-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W2G4gCb41EPOrzGA4VGSZOG+PXbApzc4AAuaTzaHTCK9TW0rc+PnbalavUf3FlOT 3lQv2obSEgkoQ5pk+SHawg== 0000816151-98-000025.txt : 19980813 0000816151-98-000025.hdr.sgml : 19980813 ACCESSION NUMBER: 0000816151-98-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LABONE INC CENTRAL INDEX KEY: 0000816151 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 480952323 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15975 FILM NUMBER: 98684055 BUSINESS ADDRESS: STREET 1: 10310 W 84TH TERR CITY: LENEXA STATE: KS ZIP: 66214 BUSINESS PHONE: 9138888397 MAIL ADDRESS: STREET 1: 10310 W 84TH TERRACE CITY: LENEXA STATE: KS ZIP: 66214 FORMER COMPANY: FORMER CONFORMED NAME: HOME OFFICE REFERENCE LABORATORY INC DATE OF NAME CHANGE: 19940405 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended June 30, 1998 -------------- Commission file number 0-15975 ------- LabOne, Inc. ------------ 10310 West 84th Terrace Lenexa, Kansas 66214 (913) 888-1770 Incorporated in Delaware I.R.S. Employer Identification Number: 48-0952323 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Number of shares outstanding of the only class of Registrant's common stock, $.01 par value, as of July 31, 1998 - 13,142,350 shares net of 1,857,650 shares held as treasury stock. Page 1 of 32 PART I. FINANCIAL INFORMATION ITEM 1 - Financial Statements LabOne, Inc. and Subsidiary Consolidated Balance Sheets June 30, December 31, 1998 1997 ASSETS --------- --------- Current assets: Cash and cash equivalents $12,220,186 18,284,672 Short-term investments 500,854 1,204,638 Accounts receivable-trade, net of allowance for doubtful accounts of $1,549,232 in 1998 and $968,295 in 1997 15,684,044 12,604,687 Income taxes receivable 574,277 508,704 Inventories 1,629,271 2,203,471 Real estate available for sale 3,515,000 3,515,000 Prepaid expenses and other current assets 2,329,372 2,279,619 Deferred income taxes 3,646,057 3,299,387 ---------- ---------- Total current assets 40,099,061 43,900,178 Property, plant and equipment 49,474,121 43,956,571 Less accumulated depreciation 34,381,182 33,515,280 ---------- ---------- Net property, plant and equipment 15,092,939 10,441,291 Other assets: Intangible assets, net of accumulated amortization 4,762,906 5,229,708 Deferred income taxes - noncurrent 336,224 321,799 Deposits and other assets 24,344 80,497 ---------- ---------- Total assets $60,315,474 59,973,473 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,072,212 3,326,451 Deferred income taxes payable 9,308 - Accrued payroll and benefits 3,949,042 4,530,235 Other accrued expenses 397,404 423,396 Other current liabilities 194,371 194,148 ---------- ---------- Total current liabilities 8,622,337 8,474,230 Deferred income taxes - noncurrent 331,176 - ---------- ---------- Total liabilities 8,953,513 8,474,230 Stockholders' equity: Preferred stock, $.01 par value per share; 1,000,000 shares authorized, none issued - - Common stock, $.01 par value per share; 40,000,000 shares authorized, 15,000,000 shares issued 150,000 150,000 Additional paid-in capital 13,806,438 13,723,250 Equity adjustment from foreign currency translation (729,424) (666,927) Retained earnings 60,046,799 60,259,272 ---------- ---------- 73,273,813 73,465,595 Less treasury stock of 1,860,304 shares in 1998 and 1,874,706 shares in 1997 21,911,852 21,966,352 ---------- ---------- Total stockholders' equity 51,361,961 51,499,243 ---------- ---------- Total liabilities and stockholders' equity $60,315,474 59,973,473 ========== ========== See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 2
LabOne, Inc. and Subsidiary Consolidated Statements of Earnings Three months ended June 30, Six Months Ended June 30, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Sales $ 25,762,263 20,307,489 49,095,697 38,047,474 Cost of sales 13,831,903 10,636,249 26,790,851 20,086,354 ---------- ---------- ---------- ---------- Gross profit 11,930,360 9,671,240 22,304,846 17,961,120 Selling, general and administrative expenses 7,864,301 7,090,960 15,175,104 13,418,819 ---------- ---------- ---------- ---------- Earnings from operations 4,066,059 2,580,280 7,129,742 4,542,301 Other income 167,897 272,647 400,796 597,901 ---------- ---------- ---------- ---------- Earnings before income taxes 4,233,956 2,852,927 7,530,538 5,140,202 Income tax expense 1,717,646 1,166,427 3,014,167 2,094,220 ---------- ---------- ---------- ---------- Net earnings $ 2,516,310 1,686,500 4,516,371 3,045,982 ========== ========== ========== ========== Basic and diluted earnings per common share $ 0.19 0.13 $ 0.34 0.23 ====== ====== ===== ===== Dividends per common share $ 0.18 0.18 $ 0.36 0.36 ====== ====== ===== ===== Basic weighted average common shares outstanding 13,136,962 13,102,359 13,135,928 13,093,553 ========== ========== ========== ========== Diluted weighted average common shares outstanding 13,327,517 13,309,189 13,323,253 13,327,078 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 3 LabOne, Inc. and Subsidiary Consolidated Statement of Stockholders' Equity Six Months Ended June 30, 1998
Accumulated Additional other Total Common paid-in comprehensive Retained Treasury stockholders' Comprehensive stock capital income earnings stock equity income Balance at December 31, 1997 $150,000 13,723,250 (666,927) 60,259,272 (21,966,352) 51,499,243 Comprehensive income: Net earnings 4,516,371 4,516,371 4,516,371 Equity adjustment from foreign currency translation (62,497) (62,497) (62,497) --------- Comprehensive income 4,453,874 ========= Cash dividends ($0.36 per share) (4,728,844) (4,728,844) Stock options exercised, net (10,510 shares) 58,377 10,715 69,092 Directors' stock issued (3,892 shares) 24,811 43,785 68,596 -------- ---------- -------- ---------- ----------- ---------- Balance at June 30, 1998 $150,000 13,806,438 (729,424) 60,046,799 (21,911,852) 51,361,691 ======== ========== ======== ========== =========== ==========
See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 4 LabOne, Inc. and Subsidiary Consolidated Statements of Cash Flows Six months ended June 30, 1998 1997 --------- --------- Cash provided by (used for) operations: Net earnings $ 4,516,371 3,045,982 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 2,091,470 2,183,620 Loss (gain) on disposal of property and equipment 3,861 (111,570) Directors' stock compensation 68,597 69,583 Provision for deferred taxes (25,864) (174,559) Changes in: Accounts receivable (3,079,357) (3,716,667) Income taxes (65,573) 16,907 Inventories 574,200 (879,582) Prepaid expenses and other current assets (49,753) 51,232 Accounts payable 745,761 449,178 Accrued payroll & benefits (581,193) 890,313 Accrued expenses (25,992) 74,145 Other current liabilities 223 24,037 ---------- ---------- Net cash provided by operations 4,172,751 1,922,619 ---------- ---------- Cash provided by (used for) investment transactions: Purchases of investments held to maturity (5,461,090) (10,190,477) Proceeds from maturities of investments held to maturity 6,201,894 5,232,335 Property, plant and equipment, net (6,318,937) (2,383,890) Acquisition of intangible assets, net - (4,128,274) Other 56,153 2,139 ---------- ---------- Net cash used for investment transactions (5,521,980) (11,468,167) ---------- ---------- Cash provided by (used for) financing transactions: Issuance of treasury stock, net of proceeds from the exercise of stock options 69,092 249,895 Cash dividends (4,728,844) (4,714,419) ---------- ---------- Net cash used for financing transactions (4,659,752) (4,464,524) ---------- ---------- Effect of foreign currency translation (55,505) (18,733) ---------- ---------- Net decrease in cash and cash equivalents (6,064,486) (14,028,805) Cash and cash equivalents - beginning of period 18,284,672 28,647,378 ---------- ---------- Cash and cash equivalents - end of period $12,220,186 14,618,573 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Income Taxes $ 3,058,933 221,022 ========== ========== See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 5 LabOne, Inc. and Subsidiary Notes to Consolidated Financial Statements June 30, 1998 and 1997 The accompanying consolidated financial statements include the accounts of LabOne, Inc. and its wholly-owned subsidiary Lab One Canada Inc. (a Canadian corporation). All significant intercompany transactions have been eliminated in consolidation. The financial information furnished herein as of June 30, 1998 and for the periods ended June 30, 1998 and 1997 is unaudited; however, in the opinion of management, it reflects all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state the Company's financial position and the results of its operations and cash flows. The balance sheet information as of December 31, 1997 has been derived from the audited financial statements as of that date. The financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances, and included in the financial statements are certain amounts based on management's estimates and judgments. The financial information herein is not necessarily representative of a full year's operations because levels of sales, capital additions and other factors fluctuate throughout the year. These same considerations apply to all year- to-year comparisons. See the Company's Annual Report on Form 10-K for the year ended December 31, 1997, for additional information not required by this report on Form 10-Q. Business Segment Information - ---------------------------- The company operates in three lines of business: insurance risk appraisal testing, clinical diagnostic testing and substance abuse testing. The following table presents selected financial information for each segment:
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Sales: Insurance $ 17,571,796 15,896,373 34,394,248 30,325,512 Clinical 4,723,128 2,120,393 8,377,171 3,661,378 Substance abuse testing 3,467,339 2,290,723 6,324,278 4,060,584 ---------- ---------- ---------- ---------- Total sales $ 25,762,263 20,307,489 49,095,697 38,047,474 ========== ========== ========== ========== Operating income (loss): Insurance $ 5,573,412 4,734,529 10,785,673 9,045,872 Clinical (1,509,398) (1,894,760) (3,444,445) (3,999,060) Substance abuse testing 40,165 (197,886) (138,622) (507,488) General corporate income (expense) (38,120) (61,603) (72,864) 2,977 --------- --------- ---------- --------- Total earnings from operations 4,066,059 2,580,280 7,129,742 4,542,301 Other income (expense) 167,897 272,647 400,796 597,901 --------- --------- --------- --------- Earnings before income taxes $ 4,233,956 2,852,927 7,530,538 5,140,202 ========= ========= ========= =========
