[Letterhead of National Health Laboratories Incorporated]
April 26, 1994
To Our Stockholders:
You are cordially invited to attend the 1994 Annual Meeting of Stockholders of
National Health Laboratories Incorporated to be held at the Sheraton Music City
Hotel, 777 McGavock Pike at Century City, Nashville, Tennessee 37214, on
Tuesday, June 7, 1994 at 10:30 a.m. Central time.
The business of the meeting will be to consider approval of the formation of a
holding company structure for the Company through a merger, to elect directors,
to consider approval of the Company's 1994 Stock Option Plan and to ratify the
selection of independent auditors for 1994.
While stockholders may exercise their right to vote their shares in person, we
recognize that many stockholders may not be able to attend the annual meeting.
Accordingly, we have enclosed a proxy which will enable you to vote your shares
on the issues to be considered at the annual meeting even if you are unable to
attend. All you need to do is mark the proxy to indicate your vote, date and
sign the proxy, and return it in the enclosed postage-paid envelope as soon as
conveniently possible. If you desire to vote in accordance with management's
recommendations, you need not mark your votes on the proxy but need to sign,
date and return it in the enclosed postage-paid envelope in order to record
your vote.
Sincerely,
/s/ James R. Maher
James R. Maher
President and
Chief Executive Officer
NATIONAL HEALTH LABORATORIES INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
National Health Laboratories Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders of
National Health Laboratories Incorporated, a Delaware corporation (the
"Company"), will be held on the 7th day of June 1994 at 10:30 a.m., local time,
at the Sheraton Music City Hotel, 777 McGavock Pike at Century City, Nashville,
Tennessee 37214, for the following purposes:
1. To approve a proposed corporate reorganization of the Company in
which National Health Laboratories Holdings Inc., a newly formed, wholly owned
subsidiary of the Company, will become the parent holding company of the
Company as described herein.
2. To elect all 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.
3. To ratify the selection of KPMG Peat Marwick as the Company's
independent auditors for 1994.
4. To approve and adopt the National Health Laboratories Incorporated
1994 Stock Option Plan.
5. To transact such other business as may properly come before the
annual meeting or at any adjournments thereof.
A proxy statement/prospectus 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 25, 1994 are entitled to notice of, and to vote
at, the annual meeting and at any adjournments thereof.
To ensure that your vote will be counted, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed prepaid
envelope, whether or not you plan to attend the annual meeting.
By Order of the Board of Directors
/s/ Alvin Ezrin
Alvin Ezrin
Secretary
April 26, 1994
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. THIS WILL ENSURE THAT YOUR
SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES.
THIS DOCUMENT IS A PROXY STATEMENT FOR THE ANNUAL MEETING
OF STOCKHOLDERS OF NATIONAL HEALTH LABORATORIES INCORPORATED
AND A PROSPECTUS OF NATIONAL HEALTH LABORATORIES HOLDINGS INC.
NATIONAL HEALTH LABORATORIES INCORPORATED
NATIONAL HEALTH LABORATORIES HOLDINGS INC.
-----------------------------------------
SHARES OF COMMON STOCK
OF
NATIONAL HEALTH LABORATORIES HOLDINGS INC.
-----------------------------------------
This Proxy Statement/Prospectus is being furnished in connection with
the solicitation by the Board of Directors of National Health Laboratories
Incorporated (the "Company") of proxies to be voted at the annual meeting of
stockholders to be held on the 7th day of June 1994 at 10:30 a.m., local time,
at the Sheraton Music City Hotel, 777 McGavock Pike at Century City, Nashville,
Tennessee 37214, and at any adjournments thereof. This Proxy
Statement/Prospectus is first being sent to stockholders on or about
April 26, 1994.
At the annual meeting, the Company's stockholders will be asked (1) to
approve the Agreement and Plan of Merger attached as Exhibit A hereto (the
"Plan of Merger"), (2) to elect the following persons as directors of the
Company until the Company's next annual meeting and until such directors'
successors are elected and shall have qualified: Ronald O. Perelman, Saul J.
Farber, M.D., Howard Gittis, Ann Dibble Jordan, James R. Maher, David J.
Mahoney, Paul A. Marks, M.D., Linda Gosden Robinson and Samuel O. Thier, M.D.,
(3) to ratify the selection of KPMG Peat Marwick as the Company's independent
auditors for 1994, (4) to approve and adopt the National Health Laboratories
Incorporated 1994 Stock Option Plan (the "1994 Option Plan") and (5) to take
such other action as may properly come before the annual meeting or any
adjournments thereof.
The Board of Directors of the Company is recommending approval of the
Plan of Merger in connection with a proposed corporate reorganization that will
create a holding company structure for the Company. National Health
Laboratories Holdings Inc. ("NHL Holdings"), a wholly owned subsidiary of the
Company that has been newly formed specifically to effect the reorganization,
will become the parent holding company of the Company. All outstanding shares
of common stock of the Company will be converted on a share-for-share basis
into shares of common stock of NHL Holdings. As a result, the owners of common
stock of the Company will become the owners of common stock of NHL Holdings.
Subsequent to the reorganization, the Company will continue to carry on its
present business as a subsidiary of NHL Holdings. The Company believes the
reorganization will provide increased alternatives available for future
financing. See "Proposed Reorganization--Reasons for Reorganization."
Reference is made to "Proposed Reorganization--Certificate of
Incorporation and By-laws of NHL Holdings" and "--Description of NHL Holdings'
Common Stock" for further information concerning the securities offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/
PROSPECTUS IS APRIL 26, 1994.
AVAILABLE INFORMATION
NHL Holdings has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended, covering the shares of NHL Holdings' common stock to be
issued in connection with the reorganization provided for by the Plan of Merger
(the "Registration Statement"). This Proxy Statement/Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement and the exhibits thereto may be
inspected and copied, at prescribed rates, at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission at the following locations: 7
World Trade Center, Suite 1300, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports, proxy statements and other information filed by the Company with
the Commission may be inspected and copied, at prescribed rates, at the public
reference facilities and the regional offices maintained by the Commission at
the addresses set forth above and may be inspected at the offices of the New
York Stock Exchange (the "NYSE"), 20 Broad Street, New York, New York 10005.
Copies of such materials and the Registration Statement referred to above can
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Following the
reorganization, NHL Holdings will file reports and other information under the
Exchange Act.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1993; and
(ii) the description of the Company's common stock set forth in
the Company's registration statements filed pursuant to Section 12 of the
Exchange Act, and any amendment or report filed for the purpose of updating any
such description.
All documents and reports filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the annual meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and
to be a part hereof from the dates of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of shares of common stock of the Company, to whom this
document is delivered, upon written or oral request, a copy of any and all of
the information that has been incorporated by reference in this document (not
including exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
2
that this document incorporated). Written or telephone requests for copies of
such material should be directed to National Health Laboratories Incorporated,
4225 Executive Square, Suite 800, La Jolla, California 92037, Attention:
Secretary (telephone: (619) 550-0600).
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST DIRECTED TO THE COMPANY AT THE ADDRESS OR TELEPHONE
NUMBER LISTED IN THE PRECEDING PARAGRAPH. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 31, 1994.
----------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EITHER NHL HOLDINGS OR THE COMPANY. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SHARES OF NHL HOLDINGS COMMON STOCK, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, BY ANY PERSON IN ANY JURISDICTION OR IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
3
TABLE OF CONTENTS
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 2
INFORMATION INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . 2
GENERAL INFORMATION
Solicitation and Voting of Proxies; Revocation . . . . . . . . . . . . 5
Record Date; Beneficial Ownership. . . . . . . . . . . . . . . . . . . 5
PROPOSED REORGANIZATION
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Company and NHL Holdings . . . . . . . . . . . . . . . . . . . . . 6
Terms of Reorganization; Conditions to Consummation of the
Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reasons for Reorganization . . . . . . . . . . . . . . . . . . . . . . 7
Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . . 7
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . 8
New York Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . 8
Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 8
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . 9
Certificate of Incorporation and By-Laws of NHL Holdings . . . . . . . 9
Description of NHL Holdings' Capital Stock . . . . . . . . . . . . . . 9
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ELECTION OF DIRECTORS
Nominees for Election as Directors . . . . . . . . . . . . . . . . . . 10
Board of Directors and its Committees. . . . . . . . . . . . . . . . . 11
Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . . 12
EXECUTIVE COMPENSATION AND BENEFIT PLANS
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 13
Compensation Plans and Arrangements. . . . . . . . . . . . . . . . . . 14
Retirement Benefits and Savings Plan . . . . . . . . . . . . . . . . . 15
Employee Benefits Committee Report on Executive Compensation . . . . . 16
Common Stock Performance . . . . . . . . . . . . . . . . . . . . . . . 18
Employee Benefits Committee Interlocks and Insider Participation . . . 19
Stock Option Transactions in 1993. . . . . . . . . . . . . . . . . . . 20
RATIFICATION OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . 21
1994 OPTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS. . . . . . . . . . . . 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . . . 25
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 26
OTHER BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Exhibit A Agreement and Plan of Merger . . . . . . . . . . . . . . . . A-1
4
GENERAL INFORMATION
SOLICITATION AND VOTING OF PROXIES; REVOCATION
The purposes of the annual meeting are set forth in the accompanying
Notice. 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 approval of the Plan of Merger, the
election to the Company's Board of Directors of the nine nominees for director
identified in this Proxy Statement/Prospectus, the ratification of the
selection of KPMG Peat Marwick as the Company's auditors and the adoption of
the 1994 Option Plan. Any stockholder may revoke his proxy at any time before
it is voted by written notice to such effect received by the Company at 4225
Executive Square, Suite 800, La Jolla, California 92037, Attention: Secretary,
by delivery of a subsequently dated proxy or by attending the annual meeting
and voting in person.
