-----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, Oi3qKElIBBhaiKScns/wgoBR3pNACVRDVgOQpWwVUBXR9G2LbGawN/Dwy/M2HDsg XgLFp09wnvMYYYv3cYz3kQ== 0000892626-02-000408.txt : 20021230 0000892626-02-000408.hdr.sgml : 20021230 20021230163318 ACCESSION NUMBER: 0000892626-02-000408 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDAUER INC CENTRAL INDEX KEY: 0000825410 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] IRS NUMBER: 061218089 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09788 FILM NUMBER: 02872191 BUSINESS ADDRESS: STREET 1: TWO SCIENCE RD CITY: GLENWOOD STATE: IL ZIP: 60425 BUSINESS PHONE: 7087557000 MAIL ADDRESS: STREET 1: 2 SCIENCE ROAD CITY: GLENWOOD STATE: IL ZIP: 60425 FORMER COMPANY: FORMER CONFORMED NAME: TECH OPS LANDAUER INC DATE OF NAME CHANGE: 19910521 10-K 1 lan_10k.txt Securities and Exchange Commission FORM 10-K Washington, DC 20549 ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2002 Commission File Number 1-9788 LANDAUER, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 06-1218089 - ------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2 SCIENCE ROAD, GLENWOOD, ILLINOIS 60425 ---------------------------------------------------- (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (708) 755-7000 Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK WITH PAR VALUE OF $.10 NEW YORK STOCK EXCHANGE - ----------------------------------- ----------------------- (Title of each class) (Name of exchange on which registered) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [ ] No [ X ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ X ] No [ ] As of March 28, 2002, the aggregate market value of the voting and nonvoting common equities (based upon the closing price on the New York Stock Exchange) held by non-affiliates was approximately $319,000,000 Certain portions of the Registrant's definitive Proxy Statement in connection with the February 5, 2003 Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by reference into Part III of this Annual Report on Form 10-K. 1 INDEX Item Page - ---- ---- PART I 1. Business General Description. . . . . . . . . . . . . . . . . 3 Marketing and Sales. . . . . . . . . . . . . . . . . 4 Patents. . . . . . . . . . . . . . . . . . . . . . . 4 Raw Materials. . . . . . . . . . . . . . . . . . . . 5 Competition. . . . . . . . . . . . . . . . . . . . . 5 Research and Development . . . . . . . . . . . . . . 5 Environmental and Other Governmental Regulations . . 6 Employees and Labor Relations. . . . . . . . . . . . 6 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 6 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 6 4. Submission of Matters to a Vote of Security Holders. . . 6 4A. Executive Officers of the Registrant . . . . . . . . . . 7 PART II 5. Market for Registrant's Common Stock and Related Stockholder Matters. . . . . . . . . . . . . . . 7 6. Selected Financial Data. . . . . . . . . . . . . . . . . 8 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . 8 8. Consolidated Financial Statements and Supplementary Data Consolidated Balance Sheets. . . . . . . . . . . . . 14 Consolidated Statements of Income. . . . . . . . . . 16 Consolidated Statements of Stockholders' Investment and Comprehensive Income. . . . . . . . 17 Consolidated Statements of Cash Flows. . . . . . . . 19 Notes to Consolidated Financial Statements . . . . . 20 Reports of Independent Accountants . . . . . . . . . 32 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . 34 PART III 10. Directors and Executive Officers of the Registrant . . . 34 11. Executive Compensation . . . . . . . . . . . . . . . . . 34 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . 34 13. Certain Relationships and Related Transactions . . . . . 34 14. Controls and Procedures. . . . . . . . . . . . . . . . . 34 PART IV 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Financial Statements . . . . . . . . . . . . . . . . 35 Financial Statement Schedules. . . . . . . . . . . . 35 List of Exhibits . . . . . . . . . . . . . . . . . . 35 Reports on Form 8-K. . . . . . . . . . . . . . . . . 36 Signatures of Registrant and Directors . . . . . . . 37 Certifications . . . . . . . . . . . . . . . . . . . 38 Quarterly Financial Data (Unaudited) . . . . . . . . 40 2 PART I ITEM 1. BUSINESS GENERAL DESCRIPTION Landauer, Inc. is a Delaware corporation organized on December 22, 1987 to carry on the radiation monitoring business previously established by Tech/Ops, Inc. (Tech/Ops). On February 6, 1991, the Company changed its name from Tech/Ops Landauer, Inc. to Landauer, Inc. As used herein, the "Company" or "Landauer" refers to Landauer, Inc. and its subsidiaries. The Company offers a service for measuring, primarily through optically stimulated luminescent (OSL) badges worn by client personnel, the dosages of x-ray, gamma radiation and other penetrating ionizing radiations to which the wearer has been exposed. This technology is marketed under the trade name Luxel. While most of the Company's revenues are domestic, these services are also marketed by Landauer in Canada and by its subsidiaries and investments in other parts of the world. As of October 1, 1998, the Company acquired a 75% interest in SAPRA- Landauer, Ltda., which provides radiation dosimetry services in Brazil. As of December 28, 1998, SAPRA-Landauer acquired the radiation dosimetry service business formerly conducted by REM in Sao Paulo, Brazil. During July 1999, the Chinese government approved the Company's joint venture agreement with China National Nuclear Corporation to form Beijing-Landauer, Ltd., which provides radiation monitoring services in China. Landauer, Inc. owns a 70% interest in Beijing-Landauer. On April 2, 2002, the Company completed an agreement to merge its European operations with the radiation monitoring business operated by Laboratoire Central des Industries Electriques (LCIE), a wholly-owned subsidiary of Bureau Veritas, a professional services company involved in quality, health and safety, and environmental management. Under the agreement, Landauer exchanged its United Kingdom radiation monitoring business and its technologies for a 51% controlling interest in the new company named LCIE-Landauer. LCIE contributed its radiation monitoring business, all of which is located in France. LCIE-Landauer has its headquarters and laboratory at the current LCIE location in Fontenay-aux- Roses, a Paris suburb, and will continue to serve the United Kingdom customers from Oxford, England. Additionally, as part of the formation of the new entity on April 2, 2002, LCIE-Landauer purchased the Philips France radiation monitoring business. Landauer's activities also include the operations of Nagase-Landauer, Ltd., a 50%-owned joint venture in Japan involved in radiation monitoring in that country. The Company's AurionTM service offering provides operational radiation dose monitoring and allows users immediate information about their radiation exposure. Based on direct ion storage (DISTM) technology, calibration of devices and data management are provided as part of the service. Smart card technology coupled with radio-frequency identification provides users with the ability to assign devices to multiple users with minimal administrative overhead. Dose management is provided by Landauer via the Internet and radiation safety personnel can access a variety of reports when and where they are needed. Landauer's InLightTM dosimetry system provides smaller in-house and commercial laboratories with the ability to offer a complete radiation monitoring service using OSL technology. The system is based on the Company's propriety technology and instruments and dosimetry devices developed by Mitsushita Industrial Equipment Company and allows customers the flexibility to tailor their precise dosimetry needs. Landauer's operations include services for detecting radon gas. This service makes up a small part of revenues. 3 Landauer's wholly-owned subsidiary, HomeBuyer's Preferred, Inc., offers a radon monitoring service and, when necessary, remediation to purchasers of personal residences. The service is targeted to corporate employee relocation programs that have generally regarded radon as a serious environmental hazard. Landauer operates a crystal manufacturing facility in Stillwater, Oklahoma that it acquired in August 1998. Crystal material is a component in the Company's OSL technology. The Company's shares are listed on the New York Stock Exchange. As of September 30, 2002, there were 8,775,337 shares outstanding. The trading symbol is LDR. MARKETING AND SALES Landauer's dosimetry services are marketed primarily by full-time Company personnel located in Illinois, California, Connecticut, Georgia, and Texas. The Company's services are marketed through ventures in Japan, Brazil, China, the United Kingdom and France. In addition, U.S. sales personnel market these services in Canada. Other firms and individuals market the Company's services on a commission basis, primarily to small customers. Worldwide, the Company and its affiliates serve more than 60,000 customers representing more than 1.3 million individuals. Typically, a client will contract for a year's service in advance, representing monthly, bimonthly or quarterly badges, readings, and reports. Sales are made principally on a subscription basis. Customer relationships in the radiation monitoring market served by the Company are generally stable and recurring. Deferred contract revenue, as shown on the consolidated balance sheet, represents advance payment for services to be rendered. At September 30, 2002 and 2001, deferred contract revenue was $11,885,000 and $10,890,000, respectively. Radon gas detection kits are marketed primarily to institutional customers and government agencies. The HomeBuyer's Preferred Radon Protection Plan service agreement is marketed to companies and to their corporate relocation service providers for the benefit of purchasers of residences incident to transfers of personnel. PATENTS The Company holds exclusive worldwide licenses to patent rights for certain technologies that measure and image radiation exposure to crystalline materials when stimulated with light. These licenses were acquired by the Company from Battelle Memorial Institute and Oklahoma State University as part of collaborative efforts to develop and commercialize a new generation of radiation dosimetry technology. These licenses expire from the years 2011 through 2015. As of September 30, 2002, the Company is using OSL technology to provide dosimetry services to essentially its entire domestic and many of its international customers. These licenses and systems represent an important proprietary component of the OSL commercial service known as Luxel. Additionally, the Company holds certain patents that relate to various dosimeter designs. These patents expire in 2017. The Company believes that its business is primarily dependent upon the Company's technical competence, the quality and reliability of its services, and its prompt and responsive performance. Rights to inventions of employees working for Landauer are assigned to the Company. 