There were no material changes in asset levels by segment or in the basis of segmentation or measurement of segment operating income or loss. Page 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS - --------------------- Three Months Ended Six Months Ended June 30, June 30, 1998 1997 % Increase 1998 1997 %Increase ----------- ----------- ---------- ---------- ---------- --------- Sales $ 25,762,263 20,307,489 27% $49,095,697 38,047,474 29% Net earnings 2,516,310 1,686,500 49% 4,516,371 3,045,982 48% Earnings per common share $0.19 0.13 $0.34 0.23 Cash dividends per common share $0.18 0.18 $0.36 0.36
The Company provides high-quality laboratory testing services to insurance companies, physicians and employers. LabOne provides risk-appraisal laboratory services to the insurance industry. The tests performed by the Company are specifically designed to assist an insurance company in objectively evaluating the mortality and morbidity risks posed by policy applicants. The majority of the testing is performed on specimens of individual life insurance policy applicants. The Company also provides testing services on specimens of individuals applying for individual and group medical and disability policies. LabOne's clinical testing services are provided to the healthcare industry to aid in the diagnosis and treatment of patients. LabOne operates only one highly automated and centralized laboratory, which the Company believes has significant economic advantages over other conventional laboratory competitors. LabOne markets its clinical testing services to the payers of healthcare--insurance companies and self-insured groups. The Company does this through Lab Card(Registered), a Laboratory Benefits Management (LBM) program. The Lab Card Program provides laboratory testing at reduced rates as compared to traditional laboratories. It uses a unique benefit design that shares the cost savings with the patient, creating an incentive for the patient to help direct laboratory work to LabOne. Under the Program, the patient incurs no out-of-pocket expense when the Lab Card is used, and the insurance company or self-insured group receives substantial savings on its laboratory charges. Additionally, BlueCross BlueShield of Tennessee selected LabOne to provide routine outpatient laboratory testing services for BlueCare members throughout Tennessee effective February 1, 1998. BlueCare is BlueCross BlueShield of Tennessee's plan for Tenncare participants and covers approximately 350,000 members. The Company's LBM programs, including BlueCare and the Lab Card Program, have approximately two million lives enrolled. LabOne is certified by the Substance Abuse and Mental Health Services Administration (SAMHSA) to perform substance abuse testing services for federally regulated employers and is currently marketing these services throughout the country to both regulated and nonregulated employers. The Company's rapid turnaround times and multiple testing options help clients reduce downtime for affected employees and meet mandated drug screening guidelines. Page 7 SECOND QUARTER ANALYSIS Net sales increased 27% to $25.8 million in the second quarter 1998 from $20.3 million in the second quarter 1997 due to increases in all business segments. Insurance segment revenue increased to $17.6 million during the second quarter 1998 as compared to $15.9 million in the same quarter last year. The increase was due to an increase in market share and an increase in oral fluid testing on applicants applying for smaller face-amount policies. The total number of insurance applicants tested in the second quarter 1998 increased by 13% as compared to the same quarter last year. Average revenue per applicant decreased 4% during the same periods due to competitive pricing pressures. Insurance kit and container revenue increased, due primarily to an increase in the number of blood and oral fluid kits sold. Clinical (diagnostic) laboratory revenue increased 123% from $2.1 million in the second quarter 1997 to $4.7 million in 1998 due to an 94% increase in testing volumes and a 15% increase in the average revenue per patient. Substance abuse testing (SAT) revenue increased 51% from $2.3 million in the second quarter 1997 to $3.5 million in 1998 primarily due to increased testing volumes. Cost of sales increased $3.2 million in the second quarter 1998 as compared to the prior year, due primarily to increases in supplies, inbound freight and outside laboratory testing and collection services. Laboratory supplies increased due to the increased specimen volumes tested in each segment. Insurance kit supplies increased due to the higher volume of kits sold. Inbound freight and outside laboratory testing and collection services increased primarily due to the increased specimen volumes in the clinical and SAT segments. Clinical cost of sales expenses were $3.6 million as compared to $2.1 million in the second quarter 1997. SAT cost of sales expenses were $2.3 million as compared to $1.7 million in the second quarter 1997. As a result of the above factors, gross profit for the quarter increased $2.3 million (23%) from $9.7 million in 1997 to $11.9 million in 1998. Clinical gross profit increased to $1.1 million in the second quarter 1998 from $39,000 in the second quarter 1997. SAT gross profit increased to $1.1 million in the second quarter 1998 from $0.6 million last year. Selling, general and administrative expenses increased $0.8 million (11%) in the second quarter 1998 as compared to the prior year, due primarily to increases in payroll expenses and bad debt accruals. These were partially offset by a decrease in depreciation expense. Clinical expenses, including allocated overhead, were $2.6 million as compared to $1.9 million in 1997. SAT expenditures, including allocations, were $1.1 million as compared to $0.7 million last year. The overhead allocation to the clinical and SAT testing segments for the second quarter 1998 was $1.3 million as compared to an allocation of $0.8 million in 1997. Operating income increased from $2.6 million in the second quarter 1997 to 4.1 million in 1998. The insurance segment increased $0.8 million. The clinical segment improved $0.4 million to an operating loss of $1.5 million for the quarter. The SAT segment improved $0.2 million from an operating loss of $0.2 million in the second quarter 1997 to an operating gain of $40,000 in 1998. Investment income decreased $0.1 million due primarily to less funds available for investment. The effective income tax rate remained steady at 41% in 1997 and 1998. The combined effect of the above factors resulted in net earnings of $2.5 million or $0.19 per share in the second quarter 1998 as compared to $1.7, million or $0.13 per share, in the same period last year. Page 8 YEAR-TO-DATE ANALYSIS Revenue in the six month period ended June 30, 1998 was $49.1 million as compared to $38.0 million in the same period last year. The increase of $11.0 million is due to increases in clinical laboratory revenue of $4.7 million, insurance laboratory revenue of $2.8 million, SAT revenue of $2.3 million and kit revenue of $1.3 million. The total number of insurance applicants tested in the six month period increased by 15% as compared to last year, while average revenue per applicant declined 3%. Kit and container revenue increased $1.3 million due primarily to an increase in the number of full blood and oral fluid kits sold. Clinical laboratory revenue increased from $3.7 million during the first six months of 1997 to $8.4 million for the same period in 1998 due to increased testing volumes and higher revenue per patient. SAT revenue increased from $4.1 million in 1997 to $6.3 million in 1998 due to a 55% increase in testing volumes. Cost of sales increased $6.7 million year to date as compared to the prior year. This increase is due primarily to increases in laboratory and kit supplies, payroll expenses, inbound freight and outside laboratory services. Lab supplies increased 27% due to the larger volume of all specimen types processed, and insurance kit expense increased due to the higher volume of kits sold. Payroll increased 16%. Freight and outside testing increased primarily due to the substantial growth in clinical and SAT specimen volumes. Clinical cost of sales expenses were $7.0 million as compared to $4.0 million during the first six months of 1997. SAT cost of sales expenses were $4.4 million as compared to $3.1 million during 1997. As a result of the above factors, gross profit for the first six months increased from $18.0 million in 1997 to $22.3 million in 1998. Clinical gross profit improved from a loss of $0.3 million in 1997 to a gain of $1.4 million in 1998. SAT gross profit increased to $1.9 million in the first six months of 1998 from $0.9 million last year. Selling, general and administrative expenses increased $1.8 million (13%) in the six month period ended June 30, 1998 as compared to the prior year due primarily to increases in payroll expenses and bad debt accruals. Payroll expense increased primarily due to a 13% increase in headcount and increased benefit expenses. These were partially offset by a decrease in depreciation expense. Clinical expenditures were $4.9 million as compared to $3.7 million in 1997. SAT expenses increased from $1.5 million in 1997 to $2.1 million in 1998. The overhead allocation to the clinical and SAT segments for the period was $2.4 million as compared to an allocation of $1.5 million in 1997. Operating income increased from $4.5 million in the first six months of 1997 to $7.1 million in 1998, primarily due to an increase in the insurance segment operating income of $1.7 million. The clinical segment had an operating loss of $3.4 million for the six month period ended June 30, 1998 as compared to an operating loss of $4.0 million in 1997. The SAT segment improved from an operating loss of $0.5 million in 1997 to a loss of $0.1 million in 1998. Investment income decreased $0.2 million primarily due to less funds available for investment. The effective income tax rate declined from 41% in 1997 to 40% in 1998. The combined effect of the above factors resulted in net earnings of $4.5 million or $0.34 per share in the six month period ended June 30, 1998 as compared to $3.0 million or $0.23 per share in the same period last year. Page 9 FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES - --------------------------------------------------- LabOne's working capital position decreased by $3.9 million to $31.5 million at June 30, 1998, from $35.4 million at December 31, 1997. This decrease is