Solicitation of proxies may be made by mail and may also be made by
personal interview, telephone and facsimile transmission, and by directors,
officers and regular employees of the Company without special compensation
therefor. The Company expects to reimburse banks, brokers and other persons for
their reasonable out-of-pocket expenses in handling proxy materials for
beneficial owners.
A quorum for the annual meeting consists of a majority of the total
number of shares of voting securities outstanding on the record date. The
affirmative vote of a majority of the outstanding shares of the Company's
common stock is required for approval of the Plan of Merger and adoption of the
1994 Option Plan. Directors of the Company will be elected by a plurality vote
of the shares of the Company's common stock represented at the annual meeting.
The affirmative vote of a majority of the shares of the Company's common stock
represented at the annual meeting is required for the ratification of the
selection of KPMG Peat Marwick as independent auditors. At April 25, 1994, the
directors and executive officers of the Company and their affiliates owned
beneficially an aggregate of 21,229,463 shares of common stock of the Company,
representing approximately 25% of the total number of shares of common stock
outstanding.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE PLAN OF MERGER, THE ELECTION OF THE BELOW SPECIFIED NOMINEES FOR
DIRECTOR OF THE COMPANY, THE RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK
AS INDEPENDENT AUDITORS AND THE ADOPTION OF THE 1994 OPTION PLAN.
RECORD DATE; BENEFICIAL OWNERSHIP
Only holders of record of the Company's common stock at the close of
business on April 25, 1994 will be entitled to notice of and to vote at the
annual meeting. On that date, there were issued and outstanding 84,750,692
shares of common stock (not including treasury shares), each of which is
entitled to one vote. Of that total, 20,176,729 (or approximately 24%) is owned
by National Health Care Group, Inc. ("Health Care"), an indirect wholly owned
subsidiary of MacAndrews & Forbes Holdings Inc. ("M&F Holdings"), a corporation
wholly owned through Mafco Holdings Inc. ("Mafco" and together with M&F
Holdings, "MacAndrews & Forbes") by Ronald O. Perelman, Chairman of the Board
of the Company. See "Security Ownership of Certain Beneficial Holders." Health
Care has informed the Company that it will vote in favor of the approval of the
Plan of Merger, the election of the nominees to the Board of Directors
identified herein, the ratification of the selection of KPMG Peat Marwick as
the Company's independent auditors for 1994 and the adoption of the 1994 Option
Plan.
5
PROPOSED REORGANIZATION
GENERAL
The Board of Directors of the Company has unanimously approved, and
recommended that the stockholders approve, a proposed corporate reorganization
pursuant to the Plan of Merger. The reorganization will create a parent holding
company and convert the Company's outstanding common stock into common stock of
the new holding company on a share-for-share basis. The affirmative vote of a
majority of the outstanding shares of the Company's common stock is required
for approval of the Plan of Merger.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE PLAN OF MERGER.
THE COMPANY AND NHL HOLDINGS
The Company is one of the leading clinical laboratory companies in the
United States. Through a national network of laboratories, the Company offers a
broad range of testing services used by the medical profession in the
diagnosis, monitoring and treatment of disease. The Company's principal
executive offices are located at 4225 Executive Square, Suite 800, La Jolla,
California 92037, and its telephone number is (619) 550-0600.
NHL Holdings, a newly formed, wholly owned subsidiary of the Company,
was organized under the laws of the State of Delaware specifically for the
purpose of becoming the new parent holding company in the reorganization. Its
executive offices are located at the Company's principal executive offices
referred to above. NHL Holdings has newly formed a wholly owned subsidiary, NHL
Sub Acquisition Corp. ("NHL Acquisition"), specifically to effect the
reorganization. Neither NHL Holdings nor NHL Acquisition has any significant
assets or capitalization nor has engaged in any business or prior activities
other than in connection with the reorganization. The formation of the holding
company structure will be accomplished through the merger of NHL Acquisition
with and into the Company, at which time the outstanding common stock of the
Company will be deemed converted into common stock of NHL Holdings on a share-
for-share basis. The form of the Plan of Merger is attached hereto as Exhibit A
and is incorporated herein by reference.
If the Plan of Merger is approved by the stockholders and not
terminated by the Board of Directors of NHL Holdings, the reorganization will
become effective at the close of business on the date that an appropriate
certificate of merger is filed with the Delaware Secretary of State as required
by Delaware law. The Company anticipates that the reorganization will become
effective promptly following the annual meeting.
Immediately following the effective time of the reorganization, NHL
Holdings will have the same consolidated assets, liabilities and stockholders'
equity and the same directors and executive officers as the Company had
immediately prior to such date. In addition, there will be no change in the
state of incorporation from the Company to NHL Holdings since both companies
are Delaware corporations with substantially identical certificates of
incorporation and By-laws. NHL Holdings expects to continue the Company's
current quarterly dividend policy.
TERMS OF REORGANIZATION; CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
Pursuant to the Plan of Merger:
(i) NHL Acquisition will be merged into the Company, with the
Company being the surviving corporation.
(ii) Except as set forth in paragraph (iv) below, each
outstanding share of the Company's common stock will be changed and converted
into one share of common stock of NHL Holdings.
6
(iii) The outstanding shares of common stock of NHL Acquisition
will be changed and converted into the shares of the surviving corporation.
(iv) The outstanding shares of NHL Holdings' common stock and
the Company's common stock held by the Company prior to the time the
reorganization is effected will be cancelled.
As a result of the foregoing, the Company, as the surviving corporation
in the merger, will become a subsidiary of NHL Holdings, and all the common
stock of NHL Holdings outstanding immediately after the merger will be owned by
the former common stockholders of the Company. The Company will continue to own
all outstanding stock of its existing subsidiaries.
As of the effective time of the reorganization, the stockholders of the
Company prior to the effective time will automatically become owners of NHL
Holdings' common stock and, as of the effective time, will cease to be owners
of the Company's common stock. Stock certificates representing shares of the
Company's common stock will, at the effective time, automatically represent
shares of NHL Holdings' common stock. Stockholders of the Company's common
stock will not be required to exchange their stock certificates as a result of
the reorganization. Should a stockholder desire to sell shares of NHL
Holdings' common stock after the effective time, delivery of the stock
certificate or certificates which previously represented shares of the
Company's common stock will be sufficient.
Following the reorganization, certificates bearing the name of NHL
Holdings will be issued in the normal course upon surrender of outstanding
Company common stock certificates for transfer or exchange. If any stockholder
surrenders a certificate representing shares of the Company's common stock for
exchange or transfer and the new certificate to be issued is to be issued in a
name other than that appearing on the surrendered certificate theretofore
representing the Company's common stock, it will be a condition to such
exchange or transfer that the surrendered certificate be properly endorsed and
otherwise be in proper form for transfer and that the person requesting such
exchange or transfer either (i) pay NHL Holdings or its agents any taxes or
other governmental charges required by reason of the issuance of a certificate
registered in a name other than that appearing on the surrendered certificate
or (ii) establish to the satisfaction of NHL Holdings or its agents that such
taxes or other governmental charges have been paid.
The reorganization will not be consummated unless the following
conditions are satisfied: (i) approval of the Plan of Merger by the requisite
vote of stockholders of the Company; (ii) receipt of an opinion of Cravath,
Swaine & Moore, counsel to NHL Holdings and the Company, with respect to the
federal income tax consequences of the reorganization; and (iii) effectiveness
of the Registration Statement covering the shares of NHL Holdings' common stock
to be used in connection with the reorganization.
REASONS FOR REORGANIZATION
The Company has considered and continues to consider acquisitions of
laboratory companies of varying sizes, although there are currently no
definitive plans with respect to any significant acquisition. In that
connection, the agent under the Company's existing revolving credit facility
suggested that a holding company structure would provide a greater degree of
flexibility in structuring financings, and thereby permit borrowing from banks,
other financial institutions or from the securities markets more readily and on
more favorable terms than presently available to the Company. NHL Holdings
could borrow funds directly and contribute them to the Company, securing such
borrowings with a pledge of all the capital stock of the Company.
Alternatively, NHL Holdings could guarantee borrowings made by the Company with
such a pledge. Moreover, following the reorganization, NHL Holdings may create
an intermediate holding company between itself and the Company which could
borrow funds from financial institutions or in the securities markets,
similarly providing the foregoing advantages and freeing NHL Holdings from any
constraints that would be imposed as a condition to such borrowings. This
holding company structure also would provide more flexibility in that companies
could be acquired directly by NHL Holdings rather than through the Company, and
thereby remain independent of the Company's present operations and free from
any constraints on the Company imposed by credit agreements or otherwise.
AMENDMENT OR TERMINATION
The Company, NHL Holdings and NHL Acquisition, by action of their
respective Boards of Directors, may amend, modify or supplement the Plan of
Merger at any time before or after its approval by the stockholders of the
Company. After such approval, no such amendment, modification or supplement may
be made or effected that by law requires further approval by such stockholders
without the further approval of such stockholders.
7
The Plan of Merger provides that it may be terminated, and the
reorganization abandoned, at any time, whether before or after stockholder
approval of the Plan of Merger, by action of the Board of Directors of NHL
Holdings.
FEDERAL INCOME TAX CONSEQUENCES
The Company and NHL Holdings have been advised by their counsel,
Cravath, Swaine & Moore, New York, New York, that, in their opinion, for United
States federal income tax purposes, assuming that the reorganization will take
place as described in the Plan of Merger:
(i) No gain or loss will be recognized by the Company, NHL
Holdings or the stockholders of the Company upon the conversion or exchange of
the Company's common stock for NHL Holdings' common stock pursuant to the Plan
of Merger.
(ii) The tax basis of NHL Holdings' common stock received by
the Company's stockholders pursuant to the Plan of Merger will be the same as
their tax basis in the Company's common stock converted or exchanged.