4 RAW MATERIALS The Company has many sources for most of its materials and supplies, and believes that the number of sources and availability of items are adequate. Landauer internally produces certain of its requirements, such as OSL detector materials and plastic badge holders. COMPETITION Landauer has one major competitor in the United States as well as a number of smaller competitors that operate in the United States. In much of the world, radiation monitoring activities are conducted by a combination of private entities and government agencies. The Japanese market is served by the Company through its 50%-owned joint venture, Nagase-Landauer, Ltd. In early 1995, the Company began offering radiation monitoring services to customers in Canada following approval of the Company's devices by Canadian authorities. The Company began offering service to customers in China during fiscal 2000. Customers in Brazil are served through the Company's joint venture, SAPRA-Landauer, Ltda., while customers in the United Kingdom and France are served through the Company's joint venture LCIE-Landauer by its headquarters in suburban Paris, France and sales office in Oxford, England. In the United States, most government agencies, such as the Department of Energy and Department of Defense, have their own in-house radiation monitoring services. Additionally, many large private nuclear power plants also have their own in-house radiation monitoring services. The Company competes on the basis of advanced technologies, competent execution of these technologies, the quality and reliability of its services, and its prompt and responsive performance. The Company's InLightTM dosimetry system, while competitive with a number of systems offered by other companies, provides the only OSL-based radiation protection monitoring system available. The AurionTM operational radiation monitoring service competes with several electronic devices available throughout the world. Landauer has focused its marketing efforts for Aurion to include value added services for calibration, data management and administrative ease in assignment of devices to multiple users. Radon gas detection services represent a market where Landauer has many large and small competitors, many of whom use short-term charcoal detectors rather than the Company's alpha-track detectors. The HomeBuyer's Preferred Radon Protection Plan represents a product sold exclusively to the corporate relocation market through firms providing relocation services and directly to corporate customers. RESEARCH AND DEVELOPMENT Present research seeks to expand the use of OSL, particularly as it applies to radiation measurements in therapeutic and diagnostic radiology and nuclear medicine as well as environmental radiation dosimetry. The InLightTM dosimeter system recently released for commercial application will enable the Company's subsidiaries and other small dosimetry laboratories an economical approach to practice the OSL technology. The Company's technological expertise has been an important factor in its growth. The Company regularly pursues product improvements to maintain its technical position. The development of OSL dosimetry, announced in 1994, was funded by the Company in its collaborative effort with Battelle Memorial Institute and Oklahoma State University. The Company commercialized this technology over the past three years and has converted nearly all of its customers to the new technology. 5 The Company also participates regularly in several technical professional societies, both domestic and international, that are active in the fields of health physics and radiation detection and monitoring. ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS The Company believes that it complies with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment or otherwise protecting the environment. This compliance has not had, nor is it expected to have, a material effect on the capital expenditures, financial condition, liquidity, results of operation, or competitive position of Landauer. The U.S. Postal Service has studied the feasibility of irradiating letters and packages to protect the public from exposure to certain biological compounds and determined that there are other more practical methods available to achieve the desired result. Accordingly, it is not currently expected that use of irradiation in connection with the mails will become widespread to the extent that it impacts the Company's ability to continue providing its service to customers that use the U.S. mails. EMPLOYEES AND LABOR RELATIONS As of September 30, 2002, the Company employed approximately 425 full- time employees worldwide. Landauer believes its relations with its employees are good. ITEM 2. PROPERTIES Landauer owns three adjacent buildings totaling approximately 60,000 square feet in Glenwood, Illinois, about 30 miles south of Chicago. The properties house the Company's administrative offices, laboratory, assembly and reading operations and warehouse. The properties and equipment of the Company are in good condition and, in the opinion of management, are suitable and adequate for the Company's operations. The Company maintains a crystal growth facility in Stillwater, Oklahoma and maintains small offices and/or locations in Japan, the United Kingdom, Brazil, China, and France. ITEM 3. LEGAL PROCEEDINGS At September 30, 2002, Landauer was involved in various legal proceedings, but believes that these matters will be resolved without a material effect on its liquidity, results of operation, or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 6 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are as follows: Name of Officer Age Position Brent A. Latta 59 President and Chief Executive Officer James M. O'Connell 55 Vice President, Finance, Treasurer, Secretary, and Chief Financial Officer R. Craig Yoder 50 Senior Vice President, Marketing and Technology Joseph M. Zlotnicki 46 Vice President - International Robert M. Greaney 49 Vice President - Operations All of the Company's executive officers have been employed by the Company for more than ten years. Mr. Latta, who joined the Company in April 1987 as Vice President, had for more than five years previously been Vice President, Marketing of Sherwood Medical Company, a manufacturer and distributor of medical products. Prior to being elected President and Chief Executive Officer in 1998, Mr. Latta served as the Vice President Marketing of the Company. Mr. O'Connell, prior to joining the Company in September 1990, served in various financial capacities in the telecommunications, manufacturing and financial services industries. Dr. Yoder was elected to his position after serving as the Company's Vice President of Operations since 1994 and Technology Manager since joining in 1983. Prior to joining the Company, he was a member of the senior technical staff at Pennsylvania Power and Light, and at Battelle Pacific Northwest Laboratory. Mr. Zlotnicki was elected to his position in 2000 and has served Landauer for more than ten years, most recently as Manager of Corporate Development. Prior to joining Landauer, Mr. Zlotnicki worked ten years for Amersham International. Mr. Greaney was elected to his position in February 2001. He has held positions of increasing responsibility involving operations and project management since joining the Company in 1973. There are no family relationships between any director or executive officer and any other director or executive officer of the Company. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock was traded on the American Stock Exchange from 1988 through January 14, 2002. The Company's Common Stock began trading on the New York Stock Exchange on January 15, 2002. A summary of market prices of the Company's Common Stock is set forth in the table on page 40 of this Annual Report on Form 10-K. On December 20, 2002, there were approximately 600 shareholders of record. The Company believes that there are approximately 2,000 beneficial owners of its Common Stock. There were no sales of unregistered securities during fiscal 2002. The Company has paid regular quarterly cash dividends since January 1990. The Company has also paid special cash dividends in 1990 and 1992. On November 6, 2002, the Company announced that it had increased the regular quarterly cash dividend by 7% to $0.375 per share for the first quarter of fiscal 2003. This increase represents an annual rate of $1.50 per share compared with $1.40 paid in fiscal 2002. A summary of cash dividends paid for the last two years is set forth in the table on page 40 of this Annual Report on Form 10-K. 7 ITEM 6. SELECTED FINANCIAL DATA A summary of selected financial data for the last six years is set forth on page 41 of the Company's Annual Report to Stockholders accompanying this Annual Report on Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FISCAL 2002 COMPARED TO FISCAL 2001 Net revenues for fiscal 2002 were $58,608,000 compared with revenues of $53,028,000 reported for fiscal 2001, a gain of 10.5%. Revenue growth for fiscal 2002 reflected higher pricing for dosimetry services, increased