1999 $ 350,000 $ 196,504 $ 371,250 --
Chief Operating Officer 1998 $ 268,750 $ 162,382 -- 30,000
Wesley R. Elingburg............... 2000 $ 313,333 $ 254,400 $ 758,300 19,800
Executive Vice President, Chief 1999 $ 274,167 $ 152,537 $ 371,250 --
Financial Officer, and 1998 $ 240,000 $ 111,399 -- 23,200
Treasurer
Bradford T. Smith................. 2000 $ 313,333 $ 245,400 $ 758,300 19,800
Executive Vice President, 1999 $ 274,167 $ 149,309 $ 371,250 --
General Counsel, Corporate 1998 $ 240,000 $ 131,507 -- 23,200
Compliance Officer, and
Secretary
Myla Lai-Goldman.................. 2000 $ 256,667 $ 209,381 $ 388,625 14,100
Executive Vice President-- 1999 $ 233,333 $ 116,635 $ 371,250 --
Chief Scientific Officer 1998 $ 183,750 $ 60,935 -- 20,000
- ----------
(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) Represents the value of restricted stock awarded during the year indicated
under the Company's 2000 Stock Incentive Plan and the Amended and Restated
1999 Incentive Plan. All outstanding restricted stock awards have a
six-year vesting period, with accelerated vesting of outstanding shares in
percentages of 33.3%, 66.7%, or 100%, if certain predefined profitability
targets are achieved as of December 31, 2001 and 2002. Aggregate
outstanding restricted stock unit awards and their value at December 31,
2000 were: for Mr. Mac Mahon, 87,600 shares valued at $15,417,600; Mr.
Novak, 33,500 shares valued at $5,896,000; Mr. Elingburg, 24,500 shares
valued at $4,312,000; Mr. Smith, 24,500 shares valued at $4,312,000; and
Ms. Lai-Goldman, 19,900 shares valued at $3,502,400. No dividends are paid
on restricted stock awards during the restriction period.
8
(4) No officer was paid other annual compensation in excess of the lesser of
either $50,000 or 10% of the total of annual salary and bonus reported
above.
Restricted Stock Transactions in 2000
During 2000, the following restricted stock grants were made under the
2000 Stock Incentive Plan for the current Executive Officers named in the
Summary Compensation Table:
Restricted Stock Awards in 2000
Number of Performance Price on Date Price on
Shares Period Until of Grant 12/31/00
Name Granted(1) Maturation (1) ($/Sh) ($/Sh)
---- ---------- --------------- ------- ------------
Thomas P. Mac Mahon.......... 24,100 6 years $ 40.0000 $176.0000
23,500 6 years $ 106.3125 $176.0000
Richard L. Novak............. 6,500 6 years $ 40.0000 $176.0000
13,500 6 years $ 106.3125 $176.0000
Wesley R. Elingburg.......... 6,200 6 years $ 40.0000 $176.0000
4,800 6 years $ 106.3125 $176.0000
Bradford T. Smith............ 6,200 6 years $ 40.0000 $176.0000
4,800 6 years $ 106.3125 $176.0000
Myla Lai-Goldman............. 4,400 6 years $ 40.0000 $176.0000
2,000 6 years $ 106.3125 $176.0000
(1) Restrictions limit the sale or transfer of these shares during a six-year
period whereby the restrictions lapse. The plan provides for accelerated
vesting of outstanding shares in precentages of 33.3%, 66.7%, or 100%, if
certain predefined profitability targets are achieved as of December 31,
2002.
Stock Option Transactions in 2000
During 2000, the following grants were made under the 2000 Stock Incentive
Plan for the Executive Officers named in the Summary Compensation Table:
Option/SAR Grants in 2000
Percentage
Number of of Total
Securities Options/SARs Grant
Underlying Granted to Exercise or Date
Options/SARs Employees Base Price Expiration Present
Name Granted (1) in 2000 ($/Sh) Date Value ($) (2)
---- --------------- ------------- ----------- ---------- -------------
Thomas P. Mac Mahon ............ 56,600 14% $ 41.2500 2/09/10 $ 1,421,585
34,000 8% $ 106.8125 8/16/10 $ 2,212,575
Richard L. Novak................ 15,000 4% $ 41.2500 2/09/10 $ 376,746
19,600 5% $ 106.8125 8/16/10 $ 1,275,483
Wesley R. Elingburg............. 12,900 3% $ 41.2500 2/09/10 $ 324,001
6,900 2% $ 106.8125 8/16/10 $ 449,023
Bradford T. Smith............... 12,900 3% $ 41.2500 2/09/10 $ 324,001
6,900 2% $ 106.8125 8/16/10 $ 449,023
Myla Lai-Goldman................ 11,100 3% $ 41.2500 2/09/10 $ 278,792
3,000 1% $ 106.8125 8/16/10 $ 195,228
9
(1) For each grant of non-qualified options made in 2000, the exercise price
is equivalent to the fair market price per share on the date of the grant.