(iii) The holding period of NHL Holdings' common stock to be
received by the Company's stockholders in connection with the Plan of Merger
will include the period during which the Company's common stock being converted
or exchanged was held, provided that the Company's common stock is held as a
capital asset in the hands of the stockholder at the effective time.
Although it is not anticipated that state or local income tax
consequences to stockholders will vary substantially from the federal income
tax consequences described above, stockholders of the Company are urged to
consult with their own tax advisors with respect thereto, as well as with
respect to any foreign taxes applicable to foreign stockholders.
NEW YORK STOCK EXCHANGE LISTING
The common stock of NHL Holdings has been approved for listing on the
NYSE, subject to official notice of issuance and stockholder approval, under
the same symbol ("NH") as the Company's common stock. At the effective time of
the reorganization, the Company's common stock will cease to be listed on the
NYSE. As a practical matter, current owners of the Company's common stock will
continue to be able to sell their shares of the Company's common stock (or,
after the effective time, NHL Holdings' common stock) on the NYSE without
interruption.
STOCK OPTION PLANS
If the reorganization is consummated, the Company's stock option plans
(including, if approved, the 1994 Option Plan) will be amended if necessary to
cover any eligible employees of NHL Holdings and its subsidiaries and to
provide that NHL Holdings' common stock will thereafter be issued by NHL
Holdings upon exercise of any options issued thereunder. Stockholder approval
of the reorganization constitutes approval of NHL's assumption of the
obligations of the Company under the stock option plans. The retirement and
other employee benefit plans of the Company will be similarly revised or
amended, as necessary.
REGULATORY APPROVALS
The consummation of the transactions described herein do not require
the approval of, or compliance with rules promulgated by, any federal or state
regulatory authority.
APPRAISAL RIGHTS
Pursuant to Section 262 of the Delaware General Corporation Law, the
stockholders of the Company will not have appraisal rights with regard to the
reorganization.
8
DIVIDENDS
Quarterly dividends on NHL Holdings' common stock are expected to be
paid on approximately the same terms and dates as currently applicable to
dividends on the Company's common stock. Future dividends on NHL Holdings'
common stock will depend upon the earnings, financial conditions and other
factors of NHL Holdings and its subsidiaries. The quarterly dividend most
recently declared by the Board of Directors of the Company was $0.08 per share,
payable on April 26, 1994 to holders of record of the Company's common stock on
April 5, 1994.
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of NHL Holdings, upon the effectiveness of the
reorganization, is to consist of those persons who, at the effective time of
the reorganization, are serving as directors of the Company, each to have the
term of office for which he or she was elected or appointed. NHL Holdings'
executive officers are now, and upon the effectiveness of the reorganization
are expected to be, the same as those persons who are presently employed as
executive officers of the Company.
CERTIFICATE OF INCORPORATION AND BY-LAWS OF NHL HOLDINGS
The Certificate of Incorporation and By-laws of NHL Holdings have been
prepared in accordance with the Delaware General Corporation Law and do not
differ in any material respect from the Restated Certificate of Incorporation
and By-laws of the Company. The Company's certificate of incorporation and By-
laws are included in the materials incorporated by reference in this Proxy
Statement/Prospectus and NHL Holdings' certificate of incorporation and By-laws
are included as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus forms a part.
As of the effective time of the reorganization, Article FOURTH of the
Company's certificate of incorporation will be amended so that the authorized
number of shares which the Company may issue will be one thousand (1,000).
DESCRIPTION OF NHL HOLDINGS' CAPITAL STOCK
There are no material differences between the terms of the capital
stock of NHL Holdings and the capital stock of the Company. After the effective
time of the reorganization, the number of shares of NHL Holdings' common stock
outstanding will equal the number of shares of the Company's common stock
outstanding immediately prior to the effective time. Following the effective
time, NHL Holdings will also have the same number of shares of preferred stock
authorized (with none being outstanding) as will be the case with respect to
the Company immediately prior to the effective time.
All shares of NHL Holdings' common stock will participate equally with
respect to dividends and rank equally upon liquidation, subject to the rights
of holders of any prior ranking stock which may be subsequently authorized and
issued. In the event of liquidation, dissolution or winding up of NHL Holdings,
the owners of its common stock are entitled to receive pro rata the assets and
funds of NHL Holdings remaining after satisfaction of all creditors of NHL
Holdings and payment of all amounts to which owners of prior ranking stock, if
any, then outstanding may be entitled. Each share of NHL Holdings' common stock
is entitled to one vote.
The Transfer Agent and Registrar for NHL Holdings' common stock will be
the same as is presently serving in such capacity for the Company's common
stock: American Stock Transfer & Trust Co.
LEGAL OPINIONS
The legality of the shares of common stock of NHL Holdings being issued
will be passed upon by Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth
Avenue, New York, New York.
9
ELECTION OF DIRECTORS
All the Company's directors will be elected at the annual meeting to
serve until the next succeeding annual meeting of the Company and until their
successors are elected and shall have qualified. All the below listed nominees
are currently members of the Board of Directors and, except as herein stated,
the proxies solicited hereby will be voted FOR the election of such nominees.
All nominees, if elected, are expected to serve until the next succeeding
annual meeting. Directors of the Company will be elected by a plurality vote of
the outstanding shares of Company common stock present in person or represented
by proxy at the annual meeting. Under applicable Delaware law, in tabulating
the vote, broker non-votes will be disregarded and have no effect on the
outcome of the vote.
The Board has been informed that all persons 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 will vote for the election of
such other person or persons as they, in their discretion, may choose. The
Board has no reason to believe that any such nominees will be unable or
unwilling to serve.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF EACH
OF THE BELOW LISTED NOMINEES FOR DIRECTOR.
NOMINEES FOR ELECTION AS DIRECTORS
The name, age, principal occupation for the last five years, selected
biographical information and period of service as a director of the Company of
each director are set forth below.
RONALD O. PERELMAN (51) has been Chairman of the Board and Director of
the Company since 1988. Mr. Perelman has been Chairman of the Board and Chief
Executive Officer of MacAndrews & Forbes for more than the past five years. Mr.
Perelman also is Chairman of the Board of Andrews Group Incorporated ("Andrews
Group"), Consolidated Cigar Corporation ("Consolidated Cigar"), New World
Communications Group Incorporated ("New World Communications"), Mafco Worldwide
Corporation ("Mafco Worldwide"), Marvel Entertainment Group, Inc. ("Marvel"),
Revlon Consumer Products Corporation ("Revlon Products") and New World
Television Incorporated ("NWTV"). Mr. Perelman is a director of the following
corporations which file reports pursuant to the Securities Exchange Act of
1934: Andrews Group, The Coleman Company, Inc. ("Coleman"), Coleman Holdings
Inc., Coleman Worldwide Corporation, Consolidated Cigar, Mafco Worldwide,
Marvel, Marvel Holdings Inc. ("Marvel Holdings"), Marvel (Parent) Holdings Inc.
("Marvel Parent"), Marvel III Holdings Inc. ("Marvel III"), Revlon Products,
Revlon Worldwide Corporation and NWTV.
SAUL J. FARBER, M.D. (76) has been a Director of the Company since
1988. He has been Chairman of the Department of Medicine of the New York
University School of Medicine since 1966; Frederick H. King Professor of
Medicine since 1978 and Dean of the School of Medicine since 1987.
HOWARD GITTIS (60) has been a Director of the Company since 1988. He
has been Vice Chairman and a Director of MacAndrews & Forbes and various
affiliates since 1985. Mr. Gittis also is a Director of Andrews Group,
Consolidated Cigar, Mafco Worldwide, Revlon Products, Revlon Worldwide, New
World Communications, NWTV, Jones Apparel Group, Inc. and Loral Corporation.
ANN DIBBLE JORDAN (59) has been a Director of the Company since 1990.
She is a consultant and was previously Field Work Assistant Professor, School
of Social Service Administration, University of Chicago from 1970 to 1987. Ms.
Jordan also is a Director of Johnson & Johnson Corporation, Capital Cities--
ABC, Inc., Primerica, Inc., Salant Corp., The Hechinger Company and Automatic
Data Processing, Inc.
10
JAMES R. MAHER (44) has been President, Chief Executive Officer and a
Director of the Company since December 1992. Mr. Maher was Vice Chairman of The
First Boston Corporation from 1990 to 1992 and Managing Director of The First
Boston Corporation since 1982. Mr. Maher also is a director of First Brands
Corporation.
DAVID J. MAHONEY (70) has been a Director of the Company since 1988. He
has been President of David Mahoney Ventures since 1983 and was Chairman of
Norton Simon, Inc. for more than five years prior to 1983. Mr. Mahoney also is
a Director of NYNEX Corporation, The Dreyfus Corporation and Bionaire Inc.
PAUL A. MARKS, M.D. (67) has been a Director of the Company since 1991.
He has been President and Chief Executive Officer of Memorial Sloan-Kettering
Cancer Center since 1980. He has been a Professor of Medicine at Cornell
University Medical College since 1982 and a Professor at Cornell University
Graduate School of Medical Sciences since 1983. He is a member of the National
Academy of Sciences and American Academy of Arts and Sciences. Dr. Marks also
is a Director of Pfizer, Inc., several Dreyfus Mutual Funds, Life Technologies,
Inc. and Tularik, Inc.
LINDA GOSDEN ROBINSON (41) has been a Director of the Company since
1990. She has been President and Chief Executive Officer of Robinson, Lake,
Lerer & Montgomery/Sawyer Miller Group since 1986 and was Senior Vice
President, Corporate Affairs, of Warner Cable Communications, Inc. from 1983 to
1986. Ms. Robinson also is a Director of Bozell, Jacobs, Kenyon & Eckhardt,
Inc. and the Coro Foundation. She is a Trustee of New York University Medical
Center.