demand for ancillary products and the services this technology offers to our customers, and account gains in key market segments. Also contributing to revenue growth, beginning in the second half of the fiscal year was the consolidation of the operations of LCIE-Landauer, the Company's 51%-owned operating unit in France and the United Kingdom. Costs and expenses in fiscal 2002 grew at a slightly lower rate than revenues despite costs associated with the formation of LCIE-Landauer, moving the Company's listing to the New York Stock Exchange, and ongoing investment in the development of new products and markets. Gross margins increased moderately from 64.7% in fiscal 2001 to 65.1% in fiscal 2002. Net other income was more than $1,100,000 greater than in fiscal 2001 reflecting the recognition of a $786,000 gain arising from the exchange of a portion of the Company's United Kingdom business for a controlling interest in LCIE-Landauer. Higher investment and joint venture income also contributed to the increase. The Company's effective tax rate was 37.3% for fiscal 2002, slightly higher than a year ago at 36.5%. As a result, net income for fiscal 2002 increased $1,856,000 or 13%, to $16,180,000. Diluted earnings per share increased from $1.64 in fiscal 2001 to $1.83 in fiscal 2002. Excluding the gain on the formation of LCIE- Landauer, net income for fiscal 2002 was $15,669,000 or $1.77 per diluted share, an increase of 9.4% compared with fiscal 2001. Certain reclassifications have been made in the financial statements for comparative purposes. These reclassifications have no effect on the results of operation or financial position. FISCAL 2001 COMPARED TO FISCAL 2000 Net revenues for fiscal 2001 were $53,028,000 compared with revenues of $47,174,000 reported for fiscal 2000, a gain of 12.4%. Revenue growth for fiscal 2001 reflected improved pricing for the value provided by Luxel, stronger demand for the ancillary products and services this technology offers to our customers and account gains in key market segments. Also contributing to revenue growth was the acquisition of a small dosimetry service provider early in the year. Costs and expenses in fiscal 2001 grew at a slightly lower rate than revenues. Gross margins increased moderately and operating expense increased, primarily the result of our ongoing investment in the development of new products, markets and technologies. Net other income was almost 25% lower than in fiscal 2000 reflecting lower investment income and lower venture income. Although income taxes were higher, the Company's effective tax rate was lower than a year ago at 36.5%. 8 As a result, net income for fiscal 2001 increased $1,562,000 or 12.2%, to $14,324,000. Diluted earnings per share increased from $1.47 in fiscal 2000 to $1.64 in fiscal 2001. Certain reclassifications have been made in the financial statements for comparative purposes. These reclassifications have no effect on the results of operation or financial position. FOURTH QUARTER RESULTS OF OPERATIONS Revenues in the fourth quarter of fiscal 2002 were 13.3% higher than reported in the same period in fiscal 2001. Revenue growth for the quarter reflected improved pricing as well as incremental volume, and includes the impact of the consolidation of the operations of LCIE-Landauer, the Company's 51%-owned operating unit in France and the United Kingdom. Net income for the quarter of $4,173,000 represented a 9.8% increase compared with the same period in 2001. Diluted income per share for the fourth quarters of 2002 and 2001 was $.47 and $.43, respectively. Revenues in the fourth quarter of fiscal 2001 were 10.4% higher than reported in the same period in fiscal 2000. Revenue growth for the quarter reflected improved pricing as well as incremental volume, primarily achieved through the acquisition of a small dosimetry service provider early in fiscal 2001. Net income for the quarter of $3,799,000 represented a 12% increase compared with the same period in 2000. Diluted income per share for the fourth quarters of 2001 and 2000 was $.43 and $.39, respectively. LIQUIDITY AND CAPITAL RESOURCES Landauer's cash flows, as shown in the statement of cash flows, can differ from year to year as a result of the Company's operating, investing, and financing activities. Investments in short-term instruments with maturity of greater than three months are classified separately from cash and equivalents, and investments with maturities of greater than one year are classified as noncurrent assets. Investing activities included acquisitions of property, plant and equipment (including amortizable dosimetry device components) and amounted to $4,656,000 and $3,219,000, respectively, in fiscal 2002 and 2001. In September 2000, the Company invested $2,550,000 to acquire certain assets of the Eberline Analytical Corporation. Cash paid for income taxes was $10,096,000 in 2002 and $7,127,000 in fiscal 2001. At September 30, 2002, the Company had no significant long-term liabilities and its requirement for cash flow to support investing activities is generally limited. Capital expenditures for fiscal 2003 are expected to amount to $8,200,000, principally for equipment and information technology infrastructure. The Company anticipates that funds for these capital improvements will be provided from operations. The Company presently maintains bank lines of credit totaling $5,000,000. In the opinion of management, resources are adequate for projected operations and capital spending programs, as well as continuation of the regular cash dividend program. Landauer requires limited working capital for its operations since many of its customers pay for annual services in advance. Such advance payments amounted to $11,885,000 and $10,890,000, respectively, as of September 30, 2002 and 2001, and are included in deferred contract revenue. While these amounts represent approximately one-half of current liabilities, such amounts generally do not represent a cash requirement. Landauer offers radiation monitoring services in the United Kingdom, Canada, Japan, Brazil, China, and France. The Company's operations in these markets do not depend on significant capital resources. 9 The Company is exposed to market risk, including changes in foreign currency exchange rates and interest rates. As discussed in Note 1, "Summary of Significant Accounting Policies" to the consolidated financial statements, the financial statements of the Company's non-U.S. subsidiaries are remeasured into U.S. dollars using the U.S. dollar as the functional currency. The market risk associated with foreign currency exchange rates is not material in relation to the Company's financial position, results of operations, or cash flows. The Company does not have any significant trade accounts receivable, trade accounts payable, commitments or borrowings in a currency other than that of the reporting units functional currency. As such, the Company does not use derivative financial instruments to manage the exposure in its non-U.S. operations. NEW ACCOUNTING PRONOUNCEMENTS On October 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142 that requires that goodwill and certain intangible assets no longer be amortized to earnings, but be reviewed periodically for impairment. For acquisitions completed prior to June 30, 2001, the amortization of goodwill and certain intangible assets has ceased beginning in fiscal year 2002. The Company did not recognize goodwill amortization expense in fiscal 2002. Goodwill amortization expense aggregated $190,000 in fiscal 2001 and $197,000 in fiscal 2000. Diluted EPS increased by approximately $0.02 in 2002 due to the reduction in amortization expense. The provisions of SFAS No. 142 that pertain to impairment of goodwill and certain intangible assets have superseded the impairment related provisions included in SFAS No. 121. As a result of applying the new impairment provisions of SFAS No. 142, no impairment loss was indicated. Goodwill and other intangible assets at September 30, 2002 consisted of the following: ACCUMU- LATED GROSS AMORTI- NET (DOLLARS IN THOUSANDS) AMOUNT ZATION AMOUNT - ---------------------- ------ ------- ------ Intangible Assets Continuing to be Amortized: Customer Lists. . . . . . . . . . . . . $2,681 $ 300 $2,381 (Useful Life of 10 Years) Licenses & Patents. . . . . . . . . . . 811 218 593 (useful Life of 10-15 Years) Other Intangibles . . . . . . . . . . . 669 223 446 ------ ----- ------ Total . . . . . . . . . . . . . . . $4,161 $ 741 $3,420 ====== ===== ====== Goodwill No Longer Being Amortized. . . $5,181 ------ Total Goodwill & Other Intangible Assets. . . . . . . . . . . . . . . . $8,601 ====== Estimated annual aggregate amortization expense related to these intangible assets will be approximately $355,000 for each of the next five years. 10 In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The provisions of this statement are required to be applied starting with fiscal years beginning after June 15, 2002. This statement addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 has no impact on the Company's financial statements. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 defines impairment for long-lived assets and provides guidance on the measurement of asset impairments. The adoption of SFAS No. 144 has no impact on the Company's financial statements. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No., 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 eliminates the exception to applying APB Opinion 30 to all gains and losses related to extinguishments of debt. The adoption of SFAS No. 145 has no impact on the Company's financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement requires that a liability for costs associated with an exit or disposal activity be recognized when the costs are incurred rather than at the date of a commitment to the exit or disposal plan. This statement will be applied prospectively to exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 has no impact on the Company's financial statements. INFLATION From time to time, the Company tries to reflect the inflationary impact of materials, labor and other operating costs and expenses in its prices. The market for the services that the Company offers, however, is highly competitive, and in some cases has limited the ability of the Company to offset inflationary cost increases. COMPUTER SOFTWARE MODIFICATIONS During 1996, the Company established an internal task force to review the extent to which the Company's computer software, computer hardware and non-information technology system were year 2000 compliant. This task force, assisted in certain instances by outside consultants, completed an internal assessment of the systems with a view to determining whether any remediation or replacement was necessary for the continued operation of such systems. The Company focused its compliance efforts on software, hardware and non-information technology systems. The Company completed remediation, installation and compliance testing of all of its mission critical software and hardware systems. The Company experienced no significant adverse consequences as a result of year 2000 compliance issues. The total cost of remediation and replacement of its non-compliant systems amounted to $2,069,000, of which $606,000 was capitalized. 11 FORWARD LOOKING STATEMENTS Certain matters contained in this report are forward-looking statements, including, without limitation, statements concerning the development and introduction of new technologies, the adaptability of OSL to new platforms and new formats, the usefulness of older technologies, the cost associated with the Company's business development and research efforts, the Company's business plans, foreign exchange risks, government regulations, changes in postal and delivery practices, the Company's market position, the risks of conducting business internationally, the effects of changing economic and competitive conditions, and pending accounting announcements. The words "believe", "expect", anticipate", and "estimate" and other similar expressions generally identify forward-looking statements. All forward-looking statements contained herein are based largely on the Company's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. CRITICAL ACCOUNTING POLICIES The Securities and Exchange Commission (SEC) issued statements regarding disclosure by companies within their management's discussion and analysis of financial condition and results of operations. In those statements, the SEC encouraged companies to identify critical accounting policies. Critical accounting policies are those that are most important to the portrayal of a company's financial condition and results, and that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. In response to the SEC statements, management has identified the following critical accounting policies used in the preparation of our financial statements and accompanying notes. REVENUE RECOGNITION AND DEFERRED CONTRACT REVENUE The Company recognizes revenues and the related costs for its services in the periods for which such services are provided. Many customers pay for these services in advance. The amounts recorded as deferred contract revenue in the consolidated balance sheet represent customer deposits invoiced in advance during the preceding twelve months for services rendered over the succeeding twelve months, and are net of services rendered through the respective consolidated balance sheet date. Such advance billings amounted to $11,885,000 and $10,890,000, respectively, as of September 30, 2002 and September 30, 2001, are included in deferred contract revenue, and are stated net of services rendered through the respective consolidated balance sheet dates. Management believes that the amount of deferred revenue shown at the respective consolidated balance sheet dates fairly represents the level of business activity it expects to conduct with customers invoiced under this arrangement. ALLOWANCE FOR DOUBTFUL ACCOUNTS Management judgments and estimates are utilized in connection with establishing an allowance for the possibility that portions of the Company's accounts receivable balances may become uncollectable. Specifically, management analyzes accounts in relation to receivable aging trends, economic factors, and changes in customer payment history in establishing this allowance. Accounts receivable are reduced by this allowance of $482,000 as of September 30, 2002 and $368,000 as of September 30, 2001, amounted to $13,620,000 and $11,713,000, respectively, as of September 30, 2002 and September 30, 2001. 12 PROPERTY, PLANT & EQUIPMENT Plant and equipment are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives, which are primarily thirty years for buildings and three to eight years for equipment. Landauer assesses the carrying value of its property plant and equipment and the remaining useful lives whenever events or circumstances indicate the carrying value may not be recoverable or the estimated useful life may no longer be appropriate. Factors considered important which could trigger this review included competitive conditions, government regulations and technological changes. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized. GOODWILL AND OTHER INTANGIBLE ASSETS The Company's intangible assets are comprised of goodwill, purchased customer lists, licenses and patents. On October 1, 2001, the Company adopted SFAS No. 142 which requires that goodwill and certain intangible assets no longer be amortized to earnings, but be reviewed periodically for impairment. For acquisitions completed prior to June 30, 2001, the amortization of goodwill and certain intangible assets has ceased beginning in fiscal year 2002. The provisions of SFAS No. 142 that pertain to impairment of intangible assets have superseded the impairment related provisions included in SFAS No. 121, beginning in fiscal year 2002. Under SFAS No. 142, the impairment review of goodwill and other intangible assets that are not being amortized must be based generally on fair values, instead of projected future undiscounted cash flows. The fair values of these assets were calculated based on discounted cash flow analyses. As a result of initially applying the new impairment provisions of SFAS No. 142, no impairment loss was required. Purchased customer lists are recorded at cost and are amortized on a straight-line basis over the estimated useful lives, which are primarily ten years. Patents and licenses are also recorded at cost and are amortized on a straight-line basis over their useful lives, which range from 10 to 15 years. 13 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED BALANCE SHEETS LANDAUER, INC. AND SUBSIDIARIES (Dollars in Thousands) As of September 30, Notes 2002 2001 - ------------------- ----- ------- ------- ASSETS Current assets: Cash and cash equivalents . . . . . 1 $ 7,627 $ 7,055 Short-term investments. . . . . . . 1 317 387 Receivables, net of allowance for doubtful accounts of $482 in 2002 and $368 in 2001 . . . . . . 13,620 11,713 Inventories . . . . . . . . . . . . 1 2,135 1,693 Prepaid expenses. . . . . . . . . . 773 707 Prepaid income taxes. . . . . . . . 1 & 5 2,358 -- ------- ------- Total current assets. . . . . . . . . 26,830 21,555 ------- ------- Property, plant and equipment, at cost: . . . . . . . . . . . . . . 1 Land and improvements . . . . . . . 538 538 Buildings and improvements. . . . . 3,768 3,519 Equipment . . . . . . . . . . . . . 33,198 31,360 ------- ------- 37,504 35,417 Less: accumulated depreciation and amortization. . . . . . . . . 19,325 18,917 ------- ------- Net property, plant and equipment . . 18,179 16,500 ------- ------- Equity in joint venture . . . . . . . 3 2,806 2,331 Goodwill and other intangible assets, net of amortization . . . . 1 & 4 8,601 7,216 Dosimetry devices, net of amortization. . . . . . . . . . . . 3,546 2,585 Other assets. . . . . . . . . . . . . 295 363 ------- ------- TOTAL ASSETS. . . . . . . . . . . . . $60,257 $50,550 ======= ======= 14 CONSOLIDATED BALANCE SHEETS - CONTINUED LANDAUER, INC. AND SUBSIDIARIES (Dollars in Thousands) As of September 30, Notes 2002 2001 - ------------------- ----- ------- ------- LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable. . . . . . . . . . $ 1,789 $ 627 Dividends payable . . . . . . . . . 3,071 3,055 Deferred contract revenue . . . . . 1 11,885 10,890 Accrued compensation and related costs . . . . . . . . . . 2,505 2,242 Accrued pension costs . . . . . . . 8 1,922 1,831 Accrued taxes on income . . . . . . 1 & 5 1,753 306 Other accrued expenses. . . . . . . 2,264 1,842 ------- ------- Total current liabilities . . . . . . 25,189 20,793 ------- ------- Minority interest . . . . . . . . . . 462 114 Commitments and contingencies . . . . 6 & 9 -- -- STOCKHOLDERS' INVESTMENT. . . . . . . 7 & 10 Preferred stock . . . . . . . . . . . -- -- Common stock. . . . . . . . . . . . . 878 873 Premium paid in on common stock . . . 10,946 9,876 Cumulative translation adjustments. . (855) (826) Retained earnings . . . . . . . . . . 23,637 19,720 ------- ------- Total stockholders' investment. . . . 34,606 29,643 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT. . . . . . $60,257 $50,550 ======= ======= The accompanying notes are an integral part of these financial statements. 15 CONSOLIDATED STATEMENTS OF INCOME LANDAUER, INC. AND SUBSIDIARIES (Dollars in Thousands, Except per Share) For the years ended September 30, Notes 2002 2001 2000 - ------------------- ----- -------- -------- -------- Net revenues. . . . . . . $ 58,608 $ 53,028 $ 47,174 Costs and expenses: Cost of sales . . . . . 20,462 18,716 16,959 Selling, general, and administrative. . . . 1 13,747 12,438 10,379 Impairment in value of assets . . . . . . 11 -- -- 520 -------- -------- -------- 34,209 31,154 27,858 Operating income. . . . . 24,399 21,874 19,316 Equity in income of joint venture . . . . . 3 735 502 759 Other income. . . . . . . 1,137 256 240 -------- -------- -------- Income before taxes . . . 26,271 22,632 20,315 Income taxes. . . . . . . 1 & 5 (9,811) (8,269) (7,519) -------- -------- -------- Income before minority interest. . . . . . . . 16,460 14,363 12,796 Minority interest . . . . (280) (39) (34) -------- -------- -------- Net income. . . . . . . . $ 16,180 $ 14,324 $ 12,762 ======== ======== ======== Net income per share: . . 2 Basic . . . . . . . . . . $ 1.85 $ 1.65 $ 1.47 Diluted . . . . . . . . . $ 1.83 $ 1.64 $ 1.47 ======== ======== ======== 16 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME LANDAUER, INC. AND SUBSIDIARIES (Dollars in Thousands)