The options vested with respect to one third of the shares covered hereby
on the date of grant and an additional one third will vest on each of the
first and second anniversaries of such date, subject to their earlier
termination.
(2) Valuation based upon the Black-Scholes option pricing model with the
following assumptions: expected dividend yield 0.0%, volatility of 0.548,
risk-free interest rate of 5.04%, and an expected life of seven years.
The following chart shows, for 2000, the number of stock options exercised
and the 2000 year-end value of the options held by the current Executive
Officers named in the Summary Compensation Table:
Aggregated Option/SAR Exercises in 2000
and Year-End 2000 Option/SAR Values
Number of Value of
Securities Unexercised
Underlying In-the-Money
Shares Options/SARs Options/SARs
Acquired at Year-End at Year-End ($)(1)
on Value ----------- ------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ------------------------- ----------- -------------
Thomas P. Mac Mahon.......... 115,000 $ 10,664,625 1,666 123,934 $ 260,937 $ 15,200,163
Richard L. Novak............. 41,000 $ 4,240,125 0 44,600 $ 0 $ 4,943,575
Wesley R. Elingburg.......... 36,466 $ 3,011,277 2,500 27,534 $ 115,000 $ 3,427,007
Bradford T. Smith............ 35,000 $ 3,118,409 4,466 27,534 $ 350,204 $ 3,427,007
Myla Lai-Goldman............. 16,666 $ 1,435,361 2,417 20,767 $ 283,091 $ 2,747,506
(1) Calculated using the actual December 31, 2000 closing price per common
share on the NYSE Composite Tape of $176.0000.
Retirement Benefits and Savings Plan
The following tables set 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(1)
Wesley R. Elingburg and Bradford T. Smith
Five-year
average 10 15 20 25 30
Compensation(2) Years(3) Years(3) Years(3) Years(3) Years(3)
--------------- -------- --------- --------- --------- --------
$50,000 $ 7,339 $10,749 $ 14,159 $ 17,569 $17,569
100,000 17,080 25,360 33,641 41,921 41,921
150,000 27,080 40,360 53,641 66,921 66,921
10
200,000 37,080 55,360 73,641 91,921 91,921
250,000 47,080 70,360 93,641 116,921 116,921
300,000 57,080 85,360 113,641 141,921 141,921
328,206 62,721 93,822 124,923 156,024 156,024
Pension Plan Table(4)
Thomas P. Mac Mahon, Richard L. Novak, and Stevan R. Stark
Five-year
average 10 15 20 25 30
Compensation(2) Years(3) Years(3) Years(3) Years(3) Years(3)
--------------- -------- --------- --------- --------- --------
$50,000 $ 6,498 $ 9,747 $ 12,996 $ 16,245 $ 19,494
100,000 15,625 23,437 31,249 39,062 46,874
150,000 24,985 37,477 49,969 62,462 74,954
200,000 34,345 51,517 68,689 85,862 103,034
250,000 43,705 65,557 87,409 109,262 131,114
300,000 53,065 79,597 106,129 132,662 159,194
328,206 58,345 87,517 116,690 145,862 175,035
(1) The Retirement Plan, as supplemented by the Pension Equalization Plan, is a
defined benefit pension plan designed, in conjunction with the Company's
Pension Equalization Plan, to provide an employee having 25 years of
credited service with an annuity equal to 50% of final average compensation
less 50% of estimated individual Social Security benefits. The benefit is
then converted from a life annuity to an actuarially equivalent life
annuity with a ten year guarantee. In addition, following retirement from
active service, an additional benefit is paid from the Pension Equalization
Plan designed to provide for a portion of their postretirement medical
benefit. For 2000, this additional benefit amounted to $519 per year, based
on a retiree over age 61, with a dependent under the age of 61.