SAMUEL O. THIER, M.D. (56) has been a Director of the Company since
1992. He has been President of Brandeis University since 1991 and, commencing
June 1, 1994, Dr. Thier will become President and Chief Executive Officer of
Massachusetts General Hospital. Dr. Thier was President of the Institute of
Medicine of the National Academy of Sciences from 1985 to 1991. From 1966 to
1985 Dr. Thier served on the faculties of the medical schools at Harvard
University, University of Pennsylvania and Yale University. At Yale University,
Dr. Thier was Chairman of the Department of Internal Medicine from 1975 through
1985.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Executive Committee, an Audit Committee,
an Employee Benefits Committee, an Ethics and Quality Assurance Committee and a
Nominating Committee.
The Executive Committee consists of Messrs. Perelman, Gittis and Maher.
The Executive Committee may exercise all the powers and authority of the Board,
except as otherwise provided under the corporation law of Delaware. The Audit
Committee, consisting of Dr. Farber, Ms. Jordan and Dr. Marks, makes
recommendations 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. The Ethics and Quality
Assurance Committee consists of Mr. Gittis, Dr. Farber and Ms. Jordan. The
Ethics and Quality Assurance Committee will be responsible to ensure that the
Company adopts and implements procedures that require the Company's employees
to act in accordance with high ethical standards and deliver high quality
services. The Ethics and Quality Assurance Committee was formed in February
1994 and did not meet in 1993. The Employee Benefits Committee, consisting of
Dr. Farber, Messrs. Gittis and Mahoney, Ms. Robinson and Dr. Thier, makes
recommendations to the Board regarding compensation, benefits and incentive
arrangements for officers and other key managerial employees of the Company.
The Employee Benefits Committee may consider and recommend awards of options to
purchase shares of common stock pursuant to the Company's 1988 Stock Option
Plan and, subject to stockholder approval as discussed herein, the 1994 Option
Plan. The Nominating Committee, consisting of Mr. Perelman, Ms. Jordan, Ms.
11
Robinson and Dr. Thier, makes recommendations to the Board regarding the
qualifications for directors and procedures for identifying possible nominees.
The Nominating Committee also reviews the performance of current directors and
evaluates the appropriate size and composition of the Board.
During 1993, the Board of Directors held nine meetings and the
Executive Committee held six meetings. In 1993, the Board of Directors acted
once by unanimous written consent of all members thereof and the Executive
Committee acted 16 times by unanimous written consent of all members thereof,
each in accordance with the Company's by-laws and the corporation law of
Delaware. The Employee Benefits Committee held six meetings and acted once by
unanimous written consent, the Audit Committee held seven meetings and the
Nominating Committee held one meeting in 1993. During 1993 no director attended
fewer than 75% of the meetings of the board and the committees of which he or
she is a member.
COMPENSATION OF DIRECTORS
Directors who are not currently receiving compensation as officers or
employees of the Company or any of its affiliates are paid an annual $25,000
retainer fee, payable in monthly installments, and a fee of $1,000 for each
meeting of the Board of Directors or any committee thereof they attend.
12
EXECUTIVE COMPENSATION AND BENEFIT PLANS
EXECUTIVE COMPENSATION
The compensation paid by the Company to its Chief Executive Officer and
each of the Company's four most highly compensated executive officers for
services during the year ended December 31, 1993 was as follows:
Summary Compensation Table
Long
Term
Compen-
sation
Annual Compensation Awards
-----------------------------------------------------------------------------
All Other
Options/ Compensa-
Name and Principal Position Year Salary($)(a) Bonuse($)(b) SARs (#) tion ($)(c)
- --------------------------- --- ----------- ------------ -------- ------------
James R. Maher - President and
Chief Executive Officer 1993 $ 1,000,000 $ 500,000 0 $29,136
1992 $ 34,616 $1,662,500 300,000
1991 - - - $ 0
David C. Flaugh - Senior Exec- 1993 507,683 400,000 125,000 13,865
utive Vice President and Chief 1992 267,117 265,000 0 9,287
Operating Officer 1991 248,655 400,000 16,500 -
Timothy J. Brodnik - Executive 1993 325,000 262,500 50,000 11,334
Vice President 1992 238,046 243,800 0 10,007
1991 217,497 284,000 11,500 -
W. David Slaunwhite, Ph.D. - 1993 324,615 282,500 50,000 11,397
Executive Vice President 1992 267,117 265,000 0 94,644
1991 247,501 470,000 16,500 -
Bernard E. Statland, M.D., 1993 457,500 252,500 50,000 17,219
Ph.D. - Executive Vice Presi- 1992 386,243 365,000 0 15,482
dent 1991 366,340 390,000 16,500 -
- ----------
(a) Includes salary paid or accrued for each indicated year.
(b) Includes bonus accrued or paid for each indicated year and other payments made pursuant to employment agreements. The 1992
amount for Mr. Maher represents the value, on the date of grant, of 100,000 shares of the Company's common stock granted in
1992.
(c) Reflects the following: (i) relocation expenses in 1993 for Mr. Maher of $14,001 and in 1992 for Dr. Slaunwhite of $84,365;
(ii) life insurance premiums of $8,060 in 1993 for Mr. Maher, $6,790 in 1993 and $3,414 in 1992 for Mr. Flaugh, $4,259 in 1993
and $3,141 in 1992 for Mr. Brodnik, $4,322 in 1993 and $3,413 in 1992 for Dr. Slaunwhite and $10,144 in 1993 and $8,616 in
1992 for Dr. Statland; (iii) 401(a) and (k) contributions in 1993 of $7,075 for each of such individuals named in the table
and in 1992 of $5,873 for Mr. Flaugh and $6,866 for each of Mr. Brodnik, Dr. Slaunwhite and Dr. Statland.
13
COMPENSATION PLANS AND ARRANGEMENTS
The Company has an employment agreement with Mr. Maher which provides
for his employment as President and Chief Executive Officer of the Company
through December 31, 1995 at an annual salary of $1,000,000 and an annual year-
end retention bonus of $500,000. In addition, Mr. Maher is eligible to receive
an additional bonus as may be awarded at the sole discretion of the Board of
Directors or the Employee Benefits Committee. If the employment agreement with
Mr. Maher is terminated by the Company without cause or by Mr. Maher for
certain specified reasons (for example, assignment of duties inconsistent with
his position as Chief Executive Officer, reduction in base salary or bonus, or
relocation) or upon a Change of Control of the Company, the Company will be
required to pay Mr. Maher in a lump sum of $3,000,000. For this purpose, a
"Change of Control" is deemed to occur if Mr. Perelman ceases beneficially to
own 5% or more of the combined voting power of the Company's then outstanding
securities.
The Company has an amended employment agreement with Mr. Flaugh which
provides for Mr. Flaugh to be employed through December 31, 1995 at a base
salary of $500,000 per annum, an annual year-end retention bonus equal to 50%
of base salary and discretionary bonuses each year to be determined in light of
his and the Company's performance, with a one year period of non-competition
following termination of employment. Mr. Flaugh is entitled to receive a
$150,000 lump sum payment in December 1994 if he is then employed by the
Company.
The Company has amended employment agreements with Mr. Brodnik, Dr.
Statland and Dr. Slaunwhite which provide for them to be employed through
December 31, 1996, December 31, 1995 and December 31, 1996, respectively, at a
base salary of $325,000 per annum, an annual year-end retention bonus equal to
50% of base salary and discretionary bonuses each year to be determined in
light of each individual's and the Company's performance, with a one year
period of non-competition following termination of employment. Pursuant to the
employment agreements, Mr. Brodnik, Dr. Statland and Dr. Slaunwhite are
entitled to receive lump sum payments of $100,000, $90,000 and $120,000,
respectively, in December 1994, in each case only if the executive is then
employed by the Company. In addition, Dr. Statland is employed by the Company
as Chairman of the Company's Board of Scientific Advisors at a base salary of
$132,500 per annum. The Company has an employment agreement with Michael L.
Jeub which provides for Mr. Jeub to be employed as Executive Vice President and
Chief Financial Officer of the Company through June 30, 1995 at a base salary
of $250,000 per annum through the end of the term and an annual guaranteed
retention bonus equal to 50% of the base salary.
14
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
Five year average
Compensation (1) 10 Years(2) 15 Years(2) 20 Years(2) 25 Years(2) 30 Years(2)
- ---------------- ----------- ----------- ----------- ----------- -----------
$ 50,000 $ 6,932 $ 10,398 $ 13,864 $ 17,330 $ 20,796
100,000 16,283 24,425 32,567 40,709 48,851
150,000 25,643 38,465 51,287 64,109 76,931
200,000 35,003 52,505 70,006 87,508 105,011
250,000 44,363 66,545 88,726 110,908 133,091
300,000 53,723 80,585 107,446 134,308 161,171
- ----------
(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 table is 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 National Health
Laboratories Incorporated, a participating subsidiary or with Revlon prior to
1992, 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 $115,641 for 1993 (except to the extent a larger benefit had accrued
as of December 31, 1982) and $118,800 for 1994, 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 is adjusted
annually; for 1993 the limit was $235,840 and for 1994 is reduced to $150,000
due to provisions of the Omnibus Budget Reconciliation Act of 1993. 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 Plan is designed to provide for the payment of the
difference, if any, between the
15
amount of such maximum limitation and the annual benefit that would be payable
under the Retirement Plan but for such limitation.
As of December 31,1993, credited years of service under the retirement
plans for the following individuals are for Mr. Maher-none, Mr. Flaugh-21
years, Dr. Slaunwhite-11 years, Dr. Statland-1 year and Mr. Brodnik-20 years.
EMPLOYEE BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Employee Benefits Committee of the Board of Directors (the
"Committee") is comprised of Saul J. Farber, M.D., Howard Gittis, David J.