Premium Paid in on Cumulative Total Compre- Common Common Translation Retained Stockholders' hensive Stock Stock Adjustments Earnings Investment Income ------ ---------- ----------- -------- ------------- -------- Balance September 30, 1999 $ 866 $ 8,711 $ (265) $ 16,926 $ 26,238 Options exercised, net of repurchases -- 41 -- -- 41 Net income -- -- -- 12,762 12,762 $ 12,762 Foreign currency translation adjustment -- -- (107) -- (107) (107) Dividends -- -- -- (12,116) (12,116) -- ------ ------- ------ -------- -------- -------- Comprehensive income $ 12,655 ======== Balance September 30, 2000 $ 866 $ 8,752 $ (372) $ 17,572 $ 26,818 Options exercised, net of repurchases 7 1,124 -- -- 1,131 Net income -- -- -- 14,324 14,324 $ 14,324 Foreign currency translation adjustment -- -- (454) -- (454) (454) Dividends -- -- -- (12,176) (12,176) -- ------ ------- ------ -------- -------- -------- Comprehensive income $ 13,870 ======== 17 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME - CONTINUED LANDAUER, INC. AND SUBSIDIARIES (Dollars in Thousands) Premium Paid in on Cumulative Total Compre- Common Common Translation Retained Stockholders' hensive Stock Stock Adjustments Earnings Investment Income ------ ---------- ----------- -------- ------------- -------- Balance September 30, 2001 $ 873 $ 9,876 $ (826) $ 19,720 $ 29,643 Options exercised, net of repurchases 5 1,070 -- -- 1,075 Net income -- -- -- 16,180 16,180 $ 16,180 Foreign currency translation adjustment -- -- (29) -- (29) (29) Dividends -- -- -- (12,263) (12,263) -- ------ ------- ------ -------- -------- -------- Comprehensive income $ 16,151 ======== Balance September 30, 2002 $ 878 $ 10,946 $ (855) $ 23,637 $ 34,606 ====== ======== ====== ======== ======== The accompanying notes are an integral part of these financial statements.
18 CONSOLIDATED STATEMENTS OF CASH FLOWS LANDAUER, INC. AND SUBSIDIARIES (Dollars in Thousands) For the years ended September 30, 2002 2001 2000 - ------------------- -------- -------- -------- Cash flow from operating activities: Net income. . . . . . . . . . . . .$ 16,180 $ 14,324 $ 12,762 Non-cash expenses, revenues, and gains reported in income: Non-cash gain from exchange of assets . . . . . . . . . . . (786) -- -- Depreciation and amortization . . 4,370 4,475 4,025 Equity in income of joint venture . . . . . . . . . . . . (735) (502) (759) Compensatory effect of stock options . . . . . . . . . . . . 1,075 1,130 41 Deferred income taxes . . . . . . 1,216 (291) 1,139 -------- -------- -------- 5,140 4,812 4,446 -------- -------- -------- Net increase in other current assets. (4,703) (529) (1,535) Net increase in current liabilities . 2,660 853 2,519 Net increase in net long-term assets. (1,763) (1,680) (1,650) -------- -------- -------- (3,806) (1,356) (666) -------- -------- -------- Net cash generated from operating activities. . . . . . . . 17,514 17,780 16,542 Cash flow from investing activities: Acquisition of investments. . . . . (877) -- (2,550) Acquisition of property, plant and equipment . . . . . . . . . . (4,656) (3,219) (3,799) -------- -------- -------- Net cash used by investing activities. . . . . . . . . . . . . (5,533) (3,219) (6,349) Cash flow from financing activities: Dividend received from foreign affiliate . . . . . . . . . . . . 334 1,645 400 Advance from joint venture partner. 504 -- -- Dividends paid. . . . . . . . . . . (12,247) (12,152) (12,116) -------- -------- -------- Net cash used by financing activities (11,409) (10,507) (11,716) -------- -------- -------- Net increase (decrease) in cash . . . 572 4,054 (1,523) Opening balance - cash and cash equivalents. . . . . . . . . . 7,055 3,001 4,524 -------- -------- -------- Ending balance - cash and cash equivalents. . . . . . . . . .$ 7,627 $ 7,055 $ 3,001 ======== ======== ======== Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes. . . . .$ 10,096 $ 7,127 $ 5,302 ======== ======== ======== Supplemental Non-cash Investing and Financing Information: Dividend declared . . . . . . . . .$ 3,071 $ 3,055 $ 3,031 Foreign currency translation adjustment. . . . . . . . . . . . (29) (454) (107) ======== ======== ======== The accompanying notes are an integral part of these financial statements. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS LANDAUER, INC. AND SUBSIDIARIES 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Landauer, Inc.; HomeBuyer's Preferred, Inc., its wholly-owned subsidiary; SAPRA-Landauer, Ltda., its 75%-owned subsidiary; Beijing- Landauer, Ltd., its 70%-owned subsidiary; and LCIE-Landauer, its 51%-owned subsidiary, ("Landauer" or the "Company"). Nagase-Landauer, Ltd. (50%- owned) is a Japanese corporation that is accounted for on the equity basis. All material intercompany transactions have been eliminated. The cost of purchased businesses included in the accompanying consolidated financial statements exceeded the fair value of net identifiable tangible and intangible assets at the date of acquisition in the amount of $8,430,000. As of September 30, 2002 and 2001, accumulated amortization was $3,249,000 and $3,084,000, respectively. On October 1, 2001, the Company adopted SFAS No. 142 that requires the goodwill and certain intangible assets no longer be amortized to earnings, but be reviewed periodically for impairment. For acquisitions completed before June 30, 2001, the amortization of goodwill and certain intangible assets has ceased beginning in fiscal year 2002. The Company did not recognize goodwill amortization expense in fiscal 2002. Goodwill amortization expense aggregated $190,000 in fiscal 2001 and $197,000 in fiscal 2000. Diluted EPS increased by approximately $0.02 in 2002 due to the reduction in amortization expense. The provisions of SFAS No. 142 that pertain to impairment of goodwill and certain intangible assets have superseded the impairment related provisions included in SFAS No. 121. As a result of applying the new impairment provisions of SFAS No. 142, no impairment loss was indicated. Please refer to footnote 4 for additional information. Certain of the Company's foreign investments, where the U.S. dollar is not the functional currency, are subject to currency translation adjustments in accordance with SFAS No. 52. CASH EQUIVALENTS Cash equivalents include investments with an original maturity of three months or less. Primarily all investments are short-term money market instruments. INVESTMENTS Investments having an original maturity of longer than three months but less than one year are classified as current assets. Those having an original maturity of longer than one year are classified as noncurrent assets. INVENTORIES Inventories of material utilized in the construction of dosimeter badges are valued at cost utilizing a first-in, first-out method. 20 REVENUES AND DEFERRED CONTRACT REVENUE The Company recognizes revenues and the related costs for its services in the periods for which such services are provided. Many customers pay for these services in advance. The amounts recorded as deferred contract revenue in the consolidated balance sheet represent customer deposits invoiced in advance during the preceding twelve months for services to be rendered over the succeeding twelve months, and are net of services rendered through the respective consolidated balance sheet date. Management believes that the amount of deferred contract revenue shown at the respective consolidated balance sheet date fairly represents the level of business activity it expects to conduct with customers invoiced under this arrangement. RESEARCH AND DEVELOPMENT The cost of research and development programs is charged to selling, general and administrative expense as incurred and amounted to approximately $941,000 in 2002, $694,000 in 2001, and $522,000 in 2000. In addition, during fiscal 2000 the Company received a $500,000 technology cost reimbursement from its 50%-owned Japanese subsidiary, Nagase-Landauer. The payment reimburses a portion of costs incurred by the parent company in developing and implementing the Luxel technology. DEPRECIATION, AMORTIZATION AND MAINTENANCE Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, which are primarily thirty years for buildings and three to eight years for equipment. Dosimetry devices (principally badges) are amortized on a straight-line basis over their estimated lives, which are three to five years. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized. ADVERTISING The Company expenses the costs of advertising as incurred. INCOME TAXES Landauer files income tax returns in the jurisdictions in which it operates. For financial statement purposes, provisions for federal and state income taxes have been computed in accordance with the provisions of SFAS No. 109 entitled "Accounting for Income Taxes." USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made in the financial statements for comparative purposes. These reclassifications have no effect on the results of operations or financial position. 2. INCOME PER COMMON SHARE Earnings per share computations have been made in accordance with the provisions of SFAS No. 128, "Earnings Per Share." Basic earnings per share were computed by dividing net income by the weighted average number of shares of common stock outstanding during each year. Diluted earnings per share were computed by dividing net income by the weighted average number of shares of common stock that would have been outstanding assuming dilution during each year. 21 Following is a table that shows the weighted average number of shares of common stock for the years ended September 30: (Amounts in Thousands) 2002 2001 2000 - ---------------------- ------ ------ ------ Weighted Average Number of Shares of Common Stock Outstanding . . . . 8,756 8,693 8,661 Options Issued to Executives. . . . . 