(2) 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 indexed beginning in 1997 based on the
percentage change in the unrounded compensation limit under IRC Section 401
(a)(17) of the Code. For 2000, this limit is $328,206. No bonuses are
considered.
(3) Under the plans, the normal form of benefit for an unmarried participant is
a life annuity with a guaranteed minimum payment for ten years. For a
married participant, the normal form is a 50% joint and survivor annuity,
which is 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.
(4) The Retirement Plan, as supplemented by the Pension Equalization Plan, is a
defined benefit pension plan designed, in conjunction with the Company's
Pension Equalization Plan, 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 or an
affiliate, after attainment of age 21 and completion of one year of service
(age 25 and completion of one year of service if hired before January 1, 1985).
Final average compensation is defined as average annual base salary during the
five consecutive years in which base salary was highest out of the last ten
years prior to normal retirement age or earlier termination. The Employee
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. The limitation solely with respect to defined
benefit pension plans was $135,000 for 2000 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 2000 was
$170,000. The Company believes that, with respect to certain employees, annual
11
retirement benefits computed in accordance with the Retirement Plan's benefit
formula may be greater than those which would be provided with regard to such
qualified plan limitation. The Company's non-qualified, unfunded, Equalization
Plan is 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, subject to the
allowed maximum compensation limit under the Equalization Plan.
As of December 31, 2000, credited years of service under the retirement
plans for the following individuals are for Mr. Mac Mahon--3.0 years, Mr.
Elingburg--19.4 years, Mr. Smith--17.9 years, Mr. Stark--16 years, and Mr.
Novak--2.5 years.
Compensation Plans and Arrangements
On April 17, 1996, the Board of Directors approved the Master Senior
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 report on Form 8-K of the Company filed with the
Commission on October 24, 1996.
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
2000, the Committee met twice to review and evaluate executive compensation and
benefit programs, including information provided to the Company by independent
compensation and benefit consultants.
Executive Officer Compensation Policies. The Committee's executive
compensation policies are designed to (a) attract and retain the best
individuals critical to the success of the Company, (b) motivate and reward
such individuals based on corporate business unit and individual performance,
and (c) align executives' and stockholders' interests through equity-based
incentives.
Compensation for executives is based on the following principles: variable
compensation should comprise a significant part of an executive's compensation,
with the percentage at-risk increasing at increased levels of responsibility;
employee stock ownership aligns the interest of employees and stockholders;
compensation must be competitive with that offered by companies that compete
with the Company for executive talent; and differences in executive
compensation within the Company should reflect differing levels of
responsibility and/or performance.
12
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, total accessions, operating expenses and
certain other specific measures. A total of $1,862,692 million in benefits were
paid to certain Executive Officers in 2000 (see "Summary Compensation Table" for
amounts paid to certain Executive Officers under the plan ).
Long-term incentive compensation is paid in part in the form of stock
options granted under the Company's Stock Option Plans. The Committee believes
that grants of stock options align stockholder value and Executive Officer
interests. Stock options are granted in amounts that are directly related to
the level of responsibility of the grantees as compared with their peer group
counterparts. The number of options granted is established after determining
the projected value of such options as derived from the Black-Scholes option
pricing model. The size of previous grants and the number of shares held by an
executive are not considered in determining annual award levels.
As provided in the Company's Stock Option Plans, stock options are granted
with an exercise price equal to the Fair Market Value (as defined in the stock
plan(s)) per share on the date of grant or other appropriate date as determined
by the Board of Directors. Of the restricted stock awards granted to the
Executive Officers in 2000, the plan provides for accelerated vesting of
outstanding shares in precentages of 33.3%, 66.7%, or 100%, if certain
predefined profitability targets are achieved as of December 31, 2002.
Restrictions limit the sale or transfer of these shares during a six-year
period whereby the restrictions lapse. No stock option or restricted stock
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. A total of 96,000 restricted stock
awards were granted to certain Executive Officers in 2000 (see "Restricted
Stock Awards in 2000").
Chief Executive Officer Compensation. Thomas P. Mac Mahon was paid
$741,667 in base salary for the year ended December 31, 2000. Mr. Mac Mahon's
base salary, annual incentive compensation and long-term incentive
13
compensation were determined in the same manner as described above for other
Executive Officers. Mr. Mac Mahon became eligible to participate in the
Company's Retirement Benefits and Savings Plan in 1998.