primarily due to capital additions and dividends paid exceeding cash provided by operations before changes in working capital. Cash flow from operations before changes in working capital increased by $1.6 million year to date as compared to 1997. The increase is primarily attributable to the increase in net earnings. Trade accounts receivable increased $3.1 million or 24% from December 31, 1997, due to the increase in revenue for the six month period. Net additions to property, plant and equipment in the first six months of 1998 were $6.3 million, as compared to $2.4 million in 1997. The increase is primarily related to construction of the new facility. The new facility project is expected to cost approximately $33 million and will be financed with an industrial revenue bond (IRB) approved by the City of Lenexa (Kansas). The IRB is expected to be in place during the third quarter 1998. Interest on the bond will be based on a taxable seven day variable rate. The Company will sell $20 million of the $33 million IRB, and $13 million will be purchased by LabOne. The company expects to repay the outstanding portion over 11 years at approximately $1.85 million per year plus interest. As of June 30, 1998, total capital expenditures for this project were $10.0 million. In May 1998, LabOne's Board of Directors declared the regular quarterly dividend of $0.18 per common share. This dividend was paid on June 2, 1998, to stockholders of record as of May 26, 1998, and totaled approximately $2.4 million. The board will review the dividend payment policy on a periodic basis. There are currently no restrictions that would limit the Company's ability to make future dividend payments. The total number of shares held in treasury at June 30, 1998 was approximately 1.9 million at a total cost of $21.9 million or $11.78 per share. The Company had no short-term borrowings in the second quarter 1998. The Company expects to fund operations and future dividend payments from a combination of cash flows from operations and cash reserves. At June 30, 1998, LabOne had total cash and investments of $12.7 million as compared to $19.5 million at December 31, 1997. LabOne is actively addressing Year 2000 computer concerns. The company has established an oversight committee which includes management from all parts of the Company and meets periodically to review progress. The Company expects to complete all internal Year 2000 objectives by the end of the first quarter, 1999 and is assessing the Year 2000 preparation and contingency plans of its clients and vendors. Total expenses related to this project are not expected to be material to the Company. However, there can be no assurance that the Company's adjustments to its computer systems will completely eliminate all Year 2000 problems. In addition, there can be no assurance that the systems of clients and vendors will be converted to address Year 2000 problems in a timely and effective manner or that such conversions will be compatible with the Company's computer systems. A failure to properly address the Year 2000 problem could have a material adverse effect on the Company's business, financial condition and results of operations. Page 10 PART II. OTHER INFORMATION Item 4. - Submission of Matters to a Vote of Security Holders. (a) The annual stockholders' meeting was held on May 14, 1998. (c) Brief description of each matter voted: (1) Election of directors. For Messrs. William D. Grant, Rifkind, Seward, Thompson, Walker and Wright, there were 12,558,110 shares voted in favor thereof and 14,572 shares withheld. For Mr. Brewer, there were 12,557,445 shares voted in favor thereof and 15,237 shares withheld. For Messrs. W. Thomas Grant II, Hespe, Sadler and Schweiker, there were 12,546,482 shares voted in favor thereof and 26,200 shares withheld. There were 0 abstentions and 0 broker nonvotes for all directors. (2) Election to approve the 1997 Long-Term Incentive Plan. Of the 12,572,682 shares voted, 11,741,278 were voted in favor thereof and 257,195 were opposed. There were 16,660 abstentions and 557,549 broker nonvotes. (3) Election to ratify the appointment of KPMG Peat Marwick LLP as independent certified public accountants of the corporation and its subsidiary for the present fiscal year. Of the 12,572,682 shares voted, 12,539,139 were voted in favor thereof and 10,969 were opposed. There were 22,573 abstentions and 1 broker nonvote. Item 6. - Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Registrant's 1997 Long-Term Incentive Plan. 10.2 Form of Stock Option Agreement pursuant to the LabOne 1997 Long-Term Incentive Plan. 27. Financial Data Schedule - as filed electronically by the Registrant in conjunction with this second quarter 1998 Form 10-Q. Page 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LabOne, Inc. Date: August 12, 1998 By /s/ Kurt E. Gruenbacher ----------------------- Kurt E. Gruenbacher, V.P. Finance, CAO and Treasurer Date: August 12, 1998 By /s/ Robert D. Thompson ---------------------- Robert D. Thompson, Executive V.P., Chief Operating Officer and Chief Financial Officer Page 12 EX-27 2
5 This schedule contains summary financial information extracted from the second quarter 1998 Form 10-Q for LabOne, Inc. and is qualified in its entirety by reference to such financial statements. 0000816151 LABONE, INC. 6-MOS DEC-31-1998 JUN-30-1998 12,220,186 500,854 17,233,276 1,549,232 1,629,271 40,099,061 49,474,121 34,381,182 60,315,474 8,622,337 0 0 0 150,000 51,211,961 60,315,474 0 49,095,697 0 26,790,851 0 0 0 7,530,538 3,014,167 4,516,371 0 0 0 4,516,371 0.34 0.34
EX-10 3 Exhibit 10.1 ------------ LABONE, INC. 1997 LONG-TERM INCENTIVE PLAN 1. Purpose. The purpose of the LabOne, Inc. 1997 Long-Term Incentive Plan (the "Plan") is to further the earnings of LabOne, Inc. ("LabOne") and its subsidiaries (collectively the "Company") by: (i) assisting the Company in attracting, retaining and motivating officers, directors, employees and consultants of high caliber and potential and (ii) providing for the award of long-term incentives to such officers, directors, employees and consultants. The Plan is not intended to be a Plan that is subject to the Employee Retirement Income Security Act of 1974, as amended. Certain capitalized terms used herein are defined in Section 15 below. 2. Administration. (a) Committee. The Plan shall be administered by a committee (the "Committee") consisting of two or more members of the Board of Directors of LabOne (the "Board"). The members of the Committee shall be appointed by and may be changed from time to time in the discretion of the Board. The Board may, in its sole discretion, bifurcate the powers of the Committee among one or more separate committees, or retain all powers and duties of the Committee in a single committee; provided, however, that except as otherwise determined by the Board, (i) if a Committee is authorized to grant Awards or make determinations with respect to a Reporting Person, each member of such Committee shall be a "non-employee director" within the meaning of Rule 16b-3 under the 1934 Act, or any successor rule of similar import, and (ii) if a Committee is authorized to grant Awards or make determinations with respect to a Covered Employee, each member of such Committee shall be an "outside director" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder. (b) Authority. The Committee shall have full and final power and authority to administer and interpret the Plan. In addition to such general power and authority, and subject to the provisions of the Plan, the Committee shall have full and final authority in its discretion to: (i) determine the eligible persons to whom Awards shall be made under the Plan, (ii) determine the type or types of Awards to be granted to each Participant hereunder, (iii) determine the time or times when Awards shall be granted, (iv) determine the terms and conditions of Awards and the terms and conditions of any agreement evidencing an Award, (v) authorize the issuance of Shares pursuant to Awards granted under the Plan, (vi) interpret, construe and administer the Plan and any instrument or agreement relating to or evidencing an Award under the Plan, (vii) establish, amend, suspend or waive rules and guidelines relating to the Plan and Awards hereunder, (viii) correct any defect, supply any omission and reconcile any inconsistency in the Plan and (ix) make any other determination or take any other action that it deems necessary or desirable for administration of the Plan or any Award hereunder. Decisions of the Committee -1- shall be final, binding and conclusive on all persons, including the Company and any Participant. The Committee may hold meetings and otherwise take action in the manner permitted under the applicable provisions of the Certificate of Incorporation and By-laws of the Company, resolutions of the Board and applicable law. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award under the Plan. (c) Delegation of Authority. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not Reporting Persons or Covered Employees and to make all determinations under the Plan with respect to such Participants, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion. (d) Power and Authority of the Board of Directors. Notwithstanding anything to the contrary contained herein, the Board of Directors may at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan. 3. Stock Subject to the Plan. (a) Amount. LabOne may grant Awards under the Plan with respect to not more than a total of 1,000,000 Shares, subject, however, to adjustment as provided in subparagraph (b) hereof. Such Shares may be authorized and unissued Shares or treasury Shares. If for any reason any Award expires or lapses or is terminated, surrendered, forfeited, cancelled, exercised or settled in a manner that results in fewer shares outstanding than were awarded pursuant to the Award, the Shares subject to such Award, to the extent of such expiration, lapse, termination, surrender, forfeiture, cancellation or decrease, shall again be available for award under the Plan. Notwithstanding the provisions of this paragraph 3(a), no Shares shall again be subject to Awards if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code. (b) Adjustment. In the event that the Committee determines that any dividend or distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, merger, consolidation, reorganization, spin-off or split-up, reverse stock split, combination or exchange of Shares or other transaction affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it may deem equitable and