99 54 24 ------ ------ ------ Weighted Average Number of Shares of Common Stock Assuming Dilution . 8,855 8,747 8,685 ====== ====== ====== Following is a table that provides net income and earnings per share for the years ended September 30: (Dollars in Thousands, Except Per Share) 2002 2001 2000 - ---------------------- ------- ------- ------- Net Income: . . . . . . . . . . . . . $16,180 $14,324 $12,762 Basic EPS:. . . . . . . . . . . . . . $ 1.85 $ 1.65 $ 1.47 Diluted EPS:. . . . . . . . . . . . . $ 1.83 $ 1.64 $ 1.47 ======= ======= ======= 3. EQUITY IN JOINT VENTURE The 50% interest in the common stock of Nagase-Landauer, Ltd., a Japanese corporation located in Tokyo and engaged in providing radiation monitoring services in Japan, is accounted for on the equity basis. The related equity in earnings of this joint venture is included in its own caption in the accompanying Statements of Income. Condensed unaudited results of operations for Nagase-Landauer, Ltd. for the years ended September 30, are as follows, converted into U.S. dollars at the then-current rate of exchange: (Dollars in Thousands) 2002 2001 2000 - ---------------------- ------- ------- ------- Revenues. . . . . . . . . . . . . . . $12,790 $12,169 $13,509 Income Before Income Taxes. . . . . . 2,642 1,728 2,910 Net Income. . . . . . . . . . . . . . 1,470 1,005 1,519 ======= ======= ======= Average Exchange Rate (/$) . . . 125.9 119.4 106.4 ======= ======= ======= Condensed unaudited balance sheets for the years ended September 30, 2002 and 2001 are as follows: (Dollars in Thousands) 2002 2001 - ---------------------- ------- ------- Current Assets. . . . . . . . . . . . $ 9,685 $ 7,949 Other Assets. . . . . . . . . . . . . 1,943 1,915 ------- ------- Total Assets. . . . . . . . . . . . . $11,628 $ 9,864 ======= ======= Liabilities . . . . . . . . . . . . . $ 6,016 $ 5,202 Stockholders' Investment. . . . . . . 5,612 4,662 ------- ------- Total liabilities and Stockholders' Investment. . . . . . $11,628 $ 9,864 ======= ======= 22 4. GOODWILL AND OTHER INTANGIBLE ASSETS On October 1, 2001, the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 142 requires that goodwill and certain intangible assets no longer be amortized to earnings, but be reviewed periodically for impairment. SFAS No. 142 requires transitional disclosure of what reported income before extraordinary items and net income would have been in all periods presented, exclusive of amortization expense recognized in those periods related to goodwill and intangible assets that are no longer being amortized. Similarly, adjusted per-share amounts also are required to be disclosed for all periods presented. The amortization expense and net income of the Company for 2002 and the prior two years are shown in the table below. (Dollars in Thousands, Except Per Share) 2002 2001 2000 - ---------------------- ------- ------- ------- Reported Net Income . . . . . . . . . $16,180 $14,324 $12,762 Add Back Goodwill Amortization. . . . -- 131 135 ------- ------- ------- Adjusted Net Income . . . . . . . . . $16,180 $14,455 $12,897 ======= ======= ======= Reported EPS - Basic. . . . . . . . . $ 1.85 $ 1.65 $ 1.47 Goodwill Amortization . . . . . . . . -- 0.02 0.02 ------- ------- ------- Adjusted EPS - Basic. . . . . . . . . $ 1.85 $ 1.67 $ 1.49 ======= ======= ======= Reported EPS - Diluted. . . . . . . . $ 1.83 $ 1.64 $ 1.47 Goodwill Amortization . . . . . . . . -- 0.02 0.02 ------- ------- ------- Adjusted EPS - Diluted. . . . . . . . $ 1.83 $ 1.66 $ 1.49 ======= ======= ======= The components of goodwill and other intangible assets for the years ended September 30, 2002 and 2001 are as follows: (Dollars in Thousands) 2002 2001 - ---------------------- ------- ------- Goodwill. . . . . . . . . . . . . . . $ 5,181 $ 5,298 (No Longer Amortized) Customer List, Net of Amortization. . 2,381 865 (Useful Life of 10 Years) Licenses and Patents, Net of Amortization. . . . . . . . . . . . 593 643 (Useful Life of 10-15 Years) Other Intangibles, Net of Amortization. . . . . . . . . . . . 446 410 ------- ------- Total . . . . . . . . . . . . . . . . $ 8,601 $ 7,216 ======= ======= The intangible asset amounts noted above are presented net of accumulated amortization of $3,990,000 at September 30, 2002 and $3,738,000 at September 30, 2001. Amortization of intangible assets was $271,000, $558,000, and $314,000 for the years ended September 30, 2002, 2001 and 2000, respectively. Estimated annual aggregate amortization expense related to intangible assets will be approximately $355,000 for each of the next five years. In September 2000, the Company invested $2,550,000 to acquire certain assets, including a customer list of Eberline Analytical Corporation, a division of ThermoRetec Corporation. The Company began providing dosimetry services to the former Eberline customers in October 2000. The acquisition was accounted for as a purchase, and the customer list is amortized over a ten-year period. 23 On April 2, 2002, the Company completed an agreement to merge its European operations with Laboratoire Central des Industries Electriques (LCIE), a wholly-owned subsidiary of Bureau Veritas, a professional services company involved in quality, health and safety, and environmental management. Under the agreement, Landauer exchanged its United Kingdom radiation monitoring business with annual revenues of approximately $1,500,000 and its technologies for a 51% controlling interest in the new company named LCIE-Landauer. LCIE contributed its radiation monitoring business that has current annual revenues of more than $3,000,000, all of which is located in France. The Company recognized a gain of $786,000 arising from this transaction. LCIE-Landauer has its headquarters and laboratory at the current LCIE location in Fontenay-aux-Roses, a Paris suburb, and will continue to serve United Kingdom customers from Oxford, England. Additionally, as part of the formation of the new entity on April 2, 2002, LCIE-Landauer purchased the Philips France radiation monitoring business for $877,000. This Philips business unit had annual revenues of approximately $800,000 in 2001. Results of operations related to the acquisitions had no significant effect on the financial statements for the year ended September 30, 2002. Total consideration for these acquisitions aggregated approximately $2,000,000, which was allocated principally to working capital and customer lists. The $1,681,000 allocated to customer list is amortized over 10 years. As of September 30, 2002, the Company has a $504,000 payable due to Bureau Veritas. 5. INCOME TAXES The components of the provision for income taxes for the years ended September 30, 2002, 2001 and 2000 are as follows: 2002 ------------------------------- (Dollars in Thousands) Current Deferred Total - ---------------------- ------- -------- ------- Federal . . . . . . . . . . . . . . . $ 7,014 $ 992 $ 8,006 State . . . . . . . . . . . . . . . . 1,581 224 1,805 ------- ------- ------- Total . . . . . . . . . . . . . . $ 8,595 $ 1,216 $ 9,811 ======= ======= ======= 2001 ------------------------------- (Dollars in Thousands) Current Deferred Total - ---------------------- ------- -------- ------- Federal . . . . . . . . . . . . . . . $ 6,766 $ (230) $ 6,536 State . . . . . . . . . . . . . . . . 1,794 (61) 1,733 ------- ------- ------- Total . . . . . . . . . . . . . . $ 8,560 $ (291) $ 8,269 ======= ======= ======= 2000 ------------------------------- (Dollars in Thousands) Current Deferred Total - ---------------------- ------- -------- ------- Federal . . . . . . . . . . . . . . . $ 5,132 $ 915 $ 6,047 State . . . . . . . . . . . . . . . . 1,249 223 1,472 ------- ------- ------- Total . . . . . . . . . . . . . . $ 6,381 $ 1,138 $ 7,519 ======= ======= ======= 24 The provision for taxes on income in each period differs from that which would be computed by applying the statutory U.S. federal income tax rate to the income before taxes. The following is a summary of the major items affecting the provision: (Dollars in Thousands) 2002 2001 2000 - ---------------------- ------- ------- ------- Statutory Federal Income Tax Rate . . 35% 35% 35% Computed Tax Provision at Statutory Rate. . . . . . . . . . . $ 9,195 $ 7,921 $ 7,110 Increases (Decreases) Resulting From: State Income Tax Provision, Net of Federal Benefit. . . . . . 1,173 1,126 957 Other . . . . . . . . . . . . . . . (557) (778) (548) ------- ------- ------- Income Tax Provision in the Statement of Income . . . . . . . . $ 9,811 $ 8,269 $ 7,519 ======= ======= ======= The Company recognizes certain income and expense items in different years for financial and tax reporting purposes. Temporary differences are primarily attributable to (a) utilization of accelerated depreciation methods for tax purposes, (b) amortization of badge holder and software development costs, (c) limitations on deductibility of pension costs, (d) accrued benefit claims, vacation pay, and other compensation-related costs, and (e) reserves for obsolete inventory. Significant components of deferred taxes are as follows: (Dollars in Thousands) 2002 2001 - ---------------------- ------- ------- Deferred Tax Assets: Badge Holder Amortization . . . . . $ 667 $ 660 Pension Accrual . . . . . . . . . . 896 882 Compensation Expense. . . . . . . . 459 379 Inventory Reserve . . . . . . . . . 209 204 Other . . . . . . . . . . . . . . . 485 530 ------- ------- $ 2,716 $ 2,655 ======= ======= Deferred Tax Liabilities: Depreciation. . . . . . . . . . . . $ 964 $ 194 Software Development. . . . . . . . 3,212 2,705 ------- ------- $ 4,176 $ 2,899 ======= ======= Management does not believe that a valuation allowance is required for the net deferred tax asset. 6. LINE OF CREDIT The Company maintains an external source of liquidity in the form of a $5,000,000 unsecured line of credit maturing September 30, 2003. The credit facility contains covenants for net worth and debt to equity ratios. Draws thereunder bear interest at the prime rate in effect from time-to-time at the lending bank. There is no outstanding liability as of the balance sheet dates, and the Company is in compliance with these covenants. 