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 Option Plans are 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
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 six
publicly traded medical service and medical supply companies and one clinical
laboratory company which is a direct competitor of the Company, all with sales
ranging from approximately $1.1 billion to $4.0 billion. Other 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: Allergan,
Inc., Quest Diagnostics, Incorporated, C.R. Bard Inc., Magellan Health Services
Inc., Fisher Scientific International Inc., Thermo Electron Corporation, and
Bausch & Lomb Inc.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
12/1995 12/1996 12/1997 12/1998 12/1999 12/2000
Laboratory Corporation of America
Holdings $100 $31 $19 $15 $39 $188
S&P 500 $100 $123 $164 $211 $255 $232
Industry Peer Index $100 $107 $114 $120 $152 $247
GRAPHIC OMMITTED
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth as of March 30, 2001, 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
Ownership Percent
Beneficial Owner of Common Stock of Class
---------------- --------------- --------
Roche Holdings, Inc. 11,352,537(1) 32.4%
15 East North Street
Dover, DE 19901
Thomas P. Mac Mahon 281,020(2,3) *
Jean-Luc Belingard 3,735 *
Wendy E. Lane 3,844 *
Robert E. Mittelstaedt, Jr. 2,169 *
James B. Powell 2,508 *
David B. Skinner 3,734 *
Andrew G. Wallace 2,970 *
Wesley R. Elingburg 86,514(2,3) *
Myla Lai-Goldman 59,990(2,3,4) *
Richard L. Novak 97,322(2,3) *
Bradford T. Smith 77,697(2,3) *
All current directors and Executive Officers as a group (13 persons) 681,560 1.9%
- ----------
* Less than 1%
(1) As reported on the Schedule 13D filed with the Commission on October 30,
2000, on behalf of Roche Holdings, Inc. Roche Holdings Inc. is an indirect
wholly-owned subsidiary of Roche. Mr. Kurt Jenny, an individual and
citizen of Switzerland has, pursuant to an agreement, the power to vote a
majority of the voting shares of Roche.
(2) 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--53,867; Mr. Elingburg--14,534; Ms. Goldman--12,784; Mr.
Novak--15,000; Mr. Smith--16,500; all directors and Executive Officers as
a group--129,537.
(3) Includes shares of Restricted Common Stock. The number of shares of
Restricted Common Stock included in the table is as follows: Mr. Mac Mahon
- 124,700; Mr. Elingburg - 36,500; Ms. Goldman- 24,400; Mr. Novak -
48,500; and Mr. Smith - 36,500; all directors and Executive Officers as a
group - 295,000.
(4) Includes 500 shares of common stock held by an Executive Officer's family
as to which beneficial ownership is disclaimed.
Section 16(A) Beneficial Ownership Reporting Compliance
16
The Company's directors and executive officers, and any beneficial owner
of more than 10% of a class of equity securities of the Company, are required
to report their ownership of the Company's equity securities and any changes in
such ownership to the Commission and the securities exchange on which the
equity securities are registered. The Company is required to disclose in this
Proxy Statement any delinquent filing of such reports and any failure to file
such reports with respect to the fiscal year ended December 31, 2000 and any
prior fiscal years.
Non-employee directors of the Company receive a portion of their annual
retainer in stock on a monthly basis pursuant to the Company's 1995 Stock Plan
for Non-Employee Directors, as amended, (the "Directors' Plan"). The grants of
such stock to non-employee directors are exempt transactions pursuant to Rule
16b-3 of the Securities Exchange Act of 1934. Each of the non-employee
directors of the Company received stock pursuant to the Directors' Plan during
1997 and 1998 which was not reported on a per transaction basis, although the
grants of such stock are included in the report by such individuals of their
aggregate share holdings in their most recent Section 16 filings.
ITEM TWO: APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION
Introduction
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") currently authorizes the issuance of fifty-two
million (52,000,000) shares of Common Stock, par value $0.10, and thirty
million (30,000,000) shares of Preferred Stock, par value $0.10. On April 10,
2001, the Board of Directors adopted a resolution proposing that the
Certificate of Incorporation of the Company be amended (the "Amendment") to
increase the number of authorized shares of Common Stock to one hundred and
fifty-six million (156,000,000), and to increase the number of authorized
shares of capital stock from eighty-two million (82,000,000) to one hundred and
eighty-six million (186,000,000), subject to stockholder approval of the
Amendment. If the Amendment is approved by the stockholders, it will become
effective upon the filing of the Amendment with the Delaware Secretary of
State.