without the consent of any affected Participant, adjust the number and kind of securities which may be issued under the Plan, the number and kind of securities subject to outstanding Awards and the exercise price of each outstanding stock option granted under the Plan, and may make such other changes in outstanding Awards as it deems equitable in its absolute discretion. Fractional Shares resulting from any such adjustments shall be eliminated. No adjustment or action described in this paragraph 3(b) shall be authorized to the extent that such adjustment or action would cause the Plan or any outstanding Incentive Stock Option to violate Section 422 of the Code or would -2- cause any Performance-Based Award to fail to qualify as "qualified performance- based compensation" under Section 162(m) of the Code and the regulations promulgated thereunder. (c) Limit on Individual Grants. The maximum number of Shares subject to stock options and underlying stock appreciation rights which may be granted in the aggregate under the Plan in any calendar year to any Participant shall not exceed 150,000 Shares, subject to adjustment as provided in subparagraph (b) hereof. The maximum number of Shares subject to restricted stock awards which may be granted under the Plan in any calendar year to any Participant shall not exceed 150,000 Shares, subject to adjustment as provided in subparagraph (b) hereof. In addition, the maximum amount of compensation payable in respect of performance unit awards, other stock-based awards under paragraph 10 hereof, cash in addition to an Award under paragraph 12 hereof and dividend equivalents under paragraph 14(c) hereof that may be paid in the aggregate under the Plan in any calendar year to any Participant shall not exceed $1,500,000. In all events, determinations under this subparagraph shall be made in a manner that is consistent with Section 162(m) of the Code and the regulations promulgated thereunder. 4. Eligibility to Receive Awards. All officers, directors, key employees and consultants of the Company are eligible to be Participants in the Plan. As used herein, key employees are employees determined by the Committee to be capable of contributing significantly to the profitability and success of the Company. Incentive Stock Options (as defined below) may be granted only to persons eligible to receive such options under the Code. 5. Form of Awards. Subject to the provisions of the Plan, Awards may be made from time to time by the Committee in the form of stock options to purchase Shares, stock appreciation rights, performance units, restricted stock, other stock-based awards as provided herein or any combination of the above. Stock options may be options which are intended to qualify as incentive stock options within the meaning of Section 422 of the Code or any successor provision ("Incentive Stock Options") or options which are not intended to so qualify ("Nonqualified Stock Options"). 6. Stock Options. (a) Award. Subject to the provisions of the Plan, the Committee shall determine the terms and conditions of each stock option granted by the Committee, which may include without limitation: (i) the type of option (Incentive Stock Option or Nonqualified Stock Option), (ii) the number of Shares subject to the option, (iii) the time or times at which and/or the conditions upon which the option shall become exercisable in whole or in part, (iv) the term of the option, and (v) the exercise price per Share, provided that the exercise price per Share shall not be less than the par value of a Share. In addition, the exercise price per Share for stock options which are intended to be Performance-Based Awards (other than Performance-Based Awards described in paragraph 11(b) hereof) shall not be less than the fair market -3- value of a Share on the date of grant. The Committee, in its discretion, may provide for circumstances under which the option shall become immediately exercisable, in whole or in part, and, notwithstanding the foregoing, may accelerate the exercisability of any option, in whole or in part, at any time. A stock option granted under this Plan shall be an Incentive Stock Option only if the relevant Award Agreement by its terms expressly states that it is intended to qualify as an Incentive Stock Option and the stock option is designated as an Incentive Stock Option in the Award Agreement. (b) Payment for Shares. The Committee shall determine the form of payment of the purchase price of the Shares with respect to which an option is exercised, which may include without limitation (i) cash (which may include personal checks, certified checks, cashier's checks or money orders), (ii) Shares at fair market value, (iii) the optionee's written request to the Company to reduce the number of Shares otherwise issuable to the optionee upon the exercise of the option by a number of Shares having a fair market value equal to such purchase price, (iv) a payment commitment of a financial institution or brokerage firm in connection with the "cashless exercise" of an option, (v) any other lawful consideration, including, without limitation, an Award or a note or other commitment satisfactory to the Committee or (vi) a combination of any of the foregoing. (c) Incentive Stock Options. In the case of an Incentive Stock Option, each Award shall contain such other terms, conditions and provisions as the Committee determines to be necessary or desirable in order to qualify such option as an Incentive Stock Option within the meaning of Section 422 of the Code or any successor provision. 7. Stock Appreciation Rights. (a) Award. Stock Appreciation Rights ("SARs") may be granted by the Committee either in connection with a previously or contemporaneously granted stock option or independently of a stock option. Subject to the provisions of the Plan, the Committee shall determine the terms and conditions of each SAR. SARs shall entitle the grantee, subject to such terms and conditions as may be determined by the Committee, to receive upon exercise thereof all or a portion of the excess of (i) the fair market value at the time of exercise, as determined by the Committee, of a specified number of Shares with respect to which the SAR is exercised, over (ii) a specified price which shall not be less than 100 percent of the fair market value of the Shares at the time the SAR is granted, or, if the SAR is granted in connection with a previously or contemporaneously issued stock option, not less than the exercise price of the Shares subject to the option, provided that the specified price for SARs which are intended to be Performance-Based Awards (other than Performance-Based Awards described in paragraph 11(b) hereof) shall in no event be less than the fair market value of a Share on the date the SAR is granted. (b) SARs Related to Stock Options. If an SAR is granted in relation to a stock option, unless otherwise determined by the Committee, (i) the SAR shall be exercisable only at such times, and by such persons, as the related option is exercisable, (ii) the grantee's right to exercise the related option shall be canceled if and to the extent that the Shares subject to the option are used to calculate the amount to be received upon the exercise of the related SAR and (iii) the grantee's right to exercise the related SAR shall be canceled if and to the extent that the Shares subject to the SAR are purchased upon the exercise of the related option, provided that an SAR granted with -4- respect to less than the full number of Shares covered by a related option shall not be reduced until the exercise or termination of the related option exceeds the number of Shares not covered by the SAR. (c) Other Terms. Each SAR shall have such other terms and conditions as the Committee shall determine in its sole discretion. The Committee may, in its discretion, provide in the Award circumstances under which the SARs shall become immediately exercisable, in whole or in part, and may, notwithstanding the foregoing, accelerate the exercisability of any SAR, in whole or in part, at any time. Upon exercise of an SAR, payment shall be made in cash, Shares at fair market value on the date of exercise, other Awards, other property or any combination thereof, as the Committee may determine. 8. Restricted Stock Awards. (a) Award. Restricted stock awards under the Plan shall consist of Shares free of any purchase price or for such purchase price as may be established by the Committee, subject to forfeiture, and subject to such other terms and conditions (including attainment of performance objectives) as may be determined by the Committee. (b) Restriction Period. Restrictions shall be imposed for such period or periods as may be determined by the Committee. The Committee shall determine the terms and conditions upon which any restrictions upon restricted stock awarded under the Plan shall expire, lapse, or be removed. The Committee, in its discretion, may provide in the Award circumstances under which the restricted stock shall become immediately transferable and nonforfeitable, or under which the restricted stock shall be forfeited, and, notwithstanding the foregoing, may accelerate the expiration of the restriction period imposed on any Shares at any time. (c) Restrictions Upon Transfer. Restricted stock and the right to vote such Shares and to receive dividends thereon, may not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered during the restriction period applicable to such Shares, except to the extent determined by the Committee. Notwithstanding the foregoing, and except as otherwise provided in the Plan or determined by the Committee, the grantee of the restricted stock shall have all of the other rights of a stockholder, including, but not limited to, the right to receive dividends and the right to vote such Shares. The Committee, in its discretion, may provide that any dividends or distributions paid with respect to Shares subject to the unvested portion of a restricted stock award will be subject to the same restrictions as the Shares to which such dividends or distributions relate. -5- (d) Registration. Any restricted stock issued hereunder may be evidenced in such manner as the Committee in its sole discretion may deem appropriate, including without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any certificate or certificates are to be issued, the Committee, in its sole discretion, shall determine when the certificate or certificates shall be delivered to the grantee, may provide for the holding of such certificate or certificates in escrow or in custody by the Company or its designee pending their delivery to the grantee, and may provide for any appropriate legend to be borne by the certificate or certificates. 