25 7. CAPITAL STOCK Landauer has two classes of capital stock, preferred and common, with a par value of $.10 per share for each class. As of September 30, 2002 and 2001, there were 8,775,337 and 8,729,031 shares of common stock issued and outstanding (20,000,000 shares are authorized), respectively. There are no shares of preferred stock issued (1,000,000 shares are authorized). Cash dividends of $1.40 per share were paid in fiscal 2002. At September 30, 2002, there were accrued and unpaid dividends of $3,071,000. Landauer has reserved 1,450,000 shares of common stock for grants under its stock bonus and option plans. Recipients of grants or options must execute a standard form of noncompetition agreement. As of September 30, 2002, there have been no bonus shares issued. 8. EMPLOYEE BENEFIT PLANS Landauer maintains a noncontributory defined benefit pension and retirement plan covering substantially all full-time employees. The Company also maintains a Supplemental Key Executive Retirement Plan that provides for certain retirement benefits payable to key officers and managers. While charges for the supplemental plan are expensed annually, the plan is not separately funded. The Company maintains a directors' retirement plan that provides for certain retirement benefits payable to non-employee directors. The directors' plan was terminated in 1997. The following table sets forth the status of these plans at September 30, 2002 and 2001 in accordance with SFAS Nos. 87 and 132: Other Retirement Pension Benefits ---------------- --------------- (Dollars in thousands) 2002 2001 2002 2001 - ---------------------- ------- ------ ------ ------ Change in Benefit Obligation: Benefit obligation at beginning of year . . . . . $ 9,410 $8,447 $ 813 $ 594 Service Cost. . . . . . . . . 564 499 72 64 Interest Cost . . . . . . . . 702 630 60 53 Amendments. . . . . . . . . . -- -- -- 103 Actuarial Loss. . . . . . . . 1,511 103 77 27 Benefits Paid . . . . . . . . (270) (269) (38) (28) ------- ------ ------ ------ Benefit Obligation at End of Period . . . . . . . $11,917 $9,410 $ 984 $ 813 ======= ====== ====== ====== Change in Plan Assets: Fair Value of Assets at Beginning of Year . . . . . $ 7,185 $7,966 $ -- $ -- Actual Return on Plan Assets. (447) (553) -- -- Employer Contribution . . . . 491 41 39 28 Benefits Paid . . . . . . . . (270) (269) (39) (28) ------- ------ ------ ------ Fair Value of Assets at End of Period . . . . . . . $ 6,959 $7,185 $ -- $ -- ======= ====== ====== ====== 26 Other Retirement Pension Benefits ---------------- --------------- (Dollars in thousands) 2002 2001 2002 2001 - ---------------------- ------- ------- ------ ------ Reconciliation of Funded Status: Funded Status . . . . . . . . $(4,958) $(2,225) $ (984) $ (813) Unrecognized Transition Obligation (Asset). . . . . (31) (37) 227 250 Unrecognized Prior Service Cost. . . . . . . . . . . . 132 150 69 86 Unrecognized Net Actuarial (Gain) Loss . . . . . . . . . 2,832 302 (31) (112) ------- ------- ------ ------ Accrued Benefit Cost. . . . . . $(2,025) $(1,810) $ (719) $ (589) ======= ======= ====== ====== Components of Net Periodic Benefit Cost: Service Cost. . . . . . . . . $ 564 $ 499 $ 72 $ 64 Interest Cost . . . . . . . . 702 630 60 53 Expected Return on Plan Assets. . . . . . . . . . . (575) (627) -- -- Amortization of Transition Obligation (Asset). . . . . (6) (6) 22 23 Amortization of Prior Service Cost. . . . . 18 18 17 17 Recognized Net Actuarial (Gain) Loss . . . . . . . . 4 (7) (3) (8) ------- ------- ------ ------ Net Periodic Benefit Cost . . $ 707 $ 507 $ 168 $ 149 ======= ======= ====== ====== Weighted average assumptions as of September 30: Other Retirement Pension Benefits ---------------- --------------- (Dollars in thousands) 2002 2001 2002 2001 - ---------------------- ------- ------- ------ ------ Discount Rate at Beginning of Year . . . . . . . . . . . 7.50% 7.50% 7.50% 7.50% Discount Rate at End of Year. . 6.75% 7.50% 6.75% 7.50% Expected Return on Plan Assets. 8.00% 8.00% 0.00% 0.00% Rate of Compensation Increase . 5.50% 5.50% 6.00% 6.00% Plan assets for the defined benefit pension plan include marketable equity securities, corporate and government debt securities, and cash and short-term investments. The Supplemental Key Executive Retirement Plan and the directors' retirement plan are not separately funded. 27 Landauer maintains a 401(k) savings plan covering substantially all full-time employees. Qualified contributions made by employees to the plan are partially matched by the Company. $130,000, $127,000, and $91,000 was provided to expense for the years ended September 30, 2002, 2001, and 2000, respectively, under this plan. Landauer has adopted SFAS No. 106, "Accounting for Postretirement Benefits Other than Pensions" to account for the Company's unfunded retiree medical expense reimbursement plan. Under the terms of the plan that covers retirees with ten or more years of service, the Company will reimburse retirees to age 70 for (i) a portion of the cost of coverage under the then-current medical and dental insurance plans if the retiree is under age 65, or (ii) all or a portion of the cost of Medicare and supplemental coverage if the retiree is over age 64. The assumption for health-care cost trend rates was 6% for those younger than 65, and 5% for those 65 and older. The effect of a one percent increase on service and interest costs and postretirement benefit obligation would be $15,000 and $98,000, respectively. For a one percent decrease, the effect would be a reduction to service and interest costs and postretirement benefit obligation of $13,000 and $86,000, respectively. 9. COMMITMENTS AND CONTINGENCIES The Company is involved in various legal proceedings, but believes that the outcome of these proceedings will not have a materially adverse effect on its financial condition.proceedings will not have a materially adverse effect on its financial condition. On April 2, 2002, the Company completed an agreement to merge its European operations with the radiation monitoring business operated by Laboratoire Central des Industries Electriques (LCIE). Under the terms of the acquisition agreements, LCIE may, in the fifth and sixth year of the venture, require Landauer to purchase its interest in LCIE-Landauer at estimated fair value based on a multiple of EBITDA for the trailing four quarters. Additionally, Landauer shall have the option to purchase LCIE's interest in the seventh year of the venture on the same terms as LCIE's "Put" option. A change in control provision, as defined, may accelerate the respective Put and Call options and provides for premiums and discounts in the event such options are exercised as the result of a change in control. 10. STOCK-BASED COMPENSATION PLANS The Company maintains stock option plans for key employees ("Employees' Plan"). It also maintains a stock option plan for its non- employee directors. Had compensation cost for these plans been determined consistent with FASB Statements No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been as follows. (Dollars in thousands, except per share) 2002 2001 2000 - ----------------------- ------- ------- ------- Net Income: As Reported. $16,180 $14,324 $12,762 Pro Forma. . 16,072 14,292 12,660 Basic EPS: As Reported. $ 1.85 $ 1.65 $ 1.47 Pro forma. . 1.84 1.64 1.46 Diluted EPS: As Reported. $ 1.83 $ 1.64 $ 1.47 Pro forma. . 1.82 1.63 1.46 Because the FASB Statement No. 123 method of accounting has not been applied to options granted prior to October 1, 1996, the resulting pro forma compensation cost may not be representative of that to be expected in future years. 28 The Company may grant options for up to 1,350,000 shares under the Employees' Plan. The Company may grant options for up to 100,000 shares under the Directors' Plan. The Company has granted options on 1,012,000 and 52,000 shares, respectively, under these plans through September 30, 2002. Under each plan, the option exercise price equals the stock's fair market value on the date of grant. Options granted under the Employees' Plan vest ratably over four years. The initial grant of options in 1997 under the Directors' Plan vest ratably over ten years and subsequent grants vest ratably over four years. The term of all options granted is for a period of 10 years. Options granted under these plans may be either incentive stock options or non-qualified options. Options granted through fiscal 2002 become exercisable over a four-year period, ten years for options granted to directors, at a price not less than fair market value on the date of grant. The options expire ten years from the date of grant. During fiscal 2002, options for 55,000 shares were granted and 73,250 options were exercised. As of September 30, 2002, non-qualified options for 435,250 shares had been granted at prices from $16.50 - $37.15 per share. At year-end, 230,750 shares were exercisable. This plan also provides for the grant of restricted shares or the grant of stock appreciation rights, either separately or in relation to options granted. During fiscal 2002, 348 shares vested under previous grants were issued to key employees. As of September 30, 2002, no stock appreciation rights had been granted. See note 7 for additional information on stock options. A summary of the status of these plans at September 30, 2002, 2001, and 2000 and changes for the years then ended is presented in the following table and narrative: 2002 ------------------- Weighted (Amounts in Thousands, Average Except Per Share) Shares Price - ---------------------- ------ -------- Outstanding at Beginning of Year. . . . . . . 454 $ 22.15 Granted . . . . . . . . . . . . . . . . . . . 55 33.21 Exercised . . . . . . . . . . . . . . . . . . (73) 22.05 ---- ------- Outstanding at End of Year. . . . . . . . . . 436 $ 23.63 ==== ======= Exercisable at End of Year. . . . . . . . . . 231 $ 22.36 ==== ======= Weighted Average Fair Value of Options Granted $ 6.64 2001 ------------------- Weighted (Amounts in Thousands, Average Except Per Share) Shares Price - ---------------------- ------ -------- Outstanding at Beginning of Year. . . . . . . 