On December 31, 1999, the closing price per share of the Common Stock on
the NYSE was $3.6875. The Company effected a one-for-ten reverse stock split
following the annual meeting of May 2, 2000. Prior to that reverse split, the
number of shares of Common Stock authorized was 520 million, of which
approximately 376 million were available for future issuance or upon conversion
of then outstanding Preferred Stock. That reverse stock split reduced the
number of shares of Common Stock outstanding from approximately 130 million to
approximately 13 million. On April 10, 2001, the closing price per share of the
Common Stock on the NYSE had risen to $126.41. This increase in the per share
price of the Common Stock, if maintained, is a factor which the Board of
Directors would consider persuasive in deciding to whether to effect a stock
split in the future. If the Company were to choose to effect a stock split
after the proposed increase is approved, the Company believes that increasing
the number of shares outstanding and decreasing the price per share may help
facilitate trading in and broaden the marketability of the Common Stock.
Current Use of Shares
As of March 30, 2001, the Company had 35,003,334 shares of Common Stock
outstanding (including restricted stock awards). In addition, as of that date
2,271,774 shares were reserved for future issuance under the Company's stock
incentive, employee stock purchase and non-employee director stock plans, and
upon exercise of outstanding options. 369,500 shares had been issued as
restricted stock under the stock incentive plan. There were no shares of
Preferred Stock outstanding as of that date.
Purpose and Effect of the Proposed Amendment
The purpose of the proposed increase in the number of authorized shares of
Common Stock is to provide more shares of Common Stock for general corporate
purposes, including stock dividends and splits, raising additional
17
capital, stock issuances under stockholder and employee stock plans, and
possible future acquisitions. The Board of Directors believes that an increase
in the total number of shares of authorized Common Stock will help the Company
to meet its future needs, and give it greater flexibility in responding quickly
to advantageous business opportunities.
Except for issuance pursuant to the existing plans referred to above,
there are no present plans, understandings or agreements for issuing a material
number of additional shares of Common Stock from the currently authorized
shares of Common Stock or the additional shares of stock proposed to be
authorized under the Amendment. The additional shares would, however, be
available for issuance without future action by the Company's stockholders
except as required by law or regulation, including requirements of the New York
Stock Exchange. The Company reserves the right to seek a further increase in
authorized shares from time to time in the future as considered appropriate by
the Board of Directors.
Under the Company's Certificate of Incorporation, the Company's
stockholders do not have any preemptive rights with respect to Common Stock.
Thus, should the Board of Directors elect to issue additional shares of Common
Stock, existing stockholders would not have any preferential rights to purchase
such shares. In addition, if the Board of Directors elects to issue additional
shares of Common Stock, such issuance could have a dilutive effect on the
earnings per share and/or voting power of current stockholders.
The proposed Amendment to increase the authorized number of shares of
Common Stock could, under certain circumstances, have the effect of impeding
unsolicited takeover attempts, although this is not the reason for this
proposal. For example, in the event of a hostile attempt to take control of the
Company, it might be possible for the Company to endeavor to impede the attempt
by issuing shares of the Common Stock, thereby diluting the voting power of the
other outstanding shares and increasing the potential cost to acquire the
Company. The Amendment therefore may have the effect of discouraging
unsolicited takeover attempts. The Board of Directors is not aware of any
attempt to take control of the Company and the Board of Directors has not
presented the proposal to approve the Amendment with the intent that it be used
as a type of anti-takeover device.
Vote Required to Approve Amendment
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting, assuming a
quorum is present, is necessary for approval of the proposal to amend the
Certificate of Incorporation. Therefore, abstentions and broker non-votes
(which may occur if a beneficial owner of stock where shares are held in a
brokerage or bank account fails to provide the broker or the bank voting
instructions as to such shares) will effectively count as votes against this
proposal.
The Board of Directors of the Company recommends that stockholders vote
"FOR" approval of the Amendment to the Company's Certificate of Incorporation.