9. Performance Units. Performance unit awards under the Plan shall entitle grantees to future payments based upon the achievement of pre-established performance objectives. Subject to the provisions of the Plan, the Committee shall determine the terms and conditions applicable to each performance unit award, which may include without limitation the following: (a) one or more performance periods, (b) the initial value of a performance unit, (c) performance targets to be achieved during each applicable performance period and (d) the terms of payment of performance unit awards. Performance targets established by the Committee may relate to financial and nonfinancial performance goals, may relate to corporate, division, unit, individual or other performance and may be established in terms of growth in gross revenue, earnings per share, ratios of earnings to equity or assets, or such other measures or standards as may be determined by the Committee in its discretion. Multiple targets may be used and may have the same or different weighting, and they may relate to absolute performance or relative performance measured against other companies or businesses. At any time prior to payment of a performance unit award, the Committee may adjust previously established performance targets or other terms and conditions, including the Company's or other entity's financial performance for Plan purposes, to reflect unforeseen events, including without limitation, changes in laws, regulations or accounting practices, mergers, acquisitions or divestitures or other extraordinary, unusual or non-recurring items or events. Payment on performance unit awards may be made in cash, Shares, other Awards, other property or any combination thereof. 10. Other Stock-Based Awards. The Committee may grant to Participants, either alone or in addition to other Awards granted under the Plan, awards which are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares (including, without limitation, securities or other instruments convertible into Shares). Subject to the terms of the Plan, the Committee shall determine the terms and conditions of such Awards. Such Awards may be paid in Shares, cash, other Awards, other property or any combination thereof, as the Committee may determine. Such Awards may be issued for no cash consideration, for such minimum consideration as may be required by applicable law or for such other consideration as the Committee may determine. The form or forms of consideration payable for Shares or other securities delivered pursuant to a purchase right granted under this paragraph may include any form of consideration specified in paragraph 6(b) hereof. The Committee may establish certain performance criteria that may relate in whole or in part to receipt of awards hereunder. -6- 11. Performance-Based Awards. (a) Applicability. Awards granted and other compensation payable under the Plan which are intended to qualify as Performance-Based Awards shall be subject to the provisions of this paragraph 11. In the event of any conflict between the provisions of this paragraph 11 and any other provisions of this Plan, the provisions of this paragraph 11 shall prevail. (b) Performance Goals. The specific performance goals for the following Performance-Based Awards shall be one or more Stockholder-Approved Performance Goals, as selected by the Committee in its sole discretion: (i) Performance-Based Awards granted under paragraphs 8, 9, 10, 12 and 14(c) hereof and (ii) Performance-Based Awards granted under paragraphs 6 and 7 hereof which are made on account of, or the vesting or exercisability of which is contingent upon, attainment of one or more performance goals. To the extent required under Section 162(m) of the Code and the regulations promulgated thereunder, the Committee shall (I) establish in the applicable Award Agreement the specific performance targets relative to the Stockholder-Approved Performance Goals which must be attained before compensation under the Performance-Based Award becomes payable, (II) provide in the applicable Award Agreement the method for computing the amount of compensation payable to the Participant if the target or targets are attained, and (III) at the end of the relevant performance period and prior to any payment of compensation, certify whether the applicable target or targets were achieved and whether any other material terms were in fact satisfied. The specific targets and the method for computing compensation shall be established within the time period permitted under Section 162(m) of the Code and the regulations promulgated thereunder. The Committee may reserve the right in any Award Agreement covering a Performance-Based Award to reduce the amount payable at a given level of performance. The Committee shall be precluded from increasing the amount of compensation payable that would otherwise be due upon attainment of a performance goal contained in a Performance-Based Award, to the extent required under Section 162(m) of the Code and the regulations promulgated thereunder for Performance-Based Awards to qualify as "qualified performance-based compensation" under Section 162(m) of the Code. (c) Modification of Performance Goals. Except where a modification would cause a Performance-Based Award to no longer qualify as "qualified performance-based compensation" within the meaning of Section 162(m) of the Code, the Committee may in its discretion modify any performance goal or target relating to a Performance-Based Award, in whole or in part, as the Committee deems appropriate and equitable, subject to the provisions of paragraph 14(i) hereof. (d) Discretion; Compliance. Notwithstanding any other provision of this Plan to the contrary, neither the Board nor the Committee shall be entitled to exercise any discretion otherwise authorized under this Plan with respect to any Performance-Based Award or with respect to the amendment or modification of any provision of this Plan without stockholder approval, if the ability to exercise such discretion (as opposed to the exercise of such discretion) would cause any Performance-Based Award to fail to qualify as "qualified performance-based compensation" under Section 162(m) of the Code. Notwithstanding any other provision of this Plan to the contrary, the Plan shall be deemed to include such additional limitations or requirements set forth in Section 162(m) of the Code and the regulations and rulings promulgated thereunder which are required to be included in the Plan in order for -7- Performance-Based Awards to qualify as "qualified performance-based compensation" under Section 162(m) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such limitations and requirements from time to time. 12. Loans and Supplemental Cash Payments. The Committee in its sole discretion to further the purpose of the Plan may provide for cash payments to individuals in addition to an Award, or loans to individuals in connection with all or any part of an Award. Supplemental cash payments shall be subject to such terms and conditions as shall be prescribed by the Committee, provided that in no event shall the amount of payment exceed: (a) In the case of an option, the excess of the fair market value of a Share on the date of exercise over the option price multiplied by the number of Shares for which such option is exercised, or (b) In the case of an SAR, performance unit, or restricted stock Award, the value of the Shares and other consideration issued in payment of such Award. Any loan shall be evidenced by a written loan agreement or other instrument in such form and containing such terms and conditions (including, without limitation, provisions for interest, payment schedules, collateral, forgiveness or acceleration) as the Committee may prescribe from time to time. 13. General Restrictions. Each Award under the Plan shall be subject to the requirement that if at any time the Committee shall determine that (i) the listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any regulatory body, or (iii) an agreement by the recipient of an Award with respect to the disposition of Shares, or (iv) the satisfaction of withholding tax or other withholding liabilities is necessary or desirable as a condition of or in connection with the granting of such Award or the issuance or purchase of Shares thereunder, such Award shall not be consummated in whole or in part unless such listing, registration, qualification, consent, approval, agreement, or withholding shall have been effected or obtained free of any conditions not acceptable to the Committee. Any such restriction affecting an Award shall not extend the time within which the Award may be exercised; and neither the Company nor its directors or officers nor the Committee shall have any obligation or liability to the grantee or to a Beneficiary with respect to any Shares with respect to which an Award shall lapse or with respect to which the grant, issuance or purchase of Shares shall not be effected, because of any such restriction. -8- 14. General Provisions Applicable to Awards. (a) Award Agreements. Each Award under the Plan shall be evidenced by a written agreement entered into by and between LabOne and the Participant ("Award Agreement") containing such terms and conditions not inconsistent with the provisions of the Plan as the Committee in its sole discretion deems necessary or advisable. Each Participant to whom an Award has been granted shall agree that such Award shall be subject to all of the terms and conditions of the Plan and the terms and provisions of the applicable Award Agreement. A Participant shall have no rights with respect to any Award unless the Participant shall have executed and delivered to the Company a copy of the Award Agreement with respect to such Award. (b) Committee Discretion. Each type of Award may be made alone, in addition to or in relation to any other Award. Multiple Awards, multiple forms of Awards, or combinations thereof may be evidenced by a single Award Agreement or multiple Award Agreements, as determined by the Committee. Successive Awards may be granted to the same Participant whether or not any Awards previously granted to such Participant remain outstanding. The Committee's determinations under the Plan need not be uniform and may be made selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. No person shall have any claim or right to be granted an Award under the Plan. (c) Dividends. In