Mahoney, Linda Gosden Robinson and Samuel O. Thier, M.D. The Committee's duties
include determination of the Company's compensation and benefit policies and
practices for executive officers and key managerial employees. The Committee
also considers and awards options to purchase shares of the Company's common
stock pursuant to the Company's 1988 Stock Option Plan and the 1994 Option
Plan, subject to stockholder approval. In accordance with rules established by
the Commission, the Company is required to provide certain data and information
in regard to the compensation provided to the Company's Chief Executive Officer
and the four other most highly compensated executive officers. The Committee
has prepared the following report for inclusion in this Proxy
Statement/Prospectus.
Compensation Policies. The Company's current compensation arrangements
for senior executives are significantly affected by the Company's long history
as a private company until the 1988 initial public offering, after which an
Employee Benefits Committee was established. The overall compensation program
for officers historically emphasized a strong base salary position in relation
to competitive practice and a competitive annual bonus opportunity dependent
upon the operating income performance of the corporation. In contrast to the
Company's highly competitive cash compensation policy, the Company did not
offer long-term incentive opportunities as an executive compensation element
until 1989 when the first stock option awards were made. The Committee
understands that the combination of strongly competitive cash compensation and
modest use of long-term incentives is typical of private companies with
professional management leadership and this historical approach continued to
influence the Company's programs as a public company from 1989 into 1992. Late
in 1992, with the appointment of James R. Maher as President and Chief
Executive Officer, the Company's compensation philosophy changed to make a
greater portion of executive compensation dependent on the Company's long-term
stock performance.
The option grant and stock award approved in December 1992 by the
Committee for Mr. Maher reflected a shift in the Company's compensation
philosophy. This was followed early in 1993 by an award of stock options to the
next four most highly compensated officers. In 1993, the Committee also granted
options in varying amounts to 133 other senior and mid-level managers. The
option awards at all levels of management is a part of the Committee's desire
to make a growing and more significant portion of senior executive compensation
directly dependent on the Company's long term share price appreciation. The
number of options granted in 1993 to each of the four senior executives named
in the cash compensation table were determined considering the Corporation's
relatively low historical option grants, the Committee's desire to make a
greater proportion of the senior executives' compensation equity-based, an
analysis of the potential value of the options over the term of the option and
a review of option grants at the peer companies listed in the stock performance
graph.
In 1992, after consultations with Mr. Maher, the Committee decided to
raise the senior executive base salary levels and to restructure the annual
bonus opportunity as the combination of a cash year-end retention bonus equal
to 50% of base salary and a performance bonus opportunity. The general effect
of these salary and bonus actions was to set the overall cash compensation
opportunity for senior executives at or below 1992 levels, while strengthening
the retentive elements of the compensation package. When these arrangements
were established it was anticipated that the performance bonus would be based
on achieving operating income growth and the contribution of each senior
executive as evaluated by the Chief Executive Officer and approved by the
Committee.
16
The Committee believes that each of the four most highly compensated
senior executives of the Company have demonstrated superior performance in 1993
during a difficult period for the Company in the aftermath of the government
settlement and the general uncertainty in the medical services marketplace.
Notwithstanding such performance, however, given industry conditions and the
effects of the changes in the industry on the Company's results, the Committee
believes that it would not be appropriate to award any discretionary bonus
above the year end retention bonus nor to increase any compensation levels for
senior executives at this time.
Compensation of Chief Executive Officer. The compensation arrangement
with the Company's President and Chief Executive Officer was entered into in
December 1992. At that time, the Committee considered the salary and incentive
pay levels at public companies whose financial characteristics and market
capitalization are similar to the Company and whose workforce skills
requirements and customer base are similar. The Committee also considered the
Company's circumstances and special leadership challenges in the aftermath of
the settlement with the federal government. In the Committee's judgment, these
circumstances required stable new direction at the chief executive officer
level to help ensure sustained quality of the Company's services and continued
employee commitment to the Company's objectives.
Based on these considerations and the Company's strategic direction for
executive compensation, it was determined to provide a cash compensation
arrangement for the Chief Executive consisting of an annual salary of $1
million, a year-end retention bonus of $500,000 for each year of the contract
term and an annual discretionary performance bonus opportunity. The Committee
also determined that it was important to structure the Chief Executive
Officer's total compensation package to reflect the policy of creating strong
financial incentives for executive officers to achieve a high level of long
term shareholder return. Accordingly, the Chief Executive Officer was awarded
100,000 shares of the Company's common stock and granted options to purchase
300,000 shares at the then fair market value of the shares, which options vest
during the term of the three year contract. The Committee views the common
stock and stock option awards as the primary means by which the Chief Executive
Officer would be rewarded for the Company's business success and believes it is
important for the Chief Executive Officer to maintain and increase his equity
interest in the Company. The annual discretionary bonus opportunity was adopted
as a special recognition vehicle appropriate for years in which the Company
achieves superior performance as measured against industry results for growth
in operating income and revenues. The Committee decided that with respect to
1993, Mr. Maher, like the other senior executives, would receive no
discretionary cash bonus in excess of his year end retention bonus.
Limit on Deductibility of Compensation. The Omnibus Budget
Reconciliation Act of 1993 ("OBRA") limits the tax 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, however, including
qualifying performance-based compensation and compensation arrangements entered
into prior to February 17, 1993 are excluded from the limitation. The Company's
general policy is to preserve the tax deductibility of compensation paid to its
executive officers. OBRA recognizes stock option plans as performance-based if
such plans meet certain requirements. The Company's 1994 Option Plan that will
be voted upon at the annual meeting of stockholders is structured to meet the
requirements of OBRA. In future years, the Compensation Committee will consider
taking such steps as it deems necessary to qualify compensation so as not to be
subject to the limit on deductibility.
The Employee Benefits Committee
Saul J. Farber, M.D.
Howard Gittis
David J. Mahoney
Linda Gosden Robinson
Samuel O. Thier, M.D.
17
COMMON STOCK PERFORMANCE
The Commission requires a five-year comparison of stock performance for
the Company with stock performance of appropriate similar companies. The
Company's common stock is traded on the NYSE. Set forth below is a line graph
comparing the yearly percentage change in the cumulative total shareholder
return on the Company's common stock and the cumulative total return on the S&P
Composite-500 Stock Index and a peer group of companies. The peer group of
companies includes eighteen companies selected by the Company. Two of these are
medical service laboratories like the Company - Nichols Institute and Unilab
Corporation. (Other direct competitors of the Company are subsidiaries of much
larger diversified corporations which were not believed appropriate to be peer
companies.) The remaining fifteen companies are all publicly traded medical
service and medical supply companies with sales ranging from $400 million to
$1.6 billion - Continental Medical Systems, Inc., Universal Health Services,
Inc., Charter Medical Corporation, Columbia Hospital Corporation, Allergan,
Inc., C. R. Bard, Inc., Pall Corporation, Thermo Electron Corporation, United
States Surgical Corporation, Bausch & Lomb Incorporated, Millipore Corporation,
Amsco International, Inc., Beckman Instruments, Inc., FHP International
Corporation and Fisher Scientific International, Inc. (Damon Corporation which
had been included in the Company's peer group in the 1993 Proxy Statement is no
longer a public company and is therefore not included in the peer group.)
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG NATIONAL HEALTH LABORATORIES, THE S & P 500 INDEX AND A PEER GROUP
(IN DOLLARS)
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
National Health Laboratories.... 156 153 410 255 208
Peer Group...................... 126 144 258 235 207
S & P 500....................... 132 128 166 179 197
- ---------
* $100 INVESTED ON 12/31/88 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
18
EMPLOYEE BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Employee Benefits Committee are Saul J. Farber,
M.D., Howard Gittis, David J. Mahoney, Linda Gosden Robinson and Samuel O.
Thier, M.D. No member of the Employee Benefits Committee is an officer or
employee of the Company.
Certain Director Relationships. Robinson, Lake, Lerer &
Montgomery/Sawyer Miller Group, the corporate communications firm of which Ms.
Robinson is President and Chief Executive Officer performs corporate
communications services for MacAndrews & Forbes and its affiliates, including
the Company. The amount of compensation paid to Robinson, Lake for services to
the Company in 1993 was $180,705. On September 17, 1993, the Company purchased
66% of the common stock of a newly-formed corporation, Health Partners, Inc.
("Health Partners"), which was formed to make acquisitions in the health care
industry. Ms. Robinson purchased 2% of the common stock of Health Partners and,
in connection with such purchase, entered into a consulting agreement with
Health Partners. Ms. Robinson currently receives no cash compensation for her
consulting services to Health Partners. A portion of Ms. Robinson's common
stock is held in escrow by Health Partners subject to vesting during the term
of her consulting agreement. In January 1993, the Company entered into an
agreement with Macalester Partners Ltd. ("Macalester"), a corporation in which
Ms. Robinson is a stockholder, pursuant to which Macalester will provide
consulting services to the Company in identifying investment opportunities for
the Company in the health care sector. The agreement with Macalester was
terminated as of September 7, 1993 in connection with the formation of Health
Partners. For its services, the Company paid Macalester $525,000 in 1993. Ms.
Robinson is the wife of a consultant to MacAndrews & Forbes who receives
$250,000 per annum for his services to MacAndrews & Forbes.
Ms. Jordan is the wife of a director of a subsidiary of MacAndrews &
Forbes who is a partner in a law firm that has on a regular basis in the past
provided services and that continues to provide services to MacAndrews & Forbes
and its affiliates, including the Company. The amount of fees and disbursements
charged to the Company for services performed by such firm in 1993 was
approximately $31,000.
Dr. Farber is on the Company's Scientific Advisory board and is paid
$15,000 per annum for such services.