18
ITEM THREE: AMENDMENT TO THE LABORATORY
CORPORATION OF AMERICA HOLDINGS 1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
On April 10, 2001, the Board of Directors adopted the Stock Plan Amendment
to the Laboratory Corporation of America Holdings 1995 Non-Employee Director
Stock Plan (the "Plan") to extend the term thereof to June 30, 2006. 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 I. The Plan was
originally adopted following approval at the annual meeting of September 20,
1995. After the annual meeting of June 25, 1997, the Plan was amended to extend
its expiration date through June 30, 2001 and to increase by 300,000 the number
of shares available under the Plan. As of March 30, 2001 taking into account the
reverse stock split effected following the annual meeting of May 2, 2000, 16,765
shares had been issued under the Plan, and 15,735 shares were available for
future issuance.
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, subject to shareholder approval at the Annual Meeting,
extend the expiration date of the Plan through June 30, 2006.
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 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, 2006.
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.
Set forth below is a summary of the awards expected to be made with
respect to the year 2001 pursuant to the Plan:
19
NEW PLAN BENEFITS
LABORATORY CORPORATION OF AMERICA
NON-EMPLOYEE DIRECTOR STOCK PLAN
AS AMENDED
Name and Position Dollar Value ($) Number of Units
------------------ ---------------- ---------------
Non-Executive Director Group $90,000 (1) not yet determined
- ------------
(1) Each director will receive $15,000.
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.
ITEM FOUR: RATIFICATION OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed PricewaterhouseCoopers LLP ("PwC") to audit the accounts of the
Company for the year ending December 31, 2001. For the year ended December 31,
2000 the Company's accounts were audited by PwC.
PwC's report on the financial statements of the Company for the year ended
December 31, 2000 did not contain an adverse opinion or a disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope, or accounting
principles.
To the knowledge of management and the Audit Committee of the Board of
Directors of the Company, in connection with the audit of the Company's
financial statements for the year ended December 31, 2000, there were no
disagreements with PwC on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedure which, if not
resolved to the satisfaction of PwC, would have caused PwC to make reference to
the matter in its reports.
Representatives of PwC 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 PwC as the Company's
independent accountants is not required by the Company's By-Laws 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 PwC as the Company's independent accountants for the year ending December
31, 2001, the Board of Directors will consider whether to retain that firm for
such year.
Audit Fees
Audit fees paid to PricewaterhouseCoopers for the calendar year 2000 audit
and reviews of Forms 10-Q totaled $387,400, of which an aggregate amount of
$161,000 has been billed through December 31, 2000. No fees have been paid to
PricewaterhouseCoopers for financial information systems design and
implementation. Other fees paid to PricewaterhouseCoopers for the calendar year
ended December 31, 2000 totaled $411,800. These fees related to assistance
provided with filing certain registration statements during 2000, as well as
other consulting projects.
The Audit Committee of the Board of Directors has considered the other
services rendered and does not believe that they are incompatible with
PricewaterhouseCoopers remaining independent.
The Board of Directors of the Company recommends that stockholders vote
"FOR" the ratification of the appointment of PwC as the Company's independent
accountants for 2001.
20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Beneficial Ownership by Roche
At October 30, 2000, 11,352,537 shares of the Company's outstanding common
stock, or approximately 32.4% at March 30, 2001, were owned by Roche.
The Stockholder Agreement
In 1995, the Company, and affiliates of Roche entered into the Stockholder
Agreement. The Stockholder Agreement contains certain provisions relating to
(i) the governance of the Company, 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, and (iii) 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 Company's report on
Form 8-K filed with the Commission on May 12, 1995.
Roche currently has the right to designate three directors for nomination
to the Board of Directors. If Roche's ownership of the Common Stock were to fall
below 30% but remain at least 20%, Roche would have the right to designate two
directors as nominees to the Board of Directors. If such ownership were to fall
between 20% and 10%, Roche would have the right to designate one director.
Currently, the Board of Directors is comprised of seven members.
If Roche's ownership were to fall below 10%, Roche's rights under the
Stockholder Agreement would terminate with respect to (i) changing the total
number of members of the Board of Directors, (ii) designating a replacement
director upon the death, resignation or retirement of a director selected by
Roche, (iii) causing the Board of Directors to create vacancies on the Board
for Roche's designated directors, (iv) voting and solicitation of votes, (v)
directors serving on the Board committees, (vi) vacancies on Board committees
and the management committee and (vii) action taken to conform the Company's
Certificate of Incorporation and By-laws to the Stockholder Agreement.