the discretion of the Committee, any Award under the Plan may provide the Participant with dividends or dividend equivalents payable in cash or property, currently or deferred, with or without interest. Dividend equivalents granted with respect to a stock option which is a Performance-Based Award may not be made contingent upon exercise of the stock option, to the extent prohibited by Section 162(m) of the Code and the regulations promulgated thereunder with respect to qualified performance-based compensation. (d) Termination of Employment or Consulting Arrangement. The Committee shall determine the effect, if any, on an Award of the disability, death, retirement or other termination of employment or services of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Beneficiary may receive payment of an Award or exercise rights thereunder. (e) Change in Control. In order to preserve a Participant's rights under an Award in the event of a change in control of the Company (as defined by the Committee), the Committee in its discretion may take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise, realization or payment of the Award, (ii) provide for payment to the Participant of cash or other property with a fair market value, as determined by the Committee, equal to the amount that would have been received upon the exercise or payment of the Award had the Award been exercised or paid upon the change in control, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provisions as the Committee may consider equitable to the Participant and in the best interests of the Company. -9- (f) Transferability. In the discretion of the Committee, any Award may be made transferable upon such terms and conditions and to such extent as the Committee determines, provided that Incentive Stock Options may be transferable only to the extent permitted by the Code. The Committee may in its discretion waive any restriction on transferability. Unless the Committee determines otherwise, a Participant's rights and interest under any Award or any Award Agreement may not be assigned or transferred in whole or in part, voluntarily or involuntarily, including by operation of law, except by will, by the laws and descent and distribution or pursuant to an effective Beneficiary designation. (g) Withholding. (i) Prior to the issuance or transfer of Shares or other property under the Plan, the recipient shall remit to the Company an amount sufficient to satisfy any Federal, state or local withholding tax requirements. The recipient may satisfy the withholding requirement in whole or in part by delivering Shares or electing to have the Company withhold Shares having a value equal to the amount required to be withheld. The value of such Shares shall be the fair market value, as determined by the Committee, of the stock on the date that the amount of tax to be withheld is determined (the Tax Date). Such Election must be made prior to the Tax Date, must comply with all applicable securities law and other legal requirements, as interpreted by the Committee, and may not be made unless approved by the Committee, in its discretion. (ii) Whenever payments to a Participant in respect of an Award under the Plan are to be made in cash, such payments shall be net of the amount necessary to satisfy any Federal, state or local withholding tax requirements. (h) Deferred or Installment Payments. The Committee may provide that the issuance of Shares or the payment or transfer of cash or property upon the settlement of Awards may be made in a single payment or transfer or in installments, and may authorize the deferral of, or permit a Participant to elect to defer, any such issuance, payment or transfer, all in accordance with such rules, requirements, conditions and procedures as may be established by the Committee. The Committee may also provide that any such installment or any such deferred issuance, payment or transfer shall include the payment or crediting of dividend equivalents, interest or earnings on deferred amounts. (i) Amendment of Awards. Subject to the terms and conditions of the Plan, the Committee will have the authority under the Plan to amend or modify the terms of any outstanding Award (including the applicable Award Agreement) in any manner, prospectively or retroactively, including, without limitation, the authority to modify the number of shares or other terms and conditions of an Award, extend the term of an Award, accelerate the exercisability or vesting or otherwise terminate any restrictions relating to an Award, convert an Incentive Stock Option to a Nonqualified Stock Option, accept the surrender of any outstanding Award and authorize the grant of new Awards in substitution for surrendered Awards; provided, however, that the amended or modified terms are permitted by the Plan as then in effect and provided, further, that if the Committee determines that such amendment or modification, taking into account any related action, materially and adversely affects a Participant, such Participant shall have consented to such amendment or modification. Nothing in this subsection shall be deemed to limit the Committee's authority to amend or modify any outstanding Award pursuant to paragraph 3(b) of the Plan. -10- 15. Certain Definitions (a) "1934 Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor law. (b) "Award" means any award of stock options to purchase Shares, stock appreciation rights, performance units, restricted stock, other stock-based awards as provided herein or any combination of the above granted under the Plan. (c) "Beneficiary" means the person or persons designated in writing by the grantee of an Award as the grantee's Beneficiary with respect to such Award; or, in the absence of an effective designation or if the designated person or persons predecease the grantee, the grantee's Beneficiary shall be the grantee's estate or the person or persons who acquire by bequest or inheritance the grantee's rights in respect of an Award. In order to be effective, a grantee's designation of a Beneficiary must be on file with the Committee before the grantee's death, but any such designation may be revoked and a new designation substituted therefor at any time before the grantee's death. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor law. (e) "Covered Employee" means a "covered employee" for a particular taxable year of the Company within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder or any Participant who the Committee believes will be such a covered employee for a particular taxable year of the Company, and who the Committee believes will have remuneration in excess of $1,000,000 for such taxable year, as provided in Section 162(m) of the Code. (f) "Participant" means any person selected to receive an Award pursuant to the Plan. (g) "Outside Director" means a member of the Board of Directors who is not an employee of LabOne or any parent corporation or subsidiary corporation of LabOne (as defined in Sections 424(e) and (f) of the Code). (h) "Performance-Based Awards" means Awards and other compensation payable under the Plan which the Committee from time to time determines are intended to qualify as "qualified performance-based compensation" under Section 162(m) of the Code. (i) "Reporting Person" means any person subject to Section 16 of the 1934 Act, or any successor rule. (j) "Shares" means shares of Common Stock, $.01 par value per share, of LabOne as constituted on the effective date of the Plan, and any other shares into which such Common Stock shall thereafter be changed by reason of any transaction described in paragraph 3(b) hereof. -11- (k) "Stockholder-Approved Performance Goals" means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance-Based Awards described in paragraph 11(b) hereof. To the extent permitted under Section 162(m) of the Code and the regulations promulgated thereunder, Stockholder-Approved Performance Goals may be described in terms of objectives related to the performance of the Participant, LabOne, any subsidiary, or any division, unit, department, region or function within LabOne or any subsidiary in which the Participant is employed. Stockholder-Approved Performance Goals may be made relative to the performance of other companies. To the extent permitted under Section 162(m) of the Code and the regulations promulgated thereunder, Stockholder-Approved Performance Goals applicable to any Performance-Based Award shall be based on specified levels of or changes in one or more of the following criteria: (i) cash flow, which may include net cash flow from operations, or net cash flow from operations, financing and investing activities, (ii) earnings per share, (iii) pre-tax income, (iv) net income, (v) return on sales, (vi) return on equity, (vii) return on assets, (viii) return on capital, (ix) return on investment, (x) revenue growth, (xi) market share, (xii) retained earnings, (xiii) improved gross margins, (xiv) operating expense ratios, (xv) earnings before interest, taxes, depreciation and amortization, (xvi) costs, (xvii) cost reductions or savings, (xviii) debt reduction, (xix) selling, general and administrative expenses and (xx) total return to shareholders (share appreciation plus dividends). 