19
STOCK OPTION TRANSACTIONS IN 1993
During 1993, the following grants were made under the 1988 Stock Option
Plan for the executive officers named in the Summary Compensation Table:
Option/SAR Grants in 1993
Grant Date
Individual Grants Value
-------------------------------------------------------- ----------
Percent of
Total
Number of Options/
Securities SARs Exercise Grant
Underlying Granted to or Base Date
Options/SARs Employees Price Expiration Present
Name Granted(a) in 1993 ($/Sh) Date Value $(b)
- ---- ----------- --------- -------- ----------- -----------
James R. Maher 0 0% -- -- --
David C. Flaugh 125,000 15 $16.63 1/18/03 $1,005,000
Timothy J. Brodnik 50,000 6 16.63 1/18/03 402,000
W. David Slaunwhite, 50,000 6 16.63 1/18/03 402,000
Ph.D.
Bernard E. Statland, M.D., 50,000 6 16.63 1/18/03 402,000
Ph.D.
- ----------
(a) No tandem SARs were granted in 1993.
(b) Valuation based upon the Black-Scholes option pricing model assuming a volatility of .41 (based on the weekly closing stock
prices from January 1, 1992 to January 5, 1993; a risk free interest rate of 5.9% (the asking yield on the 10-year U.S.
Treasury Strip maturing February 2003); a dividend yield of 1.87% (the annualized dividends at time of grant divided by the
exercise or base price). The valuation assumptions have made no adjustments for non-transferability.
For each grant of non-qualified options made in 1993, the exercise price
was equivalent to the fair market price per share on the date of grant. One
third of the option's shares of common stock vested on the date of grant and
one third vests on each of the first and second anniversaries of such date,
subject to their earlier expiration or termination.
20
The following chart shows, for 1993, the number of stock options exercised
and the 1993 year-end value of the options held by the executive officers named
in the Summary Compensation Table:
Aggregated Option/SAR Exercises in 1993
and Year End 1993 Option/SAR Values
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Year End Year End ($)(a)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------ ------------ ------------- -------------
James R. Maher 0 $0 200,000 $0
100,000 0
David C. Flaugh 0 0 58,167 0
83,333 0
Timothy J. Brodnik 0 0 28,167 0
33,333 0
W. David Slaunwhite, Ph.D. 0 0 33,167 0
33,333 0
Bernard E. Statland, M.D., Ph.D. 0 0 33,167 0
33,333 0
- ----------
(a) Calculated using actual December 31, 1993 closing price per common share on the NYSE Composite Tape of $14.25
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee and the Board of Directors has selected, subject to
ratification by the stockholders, KPMG Peat Marwick to audit the accounts of
the Company for the fiscal year ending December 31, 1994. The ratification of
the selection of KPMG Peat Marwick will require the affirmative vote of the
holders of a majority of the outstanding shares of common stock present in
person or represented by proxy at the annual meeting and entitled to vote.
Under applicable Delaware law, in determining whether the proposal has received
the requisite number of affirmative votes, abstentions and broker non-votes
will be counted and will have the same effect as a vote against the proposal.
KPMG Peat Marwick has audited the consolidated financial statements of
the Company for more than the past five years. For 1993, KPMG Peat Marwick's
audit fees totalled approximately $175,000. KPMG Peat Marwick
21
representatives will be present at the annual meeting with the opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF
THE SELECTION OF KPMG PEAT MARWICK AS THE COMPANY'S INDEPENDENT AUDITORS.
1994 OPTION PLAN
The Company's Board proposes that the stockholders approve the 1994
Option Plan approved by the Employee Benefits Committee on February 10, 1994
and by the Company's Board on February 15, 1994, subject to the approval of the
Company's stockholders. The approval of the 1994 Option Plan requires the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's common stock. Following the reorganization, NHL Holdings will assume
all obligations under the 1994 Option Plan. See "Proposed Reorganization-Stock
Option Plans".
The Company has heretofore granted options relating to all the 2.5
million shares which were available under its 1988 Stock Option Plan.
The following paragraphs summarize the principal features of the 1994
Option Plan. This summary is subject, in all respects, to the terms of the 1994
Option Plan. The Company will provide promptly, upon written request and
without charge, a copy of the full text of the 1994 Option Plan to each person
to whom a copy of this proxy statement is delivered. Requests should be
directed to: National Health Laboratories Incorporated, 4225 Executive Square,
Suite 800, La Jolla, California 92037, Attention: Stockholder Relations.
Subject to certain modifications required by changes in law and
regulation and except as otherwise described herein, the Company's 1994 Option
Plan is substantially identical to its 1988 Stock Option Plan. The 1994 Option
Plan will be administered by the Employee Benefits Committee appointed by the
Company's Board of Directors. During the ten-year period ending on the tenth
anniversary of the adoption of the 1994 Option Plan, the Employee Benefits
Committee will have authority, subject to the terms of the 1994 Option Plan, to
determine when and to whom to make grants under the plan, the number of shares
to be covered by the grants, the types and terms of options and SARs granted
and the exercise price of the shares of common stock covered by options and
SARs, and to prescribe, amend and rescind rules and regulations relating to the
1994 Option Plan.
The Company's Board of Directors may amend or terminate the 1994 Option
Plan at any time except that, unless approved (at a meeting held within 12
months before or after the date of such amendment) by a majority of the voting
shares of common stock of the Company, no such amendment may (i) increase the
maximum number of shares as to which options may be granted under the 1994
Option Plan, except for adjustments to reflect stock dividends or other
recapitalizations affecting the number or kind of outstanding shares, (ii)
change the requirements as to eligibility for participation in the 1994 Option
Plan or (iii) otherwise materially change the 1994 Option Plan.
Under the terms of the 1994 Option Plan, incentive stock options
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), non-qualified stock options ("NQSOs"), and SARs
may be granted by the Employee Benefits Committee in its discretion to key
employees (including officers and directors who are employees) of the Company
and any of its affiliates, except that ISOs may be granted only to employees of
the Company and its parent company and any subsidiary corporation. Due to the
provision of the plan which permits awards in the discretion of the Employee
Benefits Committee, it is not possible to determine how many employees of the
Company and its affiliates may be eligible for grants of options and SARs. The
1994 Option Plan generally provides that no individual employee may be granted
options or SARs representing an aggregate of more than 750,000 shares of the
Company's common stock. The aggregate number of shares of common stock as to
which options and SARs may be granted under the 1994 Option Plan will not
exceed 3,000,000.
22
The aggregate fair market value, as defined in the 1994 Option Plan and
determined as of the date of grant of an ISO, of common stock with respect to
which ISOs granted under the 1994 Option Plan and all other option plans of the
Company and its parent company first become exercisable during any calendar
year may not exceed $100,000 for any employee. The foregoing limitation does
not apply to NQSOs.
Initially, each ISO will be exercisable over a period, determined by
the Employee Benefits Committee in its discretion, but not to exceed ten years
from the date of grant, as required by the Code. In addition, in the case of an
ISO granted to an individual who, at the time such ISO is granted, owns shares
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company (a "Ten Percent Stockholder"), the exercise
period for an ISO may not exceed five years from the date of grant. In the case
of NQSOs, the exercise period will in all cases be determined by the Employee
Benefits Committee. Options may be exercised during the option period at such
times, in such amount, in accordance with such terms and conditions, and
subject to such restrictions, as are set forth in the option agreement
evidencing the grant of such options.
The exercise price of an ISO or a NQSO ("Option Price") may not be less
than one hundred percent (100%) of the fair market value of the shares of the
common stock on the date of grant, except that, in the case of an ISO granted
to a Ten Percent Stockholder, such Option Price may not be less than one
hundred ten percent (110%) of such fair market value. The Option Price of, and
the number of shares covered by, each option will not change during the life of
the option, except for adjustments to reflect stock dividends, splits, other
recapitalizations or reclassifications or changes affecting the number or kind
of outstanding shares.
The shares of common stock purchased upon the exercise of an option are
to be paid for in cash (including cash that may be received from the Company at
the time of exercise as additional compensation) or through the delivery of
other shares of the common stock with a value equal to the total Option Price
or in a combination of cash and such shares, or with money lent by the Company
to the optionee in compliance with applicable law and on terms and conditions
to be determined by the Company.
No option may be transferred by an optionee during his lifetime. If the
employment of an optionee terminates for any reason (other than by reason of
death, disability or retirement) the optionee may, within the three-month
period following such termination, exercise such options to the extent he was
entitled to exercise such options at the date of termination. If an optionee
dies while employed (or within three months after termination of employment) or
terminates employment by reason of disability or retirement, all previously
granted options (whether or not then exercisable), may, unless earlier
terminated in accordance with their terms, be exercised by the person or
persons to whom the optionee's rights pass within one year after the optionee's
death or by the optionee within one year after the optionee's disability or
retirement.
The Employee Benefits Committee may also grant SARs either alone ("Free
Standing Rights") or in conjunction with all or part of an option ("Related
Rights"). Upon the exercise of a SAR, a holder is entitled, without payment to
the Company, to receive cash, unrestricted shares of common stock or any
combination thereof, as determined by the Employee Benefits Committee, in an
amount equal to the excess of the fair market value of one share of common
stock over the exercise price per share specified in the related option (or in
the case of a Free Standing Right, the price per share specified in such
right), multiplied by the number of shares in respect of which the SAR is
exercised.
The Company is required to charge earnings at the close of each
accounting period during which the SARs are outstanding. The charge will be
equal to the amount by which the fair market value of the shares of stock
subject to the SARs exceeds the price for which the SARs may be exercised, less
the tax deduction to which the Company may be entitled if the SARs were
exercised and less any portion of such amount charged to earnings in prior
periods. In the event that the stock subject to the SARs has depreciated in
market value since the last accounting period, there will be a credit to
earnings.