Roche's right to (i) have its shares included in a registration statement
which the Company prepares and (ii) have the Company furnish it with certain
financial information, would terminate if Roche's ownership were to fall below
20%. If Roche ceased to own any Registrable Securities (as defined under the
Stockholder Agreement), then (i) all of its registration rights and (ii)
covenants of the Company in its favor with respect to transfers made by Roche
pursuant to Rule 144A under the Securities Act of 1933 under the Stockholder
Agreement would terminate.
Except as specified above, all of Roche's rights under the Stockholder
Agreement would terminate if its ownership were to fall below 30%. For the
purposes of this section, the term "ownership" means the percentage of Total
Voting Power, determined on the basis of the number of shares of Voting Stock
actually outstanding, that is controlled, directly or indirectly, by Roche and
its affiliates (as such terms are defined in the Stockholder Agreement, as it
may be amended from time to time).
Certain Transactions with Roche
The Company has certain on-going arrangements with Roche for the purchase
by the Company of certain products and the licensing by the Company from Roche
of certain diagnostic technologies, with an aggregate value of approximately
$42.7 million in 2000. In addition, the Company made royalty payments to Roche
in the amount of approximately $2.8 million in 2000. 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 $1.3 million in 2000. 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.
21
Certain Transactions with TriPath Imaging, Inc. (formerly known as AutoCyte,
Inc.)
Dr. Powell is the former President and Chief Executive Officer of TriPath
Imaging, Inc. ("TriPath") and had a beneficial ownership of approximately 4.0%
of TriPath's common stock at December 31, 2000.
The Company has certain on-going arrangements with TriPath for the
purchase by the Company of certain products with an aggregate value of
approximately $0.5 million in 2000.
STOCKHOLDER PROPOSALS
Under the rules and regulations of the Commission as currently in effect,
any holder of at least $2,000 in market value, or 1% 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 2001 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. Such holder must continue to hold his
Common Stock through the date of the meeting. Proposals of stockholders intended
to be presented at the next annual meeting must be received by Bradford T.
Smith, Secretary, Laboratory Corporation of America Holdings, 358 South Main
Street, Burlington, North Carolina 27215, no later than December 28, 2001. This
date was based on a planned meeting date in late May 2002.
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.
22
ADDITIONAL INFORMATION
The Company will make available a copy of the 2000 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 (April 18, 2001), 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
LOGO
Bradford T. Smith
Secretary
April 26, 2001
23
Annex I
SECOND AMENDMENT TO LABORATORY CORPORATION OF
AMERICA HOLDINGS 1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
This Second Amendment ("Amendment") to the Laboratory Corporation of
America Holdings 1995 Stock Plan for Non-Employee Directors (the "Plan") made
this 10th day of April, 2001 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 extend the expiration date of the Plan;
NOW THEREFORE, subject to shareholder approval, the Board of Directors
hereby adopts this Amendment upon the following terms and conditions.
1. The second sentence of Section 11 shall be deleted and replaced with
the following sentence:
The Plan shall terminate on June 30, 2006, unless the Plan is extended or
terminated at an earlier date by shareholders or by exhaustion of the Shares
available for issuance thereunder.
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
1
STOCKHOLDERS' 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
Paramount Theater, 128 East Front Street, Burlington, NC, 27215 on Thursday,
May 24, 2001 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 and Item 4. 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.)
2
The Board of Directors recommends that you vote "FOR" all the nominees listed
under Item No. 1 and "FOR" Item No. 2, Item No. 3, and Item No. 4.
FOR ALL WITHHOLD AUTHORITY
1. Election of all NOMINEES for all nominees
the members of the
Company's Board of
Directors. [_] [_]
For, except vote withheld from the following nominee(s).
- ---------------------------------------------------------
Nominees: 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.
FOR AGAINST ABSTAIN
2. Approval of the Amendment [_] [_] [_]
to the Laboratory Corporation
of America Holdings Certificate
of Incorporation
3. Approval of the Amendment [_] [_] [_]
to the Laboratory Corporation
of America Holdings 1995
Non-Employee Director Stock Plan
4. Ratification of the appointment [_] [_] [_]
of PricewaterhouseCoopers LLP
as Laboratory Corporation of
America Holdings' independent
accountants for 2001.
SHAREHOLDER NAME AND ADDRESS
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 signing. If the
shareholder is a corporation, please sign the full corporate name, by duly
authorized officer. If shares are held jointly, each shareholder should sign.
Date and promptly return the card in the envelope provided.
3