16. Miscellaneous. (a) Rights of a Shareholder. Except as otherwise provided in paragraph 8 hereof and subject to the provisions of the applicable Award Agreement, the recipient of any Award under the Plan shall have no rights as a shareholder with respect thereto unless and until certificates for Shares are issued to him, and the issuance of Shares shall confer no retroactive right to dividends. (b) Rights to Terminate Employment. Nothing in the Plan or in any Award Agreement shall confer upon any person the right to continue in the employment of the Company or affect any right which the Company may have to terminate the employment of such person. (c) Amendment and Termination of Plan. The Board may terminate, amend, modify or suspend the Plan at any time, subject to such stockholder approval as the Board determines to be necessary or desirable to comply with any tax, regulatory or other requirement. If the Committee determines that any such termination, modification, amendment or suspension of the Plan shall materially and adversely affect the rights of any grantee or Beneficiary under an Award previously granted, the consent of such grantee or Beneficiary shall be required, provided that it shall be conclusively presumed that any adjustment pursuant to paragraph 3(b) hereof does not materially and adversely affect any such right. -12- (d) Effect on Other Plans; Nature of Payments. Nothing contained in this Plan shall prevent the Company from adopting other or additional compensation arrangements or other benefit or incentive plans or shall affect any Participant's eligibility to participate in any other such arrangement or plan. Each grant of an Award and each issuance of Shares thereunder shall be in consideration of services performed for the Company by the Participant receiving the Award. Each such grant and issuance shall constitute a special incentive payment to the Participant receiving the Award and shall not be taken into account in computing the amount of salary or compensation of the Participant for the purposes of determining any pension, retirement, death or other benefits under (i) any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or (ii) any agreement between the Company and the Participant, except as such plan or agreement shall otherwise expressly provide. (e) Effective Date and Duration of Plan. The Plan shall become effective when adopted by the Board, provided that the Plan is approved by the stockholders of LabOne in accordance with Delaware law before the first anniversary of the date the Plan is adopted by the Board, and provided, further, that no payment on any Award shall be made unless and until such stockholder approval is obtained. Unless it is sooner terminated in accordance with subparagraph (c) hereof, the Plan shall remain in effect until all Awards under the Plan have been satisfied or have expired or otherwise terminated, but no Incentive Stock Option shall be granted more than ten years after the earlier of the date the Plan is adopted by the Board or is approved by the Company's shareholders. (f) Unfunded Plan. The Plan shall be unfunded, except to the extent otherwise provided in accordance with Section 8 hereof. Neither the Company nor any affiliate shall be required to segregate any assets that may be represented by Awards, and neither the Company nor any affiliate shall be deemed to be a trustee of any amounts to be paid under any Award. Any liability of the Company or any affiliate to pay any grantee or Beneficiary with respect to an Award shall be based solely upon any contractual obligations created pursuant to the provisions of the Plan, and no such obligations will be deemed to be secured by a pledge or encumbrance on any property of the Company or an affiliate. (g) Governing Law. The Plan shall be governed by, and shall be construed, enforced and administered in accordance with, the laws of the State of Delaware, except to the extent that such laws may be superseded by any Federal law. -13- EX-10 4 Exhibit 10.2 ------------ STOCK OPTION AGREEMENT pursuant to the LABONE, INC. 1997 LONG-TERM INCENTIVE PLAN AGREEMENT dated as of February 13, 1998, and entered into, in duplicate, by and between LabOne, Inc. (LabOne), a Delaware corporation, and ------, the ("Optionee"). WITNESSETH that: WHEREAS, LabOne has duly adopted the LabOne, Inc. 1997 Long-Term Incentive Plan (the "Plan"); and WHEREAS, the Committee referred to in the Plan (the "Committee"), pursuant to authority vested in it by LabOne's Board of Directors, has authorized the granting to the Optionee of a Nonqualified Stock Option as defined in the Plan (the "Option"), to purchase shares of stock of LabOne upon the terms and subject to the conditions hereinafter set forth, and LabOne desires by this instrument to grant said Option and to specify the terms and conditions thereof; and WHEREAS, the shares of the common stock of LabOne that are covered by the Option hereby granted under the Plan, when added to the other shares of the common stock of LabOne that are covered by other stock options granted under the Plan, do not exceed the total number of shares of the common stock of LabOne with respect to which awards are authorized pursuant to Section 3 of the Plan to be granted under the Plan. NOW, THEREFORE, it is hereby covenanted and agreed by and between LabOne and the Optionee as follows: Section 1. - ---------- LabOne hereby grants to the Optionee an Option to purchase an aggregate of - ----- shares of the common stock of LabOne ("Shares") of par value one cent ($0.01) per Share. Subject to all of the terms and conditions hereinafter set forth, such Option shall be irrevocable. Section 2. - ---------- The Option price with respect to the Shares covered by this Agreement shall be -------- share (market price on date of grant). Section 3. - ---------- (a) Subject to all of the other terms and conditions hereinafter set forth, the Option may be exercised by the Optionee on or after the respective dates hereinafter specified, but not later than ten (10) years and one (1) day from the date of this Agreement, namely: Page 1 On and after February 13, 1999, the Option may be exercised in respect of 20% of the aggregate number of Shares specified in Section 1, above; On and after February 13, 2000, the Option may be exercised in respect of an additional 20% of the aggregate number of Shares specified in Section 1, above; On and after February 13, 2001, the Option may be exercised in respect of an additional 20% of the aggregate number of Shares specified in Section 1, above; On and after February 13, 2002, the Option may be exercised in respect of an additional 20% of the aggregate number of Shares specified in Section 1, above; and On and after February 13, 2003, the Option may be exercised in respect of an additional 20% of the aggregate number of Shares specified in Section 1, above. (b) Notwithstanding the provisions of Section 3 (a) above, the Option may be exercised with respect to all of the Shares specified in Section 1, above, immediately upon the occurrence of a Change of Control. "Change of Control" means the occurrence of any of the following events: (i) any Person (within the meaning of Section 13 (d) and 14 (d) of the Securities Exchange Act of 1934, as amended [the "1934 Act"]), other than Lab Holdings, Inc. ("LAB HOLDINGS") or an affiliate (as that term is defined in Rule 12b-2 under the 1934 Act) of LAB HOLDINGS as of the date of this Agreement, becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of 20% or more of the combined voting power of LAB HOLDINGS or any company that directly or indirectly controls LabOne (a "LabOne Affiliate"); or (ii) a majority of the Board of Directors of LAB HOLDINGS or a LabOne Affiliate ceases to consist of Continuing Directors ("Continuing Director" means, as to LAB HOLDINGS, any person who was a member of the Board of Directors of LAB HOLDINGS as of the date of this Agreement, and any person who subsequently becomes a member of such Board of Director if such person's election or nomination for election to such Board of Directors is recommended or approved by a majority of the Continuing Directors of LAB HOLDINGS; and as to a LabOne Affiliate, "Continuing Director" means any person who is a member of the Board of Directors of such LabOne Affiliate if such person is elected to such Board of Directors with the approval of LAB HOLDINGS and/or any affiliate of LAB HOLDINGS as the holder of at least a majority of the outstanding voting interests of such LabOne Affiliate or if such person's election or nomination for election to such Board of Directors is recommended or approved by a majority of the Continuing Directors of such LabOne Affiliate); or (iii) the stockholders of LAB HOLDINGS or of any LabOne Affiliate approve an agreement to merge or consolidate with another corporation, unless such merger of consolidation (A) is approved by a majority of the Continuing Directors of LAB HOLDINGS or of the LabOne Affiliate, as the case may be, and (B) is specifically designated by a majority of the Continuing Directors of LAB HOLDINGS or of the LabOne Affiliate, as the case may be, not to constitute a change of control for purposes of the Plan; or Page 2 (iv) the stockholders of LAB HOLDINGS or of any LabOne Affiliate approve an agreement (including a plan of liquidation) to sell or otherwise dispose of all or substantially all of the assets of LAB HOLDINGS or of any LabOne Affiliate, unless such sale or other disposition is (A) approved by a majority of the Continuing Directors of LAB HOLDINGS or the LabOne Affiliate, as the case may be, and (B) is specifically designated by a majority of the Continuing Directors of LAB HOLDINGS or of the LabOne Affiliate, as the case may be, not to constitute a change of control for purposes of the Plan. Section 4. - ---------- Subject to all of the other terms and conditions set forth hereinafter and in the Plan, the Optionee may exercise the Option in respect of Shares on and after the appropriate dates set forth in Section 3 (a), above, in whole at any time, or in part from time to time. The Optionee shall give the committee a written notice to exercise the Option in whole or in a specified part, and such notice shall be accompanied by cash (including personal checks, certified checks, cashier's checks, or money orders) in full payment for the Shares then being purchased. The Optionee shall have the right, with the consent of, and subject to such terms and conditions as may be established by, the Committee, to elect to pay all or a part of the option price for the Shares by requesting LabOne to reduce the number of Shares otherwise issuable to the Optionee upon the exercise of the Option by a number of Shares having a fair market value at the time of exercise equal to such option price. The Option shall be deemed to be exercised (i) on the date that the notice of exercise and the cash and/or election are received by the Committee or (ii) if such notice of exercise and cash and/or election are mailed in the United States and the United State Postal Service has stamped its postmark thereon, then on the date of such postmark. Section 5. - ---------- (a) In no event may the Option be exercised later than one day after the tenth (10th) anniversary of this Agreement; provided, however, that the Option may be sooner terminated in accordance with the provisions of the Plan and of this Section 5. (b) If the Optionee's employment with LabOne and its subsidiaries (the "Company") terminates for any reason other than Disability or Retirement (both as defined in Section 6 (e) of the Plan) or death, and said termination does not occur within twelve (12) months after a Change of Control, as defined in Section 3 (b), above, the Optionee shall have the right to exercise the Option within a period of three months after such termination to the extent that the Option was exercisable at the time of termination. For purposes of this