23
Under the 1994 Option Plan, the exercisability of options and Related
Rights will be accelerated upon a Change in Control of the Company (as defined
in the 1994 Option Plan). The 1998 Stock Option Plan did not have such a change
in control provision. (The proposed reorganization discussed herein will not
constitute such a Change in Control of the Company.) If the exercisability of
an option or SAR is so accelerated, payments made with respect to such option
or SAR may constitute an "excess parachute payment" that is not deductible by
the Company in whole or in part under Section 280G of the Code. Such
acceleration may also subject the holder of such option or SAR to a 20% federal
excise tax under Section 4999 of the Code on all or a portion of the value
conferred on such holder by reason of the Change in Control. Option agreements
may provide that the Company will reimburse such holder for the full amount of
any such excise tax imposed.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE 1994 OPTION PLAN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth as of April 25, 1994, the total number
of shares of common stock beneficially owned, and the percent so owned, by each
director of the Company who is a beneficial owner of any shares of common
stock, by each person known to the Company to be the beneficial owner of more
than 5% of the outstanding common stock, by the officers named in the summary
compensation table and by all directors and 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 Percent of
of Beneficial Ownership Class
----------------------- ---------
Ronald O. Perelman 20,176,729(1) 24%
35 East 62nd Street
New York, NY 10021
Oppenheimer Group, Inc. 11,329,357 13
Oppenheimer Tower
World Financial Center
New York, NY 10281
GEICO Corporation 6,165,000 7
GEICO Plaza
Washington, D.C. 20076
ESL Partners, L.P. 4,653,400 5
LBP Associates, L.P.
115 East Putnam Avenue
Greenwich, CT 06830
Howard Gittis
35 East 62nd Street
New York, NY 10021 46,000(2) *
24
Amount and Nature Percent of
of Beneficial Ownership Class
----------------------- ---------
James R. Maher 390,000(3) *
4225 Executive Square
La Jolla, CA 92037
Paul A. Marks, M.D. 3,000 *
1275 York Avenue
New York, NY 10021
David C. Flaugh 136,736(3) *
Timothy J. Brodnik 69,833(3) *
William D. Slaunwhite, M.D. 74,833(3) *
Bernard E. Statland, M.D., Ph.D. 58,166(3) *
Saul J. Farber, M.D. 0 0
Ann Dibble Jordan 0 0
David J. Mahoney 0 0
Linda Gosden Robinson 0 0
Samuel O. Thier, M.D. 0 0
All directors and executive officers
as a group (18 persons) 21,231,463(3) 25%
- ----------
* Less than 1%
(1) All such shares of common stock are owned by Mr. Perelman through
MacAndrews & Forbes. Of the shares owned, approximately 13 million
shares have been pledged to secure indebtedness.
(2) Includes 3,000 shares owned by Mr. Gittis' spouse as to which he disclaims
beneficial ownership.
(3) Beneficial ownership by officers of the Company includes shares of common
stock which such officers have 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. Maher -
250,000; Mr. Flaugh - 133,166; Mr. Brodnik - 69,833; Dr. Slaunwhite
- 74,833; Dr. Statland - 58,166; all directors and executive officers as
a group - 862,164.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Tax Allocation Arrangement. The Company was included in the
consolidated federal income tax returns, and in certain state income tax
returns, of Mafco, M&F Holdings, Revlon Group Incorporated and Revlon Holdings
Inc., formerly known as Revlon Inc. As a result of the reduction of MacAndrews
& Forbes' 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 MacAndrews & Forbes' 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
25
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 could be required to pay.
Registration Rights Agreement. The Company entered into a Registration
Rights Agreement with Health Care pursuant to which the Company will be
obligated, upon the request of Health Care, 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 Health Care. Such
demand registration statements may also cover the resale from time to time of
any shares of common stock that Health Care 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.
Health Care 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 Health Care
agreed to a similar restriction with respect to underwritten offerings by the
Company. Health Care's rights under the Registration Rights Agreement are
transferable.
EXPERTS
The financial statements and schedules of National Health Laboratories
Incorporated and subsidiaries as of December 31, 1993 and 1992, and for each of
the years in the three-year period ended December 31, 1993, incorporated by
reference in this Proxy Statement/Prospectus have been incorporated herein in
reliance upon the report of KPMG Peat Marwick, independent certified public
accountants, whose report is also incorporated by reference herein, and upon
authority of such firm as experts in auditing and accounting.
STOCKHOLDER PROPOSALS
Under the rules and regulations of the Commission as currently in
effect, any holder of at least $1,000 in market value of common stock who
desires to have a proposal presented in the Company's (or, if the
reorganization is consummated, NHL Holdings') proxy material for use in
connection with the Annual Meeting of Stockholders to be held in 1995 must
transmit that proposal (along with his name, address, the number of shares of
common stock that he holds of record or beneficially, the dates upon which the
securities were acquired and documentary support for a claim of beneficial
ownership) in writing as set forth below. Proposals of stockholders intended to
be presented at the next annual meeting must be received by the Secretary,
National Health Laboratories Incorporated (or, if the reorganization is
consummated, National Health Laboratories Holdings, Inc.), 4225 Executive
Square, Suite 800, La Jolla, California 92037, not later than November 25,
1994.
Holders of common stock desiring to have proposals submitted for
consideration at future meetings of the stockholders should consult the
applicable rules and regulations of the Commission with respect to such
proposals, including the permissible number and length of proposals and other
matters governed by such rules and regulations.
26
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.
April 26, 1994
By Order of the Board of Directors
/s/ Alvin Ezrin
Alvin Ezrin
Secretary
27
EXHIBIT A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER dated as of April 15, 1994, among
NATIONAL HEALTH LABORATORIES HOLDINGS INC., a Delaware corporation ("Parent"),
NHL SUB ACQUISITION CORP., a Delaware corporation ("Sub") and a wholly owned
subsidiary of Parent, and NATIONAL HEALTH LABORATORIES INCORPORATED, a Delaware
corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and
the Company have approved the merger of Sub into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of common stock, par value $.01 per
share, of the Company ("Company Common Stock"), other than shares owned
directly or indirectly by Parent or the Company, will be converted into the
right to receive common stock, par value $.01 per share, of Parent ("Parent
Common Stock");
WHEREAS the Merger requires the approval of the holders of a
majority of the outstanding shares of the Company Common Stock entitled to vote
thereon at the meeting of holders of Company Common Stock to be called therefor
(the "Company Stockholder Approval"); and
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time of the Merger (as defined in Section 1.03).
Following the Effective Time of the Merger, the separate corporate existence of
Sub shall cease and the Company shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to and assume all the rights
and obligations of Sub in accordance with the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction of the conditions set forth in Section 4.01, at the
offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York 10019, unless another date or place is agreed to in writing by
the parties hereto.
SECTION 1.03. Effective Time. Subject to the provisions of
this Agreement, as soon as practicable following the satisfaction or waiver of
the conditions set forth in Section 4.01, the parties shall file a certificate
of merger or other appropriate documents (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Delaware Secretary of State, or at such other time as Sub and the
Company shall agree should be specified in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time of the Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and By-laws. (a)
The certificate of incorporation of the Company, as in effect immediately prior
to the Effective Time of the Merger, shall be amended as of the Effective Time
of the Merger so that Article FOURTH of such certificate of incorporation reads
in its entirety as follows: "The total number of shares of stock which the
Corporation shall have authority to issue is one thousand (1,000) shares of
Common Stock each having a par value of $1.00 per share." and, as so amended,
such certificate of incorporation shall be the certificate of incorporation of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
(b) The by-laws of the Company as in effect at the Effective
Time of the Merger shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of the Company at the
Effective Time of the Merger shall be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company at the
Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective
Time of the Merger, by virtue of the Merger and without any action on the part
of the holder of any shares of Company Common Stock or any shares of capital
stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Company-Owned Stock.
Each share of Company Common Stock and each share of Parent Common Stock that
is owned by the Company or its subsidiaries shall automatically be cancelled
and retired and shall cease to exist, and no Parent Common Stock or other
consideration shall be delivered in exchange for such Company Common Stock.
(c) Conversion of Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares to be cancelled in
accordance with Section 2.01(b)) shall be converted into the right to receive
one fully paid and nonassessable share of Parent Common Stock. As of the
Effective Time of the Merger, all such shares of Company Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the shares of Parent Common Stock to be
issued in consideration therefor upon surrender of such certificate in
accordance with Section 2.02, without interest.
SECTION 2.02. Exchange of Certificates. (a) Stock
Certificate. Following the Effective Time of the Merger, each holder of an
outstanding certificate or certificates theretofore representing shares of
Company Common Stock may, but shall not be required to, surrender the same to
Parent for cancellation or transfer, and each such holder or transferee will be
entitled to receive certificates representing the same number of shares of
Parent Common Stock as the shares of Company Common Stock previously
represented by the stock certificates surrendered. If any certificate
representing shares of Parent Common Stock is to be issued in a name other than
that in which the certificate theretofore representing Company Common Stock
surrendered is registered, it shall be a condition to such issuance that the
certificate surrendered shall be properly endorsed and otherwise in proper form
for transfer and that the person requesting such issuance shall either:
(i) pay Parent or its agents any taxes or other governmental
charges required by reason of the issuance of certificates representing shares
of Parent Common Stock in a name other than that of the registered holder of
the certificate so surrendered; or
(ii) establish to the satisfaction of Parent or its agents that
such taxes or governmental charges have been paid.
Until so surrendered or presented for transfer each outstanding certificate
which, prior to the Effective Time, represented Company Common Stock shall be
deemed and treated for all corporate purposes to represent the ownership of the
same number of shares of Parent Common Stock as though such surrender or
transfer and exchange had taken place.
(b) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to
the shares of Company Common Stock theretofore represented by such
Certificates, subject, however, to the Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record date prior to
the Effective Time of the Merger which may have been declared or made by the
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date of this Agreement and which remain unpaid
at the Effective Time of the Merger, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation they shall be cancelled
and exchanged as provided in this Article II, except as otherwise provided by
law.