Agreement, a leave of absence authorized by LabOne or a LabOne subsidiary to the Optionee in writing shall not be deemed to be a termination of employment. As used herein, the term Retirement means retirement pursuant to the pension plan maintained by LabOne, as amended from time to time. As used herein, the term Disability means a condition that, in the judgment of the committee, has rendered a grantee completely and presumably permanently unable to perform any and every duty of his regular occupation. Page 3 (c) If the Optionee's employment with the Company terminates because of the Optionee's death, or if the Optionee dies within twelve (12) months after termination of employment due to Disability or Retirement, or if the Optionee dies within three (3) months after termination of employment for any reason, the Option, if held by the Optionee on the date of the Optionee's death, may be exercised within (but not later than) twelve (12) months after the Optionee's death, and only to the extent that the Option could have been exercised immediately before the Optionee's death. In that event, the Option may be exercised only by the Optionee's Beneficiary as defined in Section 15 (c) of the Plan. For purposes of this Section 5 (c), the Optionee may designate in writing a person or persons as his Beneficiary with respect to an Option; or, in the absence of an effective designation or if the designated person or persons predeceased the Optionee, the Optionee's Beneficiary shall be the Optionee's estate on the person or persons who acquire by bequest or inheritance the Optionee's right in respect of an Option. In order to be effective, an Optionee's designation of a Beneficiary must be on file with the Committee before the Optionee's death. Any such designation may be revoked and a new designation substituted therefor at any time before the Optionee's death. (d) If the Optionee's employment with the Company terminates because of his Retirement or Disability, the Optionee may exercise the Option, to the extent that it could be exercised upon such termination of employment, at any time within twelve (12) months after the Optionee's employment so terminates. (e) If the Optionee's employment with the Company terminates for any reason, other than Retirement or Disability or death, within twelve (12) months after a Change of Control, as defined in Section 3 (b), above, the Optionee may exercise the Option at any time within twelve (12) months after the Optionee's employment so terminates. (f) In the case of an Optionee who is a director of the Company, (i) the term "employment" as used in this Section 5 shall mean Optionee's service as a director of the Company or his employment with the Company, whichever terminates later, and (ii) the term "Retirement" as used in this Section 5 shall mean the termination of the Optionee's service as a director of the Company (unless the termination of such service precedes the termination of the Optionee's employment as an employee of the Company, in which case the term "Retirement" shall have the meaning ascribed thereto by Section 5 (b) hereof). (g) Anything in this Agreement to the contrary notwithstanding, nothing in this Section 5 or elsewhere in this Agreement shall be deemed or construed as extending the ten-year-and-one-day period described in Section 5 (a), above. Section 6. - ---------- At the time of exercise of the Option, notice having been given as aforesaid, Shares shall be delivered by LabOne against full payment of the Option price in respect of the Shares delivered, subject to the provisions of Section 7 hereof. Section 7. - ---------- Each exercise of the Option shall be subject to the condition that if at any time LabOne shall determine, in its discretion, that it is necessary or desirable as a condition of, or in connection with, such exercise (or the delivery or purchase of Shares thereunder) (i) to satisfy withholding tax or Page 4 other withholding liabilities, (ii) to effect the listing, registration, or qualification on any securities exchange or under any state or federal law of any Shares otherwise deliverable in connection with such exercise, (iii) to obtain an agreement by the Optionee with respect to the disposition of the Shares, then in any such event such exercise shall not be effective unless such withholding, listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to LabOne. Any such limitation affecting the right to exercise an Option shall not extend the time within which the Option may be exercised, unless the Committee determines otherwise in its sole discretion; and neither the Company nor its directors or officers nor the Committee shall have any obligation or liability to the Optionee or to a Beneficiary with respect to any Shares with respect to which the Option shall lapse or with respect to which the purchase of Shares shall not be effected, because of such limitation. Section 8. - ---------- The Optionee shall be solely responsible for any federal, state or local income taxes imposed in connection with the exercise of the Option or the delivery of Shares incident thereto. Prior to the transfer of Shares to the Optionee in connection with the exercise of the Option, the Optionee shall remit to LabOne an amount sufficient to satisfy any federal, state or local withholding tax requirements. The optionee may satisfy the withholding requirements in whole or in part by electing (the "Election") to have LabOne withhold Shares having a value of equal to the amount required to be withheld. The value of each Share to be withheld shall be the fair market value, as determined by the Committee, of a Share on the date that the amount of tax to be withheld is determined (the "Tax Date"). Such Election must be made prior to the Tax Date, must comply with all applicable securities law and other legal requirements, as interpreted by the Committee, and may not be made unless approved by the Committee, in its discretion. Section 9. - ---------- If the Optionee disposes of any of the Shares purchased pursuant to the Option, then, in order to provide the Company with the opportunity to claim the benefit of any income tax deduction that may be available to it under the circumstances, the Optionee shall promptly notify the Company of the dates of acquisition and disposition of such Shares, the number of Shares so disposed of and the consideration, if any, received for such Shares. Section 10. - ----------- Each Option is personal to the Optionee, is not transferable by the Optionee other than by will or by the laws of descent and distribution in accordance with Section 5 (c), above, and is exercisable, during the Optionee's lifetime, only by the Optionee. Section 11. - ----------- Unless otherwise provided by the Plan, the Optionee shall have no rights as a shareholder with respect to any Shares covered by this Agreement unless and until certificates for such Shares are issued to him, and the issuance of Shares shall confer no retroactive right to dividends. Page 5 Section 12. - ----------- Subject to the provisions of Section 3 (b) of the Plan, in the event that the Committee determines that any dividend or distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, merger, consolidation, reorganization, spin-off or split-up, reverse stock split, combination or exchange of Shares or other transaction affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it may deem equitable and without the consent of Optionee, adjust the number and kind of securities subject to the Option and the exercise price per share, and may make such other changes as it deems equitable in its absolute discretion. Fractional Shares resulting from any such adjustments shall be eliminated. Section 13. - ----------- Nothing contained in this Agreement shall be deemed by implication or otherwise to impose any limitation on any right of LabOne or any of its subsidiaries to terminate the Optionee's employment at any time, in the absence of a specific agreement to the contrary. Section 14. - ----------- Any notice to be given hereunder by the Optionee shall be sent by mail addressed to LabOne, Inc., 10310 W. 84th Terrace, Lenexa, Kansas, 66214, for the attention of the Corporate Secretary, and any notice by LabOne to the Optionee shall be sent by mail addressed to the Optionee at the address of the Optionee listed in the records of the company. Either party may, by notice given to the other in accordance with the provisions of this Section, change the address to which subsequent notices shall be sent. Section 15. - ----------- It is expressly understood and agreed that the Optionee assumes all risks incident to any change hereafter in the applicable laws or regulations or incident to any change in the market value of the Shares after the exercise of the Option in whole or in part. Section 16. - ----------- The Option is not, is not intended to be, and shall not be treated as, an Incentive Stock Option (as defined in the Plan). Section 17. - ----------- This Agreement is entered into pursuant to the Plan (a copy of which is delivered to the Optionee concurrently with this grant). This Agreement is subject to all of the terms and provisions of the Plan, which are incorporated into this Agreement by reference. In the event of a conflict between this Agreement and the Plan, the provisions of the Plan shall govern. Page 6 Section 18. - ----------- The Option is subject to and contingent upon approval of the Plan by the stockholders of LabOne at a meeting of stockholders duly held in accordance with the applicable laws of the State of Delaware within twelve (12) months after the effective date of the Plan. Should stockholders fail to so approve the Plan, this Option shall be null and void. Any other provisions of this Option to the contrary notwithstanding, the Option may not be exercised in whole or in part until after such stockholder approval has been obtained. Section 19. - ----------- This Agreement shall be governed by, and shall be construed, enforced and administered in accordance with, the laws of the State of Delaware, except to the extent that such laws may be superseded by any federal law. This Agreement may not be modified orally. IN WITNESS WHEREOF, LabOne, Inc. has caused this Agreement to be executed in its corporate name, and the Optionee has executed the same in evidence of the Optionee's acceptance hereof, upon the terms and conditions herein set forth, as of the day and year first above written. LABONE, INC. By: --------------------------------- ------------------------------------ Optionee Page 7 -----END PRIVACY-ENHANCED MESSAGE-----