ARTICLE III
Additional Agreements
SECTION 3.01. Affiliates and Certain Stockholders. (a) Prior
to the Closing Date, the Company shall deliver to Parent a letter identifying
all persons who are, at the time the Merger is submitted for approval to the
stockholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act of 1933, as amended (the "Securities Act"). The
Company shall use its best efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as Schedule A hereto.
(b) The Company shall deliver to Parent on the date of the
proxy statement relating to the Company Stockholder Approval (such proxy
statement, as amended or supplemented from time to time, the "Proxy Statement")
and on the Closing Date letters, in each case dated as of such respective dates
and identifying all persons who are, as of such respective dates, beneficial
owners of five percent or more of the Company Common Stock. The Company shall
use its best efforts to cause each such person to deliver to counsel to Parent
and to the Company on the date of the Proxy Statement and on the Closing Date
written agreements, in each case dated as of such respective dates and
substantially in the form acceptable to Parent.
ARTICLE IV
Conditions Precedent
SECTION 4.01. Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) Form S-4. The registration statement on Form S-4 to be
filed with the Securities and Exchange Commission by Parent in connection with
the issuance of Parent Common Stock in the Merger shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(c) Tax Opinions. The Company shall have received from
Cravath, Swaine & Moore, counsel to the Company, on the date of the Proxy
Statement and on the Closing Date an opinion, in each case based on the
representations of Company provided to such counsel, dated as of such
respective dates and stating that the Merger will be treated for Federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code and that Parent, Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code.
ARTICLE V
Termination, Amendment and Waiver
SECTION 5.01. Termination. This Agreement may be terminated
at any time prior to the Effective Time of the Merger, whether before or after
approval by the stockholders of the Company of matters presented in connection
with the Merger, by Parent.
SECTION 5.02. Effect of Termination. In the event of
termination of this Agreement as provided in Section 5.01, this Agreement shall
forthwith become void and have no effect, without any liability or obligation
on the part of Parent, Sub or the Company, other than the provisions of this
Section 5.02 and Article VI.
SECTION 5.03. Amendment. This Agreement may be amended by the
parties at any time before or after any required approval of matters presented
in connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 5.04. Waiver. At any time prior to the Effective Time
of the Merger, the parties may waive compliance by the other parties with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
SECTION 5.05. Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 5.01, an
amendment of this Agreement pursuant to Section 5.03 or a waiver pursuant to
Section 5.04 shall, in order to be effective, require in the case of Parent,
Sub or the Company, action by its Board of Directors or the duly authorized
designee of its Board of Directors.
ARTICLE VI
General Provisions
SECTION 6.01. Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub,
c/o National Health Laboratories Incorporated
4225 Executive Avenue, Suite 800
La Jolla, CA 92037
Telecopy No. (619) 550-0600
Attention: David C. Flaugh, Senior Executive
Vice President and
Chief Operating Officer; and
(b) if to the Company, to
National Health Laboratories Incorporated
4225 Executive Avenue, Suite 800
La Jolla, CA 92037
Telecopy No. (619) 550-0600
Attention: David C. Flaugh, Senior Executive
Vice President and
Chief Operating Officer.
SECTION 6.02. Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to herein) (a)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article
II, are not intended to confer upon any person other than the parties any
rights or remedies.
SECTION 6.03. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
NATIONAL HEALTH LABORATORIES
HOLDINGS INC.,
by
/s/ David C. Flaugh
_________________________
Name: David C. Flaugh
Title: Senior Executive
Vice President and
Chief Operating
Officer
Attest:
/s/ Michael Jeub
__________________________________
Name: Michael Jeub
Title: Executive Vice President
and Chief Financial Officer
NHL SUB ACQUISITION CORP.,
by
/s/ David C. Flaugh
_________________________
Name: David C. Flaugh
Title: Senior Executive
Vice President and
Chief Operating
Officer
Attest:
/s/ Michael Jeub
__________________________________
Name: Michael Jeub
Title: Executive Vice President
and Chief Financial Officer
NATIONAL HEALTH LABORATORIES
INCORPORATED,
by
/s/ David C. Flaugh
_________________________
Name: David C. Flaugh
Title: Senior Executive
Vice President and
Chief Operating
Officer
Attest:
/s/ Michael Jeub
__________________________________
Name: Michael Jeub
Title: Executive Vice President
and Chief Financial Officer
SCHEDULE A
Form of Company Affiliate Letter
Gentlemen:
The undersigned, a holder of shares of Common Stock, par value
$.01 per share ("Company Stock"), of National Health Laboratories Incorporated,
a Delaware corporation (the "Company"), is entitled to receive in connection
with the merger (the "Merger") of the Company with NHL Sub Acquisition Corp., a
Delaware corporation, securities (the "Parent Securities") of National Health
Laboratories Holdings Inc., a Delaware corporation ("Parent"). The undersigned
acknowledges that the undersigned may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), although nothing contained
herein should be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the
Securities Act, the undersigned's ability to sell, assign or transfer the
Parent Securities received by the undersigned in exchange for any shares of
Company Stock pursuant to the Merger may be restricted unless such transaction
is registered under the Securities Act or an exemption from such registration
is available. The undersigned understands that such exemptions are limited and
the undersigned has obtained or will obtain advice of counsel as to the nature
and conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act.
The undersigned hereby represents to and covenants with the
Company that the undersigned will not sell, assign or transfer any of the
Parent Securities received by the undersigned in exchange for shares of Company
Stock pursuant to the Merger except (i) pursuant to an effective registration
statement under the Securities Act or (ii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to Parent (the
reasonable fees of which counsel will be paid by Parent) or as described in a
"no-action" or interpretive letter from the Staff of the Securities and
Exchange Commission (the "SEC"), is not required to be registered under the
Securities Act.
In the event of a sale or other disposition by the undersigned
of Parent Securities pursuant to Rule 145, the undersigned will supply Parent
with evidence of compliance with such Rule, in the form of a letter in the form
of Annex I hereto and the opinion of counsel or no-action letter referred to
above.
The undersigned acknowledges and agrees that appropriate
legends will be placed on certificates representing Parent Securities received
by the undersigned in the Merger or held by a transferee thereof, which legends
will be removed by delivery of substitute certificates upon receipt of an
opinion in form and substance reasonably satisfactory to Parent from
independent counsel reasonably satisfactory to Parent (the reasonable fees of
which counsel will be paid by Parent) to the effect that such legends are no
longer required for purposes of the Securities Act.
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other disposition
of Parent Securities and (ii) the receipt by Parent of this letter is an
inducement and a condition to Parent's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO SCHEDULE A
(Name) (Date)
On , the undersigned sold the securities
("Securities") of National Health Laboratories Holdings Inc. ("Parent")
described below in the space provided for that purpose (the "Securities"). The
Securities were received by the undersigned in connection with the merger of
NHL Sub Acquisition Corp., a subsidiary of Parent, with and into National
Health Laboratories Incorporated.
Based upon the most recent report or statement filed by Parent
with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph (e)
of Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned hereby represents that the Securities were sold
in "brokers' transactions" within the meaning of Section 4(4) of the Securities
Act or in transactions directly with a "market maker" as that term is defined
in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of
the Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
(Space to be provided for description of the Securities.)
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
A line graph representing the data for "Comparison of Five Year
Cumulative Total Return" which appears on page 18 of the typeset version of the
preceding Proxy Statement/Prospectus has been omitted in this EDGAR submission
file due to its incompatibility with the required ASCII format. Pursuant to
Rule 304 of Regulation S-T, the information contained in the aforementioned
line graph has been fairly and accurately described in narrative and/or tabular
form on page 18 of this EDGAR submission file.
NATIONAL HEALTH LABORATORIES INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James G. Richmond, David C. Flaugh and Joram
C. Salig, or any of them, with full power of substitution, proxies to vote at
the Annual Meeting of Stockholders of National Health Laboratories Incorporated
(the "Company") to be held June 7, 1994 at 10:30 a.m. local time, and at any
adjournment or postponement thereof, hereby revoking any proxies heretofore
given, to vote all shares of common stock, par value $.01 per share, of the
Company held or owned by the undersigned as indicated on the proposals more
fully set forth in the Proxy Statement/Prospectus, dated April 26, 1994, and in
their discretion upon such other matters as may come before the Annual Meeting.
1. Approve the proposed corporate reorganization of the Company creating a
holding company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Election of the members of the Board of Directors as listed below.
[ ] FOR (except as marked) [ ] WITHHELD
Nominees: Ronald O. Perelman, Saul J. Farber, M.D., Howard Gittis, Ann Dibble
Jordan, James R. Maher, David J. Mahoney, Paul A. Marks, M.D., Linda Gosden
Robinson, Samuel O. Thier, M.D.
(To withhold authority to vote for any individual nominee, strike a line
through the nominee's name).
(To be signed on Reverse Side)
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION,
JUST SIGN THE REVERSE SIDE, NO BOX NEED BE CHECKED.
(continued on the reverse side)
3. Ratify the selection of KPMG Peat Marwick as the Company's independent
auditors for 1994.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approve and adopt the Company's 1994 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the accompanying Notice of
Annual Meeting and Proxy Statement/Prospectus and hereby revokes any Proxy or
Proxies heretofore given.
Please complete, date, sign and mail in the enclosed envelope.
Dated: -------------------------------
Signature(s): -------------------------
---------------------------------------
(Please sign exactly as your name appears on
this Proxy. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such.)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
National Health Laboratories Incorporated:
We have audited the consolidated financial statements of National
Health Laboratories Incorporated and subsidiaries as listed in the accompanying
index. In connection with our audits of the consolidated financial statements,
we have also audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of National
Health Laboratories Incorporated and subsidiaries as of December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK
San Diego, California
February 10, 1994