474 $ 21.11 Granted . . . . . . . . . . . . . . . . . . . 106 19.43 Exercised . . . . . . . . . . . . . . . . . . (111) 15.71 Forfeited . . . . . . . . . . . . . . . . . . (15) 18.34 ---- ------- Outstanding at End of Year. . . . . . . . . . 454 $ 22.15 ==== ======= Exercisable at End of Year. . . . . . . . . . 218 $ 21.64 ==== ======= Weighted Average Fair Value of Options Granted $ 2.13 29 2000 ------------------- Weighted (Amounts in Thousands, Average Except Per Share) Shares Price - ---------------------- ------ -------- Outstanding at Beginning of Year. . . . . . . 419 $ 21.10 Granted . . . . . . . . . . . . . . . . . . . 55 21.16 ---- ------- Outstanding at End of Year. . . . . . . . . . 474 $ 21.11 ==== ======= Exercisable at End of Year. . . . . . . . . . 285 $ 18.44 ==== ======= Weighted Average Fair Value of Options Granted $ 2.91 Following is a table that summarizes information about options outstanding as of September 30, 2002: Options Outstanding Options Exercisable --------------------------------- -------------------- Average Weighted Weighted Remaining Average Average Range of Contractual Exercise Exercise Exercise Prices Shares Life Price Shares Price - --------------- ------- ----------- -------- ------- -------- $ 16.50-$ 19.00 81,500 3 $ 16.57 75,000 $ 16.50 $ 19.01-$ 22.00 92,000 8 $ 19.35 15,500 $ 19.33 $ 22.01-$ 25.00 41,500 5 $ 23.21 29,000 $ 23.51 $ 25.01-$ 28.00 165,250 6 $ 26.40 111,250 $ 26.43 $ 28.01-$ 31.00 -- -- -- -- -- $ 31.01-$ 34.00 43,000 9 $ 32.11 -- -- $ 34.01+ 12,000 9 $ 37.15 -- -- ------- --- ------- ------- ------- 435,250 6 $ 23.63 230,750 $ 23.36 ======= === ======= ======= ======= The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in fiscal 2002, 2001, and 2000: 2002 2001 2000 ------ ------ ------ Risk Free Interest Rates. . . . . . . 4.65% 5.85% 6.00% Expected Dividend Yield . . . . . . . 4.22% 7.21% 6.74% Expected Life (Years) . . . . . . . . 10 9 9 Expected Volatility . . . . . . . . . 23.30% 22.10% 21.60% 11. IMPAIRMENT IN VALUE OF ASSETS The Company recognized a non-cash pre-tax charge of $520,000 during fiscal year 2000, or $0.04 per diluted share, and $2,957,000 during fiscal 1999, or $0.25 per diluted share, for the discontinuation of older technologies as the Company transitioned customers to Luxel, a superior radiation measurement technology. Included in the non-cash charge is $1,000,000 related to accelerated goodwill amortization and $2,211,000 of additional depreciation and amortization charges resulting from the change in estimated useful lives of certain fixed assets. In addition, a $266,000 reserve was applied against certain inventories. 30 12. NEW ACCOUNTING PRONOUNCEMENTS In June 2002, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The provisions of this statement are required to be applied starting with fiscal years beginning after June 15, 2002. This Statement addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 has no impact on the Company's financial statements. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 defines impairment for long-lived assets and provides guidance on the measurement of asset impairments. The adoption of SFAS No. 144 has no impact on the Company's financial statements. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No., 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 eliminates the exception to applying APB Opinion 30 to all gains and losses related to extinguishments of debt. The adoption of SFAS No. 145 has no impact on the Company's financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement requires that a liability for costs associated with an exit or disposal activity be recognized when the costs are incurred rather than at the date of a commitment to the exit or disposal plan. This statement will be applied prospectively to exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 has no impact on the Company's financial statements. 31 REPORTS OF INDEPENDENT ACCOUNTANTS TO STOCKHOLDERS AND DIRECTORS OF LANDAUER, INC.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, stockholder's investment and comprehensive income and cash flows for the year ended September 30, 2002 present fairly, in all material respects, the financial position of Landauer, Inc. and Subsidiaries at September 30, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statements of Landauer, Inc. as of September 30, 2001, and for each of the two years in the period ended September 30, 2001, were audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those financial statements, before the revision described in Note 4, in their report dated November 6, 2001. As discussed above, the financial statements of Landauer, Inc. as of September 30, 2001, and for each of the two years in the period ended September 30, 2001, were audited by other independent accountants who have ceased operations. As described in Note 4, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," which was adopted by the Company as of October 1, 2001. We audited the transitional disclosures described in Note 4. In our opinion, the transitional disclosures for 2001 and 2000 in Note 4 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 or 2000 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 or 2000 financial statements taken as a whole. PricewaterhouseCoopers LLP Chicago, Illinois November 6, 2002 Arthur Andersen LLP originally issued this report on November 6, 2001. These independent accountants have ceased operations.They have not reissued their report in conjunction with this filing. 32 REPORTS OF INDEPENDENT ACCOUNTANTS - CONTINUED TO THE STOCKHOLDERS AND DIRECTORS OF LANDAUER, INC.: We have audited the consolidated balance sheets of Landauer, Inc. and Subsidiaries, a Delaware corporation (see Note 1), as of September 30, 2001 and 2000 and the related consolidated statements of income, stockholders' investment and comprehensive income, and cash flows for each of the three years in the period ended September 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Landauer, Inc. and Subsidiaries as of September 30, 2001 and 2000, and the consolidated results of its operations, and the changes in stockholders' investment and cash flows for each of the three years in the period ended September 30, 2001 in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP Chicago, Illinois November 6, 2001 33 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information contained under the headings Election of Directors and Beneficial Ownership of Certain Voting Securities in the Proxy Statement relating to the directors of the Company is incorporated herein by reference. The information contained in Item 4A hereof relating to the executive officers of the Registrant is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Except for the information relating to Item 13 hereof and except for information referred to in Item 402(a)(8) of Regulation S-K, the information contained under the headings Executive Compensation and Compensation Committee Report in the Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information contained under the headings Executive Compensation- Equity Compensation Plan Information and Beneficial Ownership of Certain Voting Securities in the Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Except for the information relating to Item 11 hereof and except for information referred to in Item 402(a)(8) of Regulation S-K, the information contained under the headings Election of Directors, and Certain Relationships and Related Transactions in the Proxy Statement is incorporated herein by reference. ITEM 14. CONTROLS AND PROCEDURES Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company's periodic filings with the Securities and Exchange Commission. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of our most recent evaluation. 34 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K A-1. FINANCIAL STATEMENTS The financial statements of Landauer, Inc. filed as part of this Annual Report on Form 10-K are indexed at page 7. A-3. LIST OF EXHIBITS (3)(a) Certificate of Incorporation of the Registrant, as amended through February 4, 1993, is incorporated by reference to Exhibit (3)(a) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. (3)(b) By-laws of the Registrant are incorporated by reference to Exhibit (3)(b) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1992. (4)(a) Specimen common stock certificate of the Registrant incorporated by reference to Exhibit (4)(a) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1997. (10)(a) The Landauer, Inc. 1996 Equity Plan, as amended and restated through November 8, 2001, is attached hereto as Exhibit (10)(a). (10)(b) Liability Assumption and Sharing Agreement among Tech/Ops, Inc., Tech/Ops Sevcon, Inc., and the Registrant is incorporated by reference to Exhibit (10)(d) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. (10)(c) Form of Indemnification Agreement between the Registrant and each of its directors is incorporated by reference to Exhibit (10)(e) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. (10)(d) Landauer, Inc. Directors' Retirement Plan dated March 21, 1990, is incorporated by reference to Exhibit (10)(f) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1996. (10)(e) Form of Supplemental Key Executive Retirement Plan of Landauer, Inc., as amended and restated effective October 1, 2002, is attached hereto as Exhibit (10)(e). (10)(f) The Landauer, Inc. Incentive Compensation Plan for Executive Officers is incorporated by reference to Exhibit 10(h) to the Annual Report on Form 10-K for the fiscal year ended September 30, 2000. (10)(g) The Landauer, Inc. 1997 Non-Employee Director's Stock Option Plan, as amended and restated through November 8, 2001, is attached hereto as Exhibit (10)(g). (10)(h) Employment agreements dated February 29, 1996 between the Registrant and Brent A. Latta, James M. O'Connell and R. Craig Yoder are incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended September 30, 1998. 35 (10)(i) Employment agreements dated November 9, 2001 between the Registrant and Joseph M. Zlotnicki and Robert M. Greaney are attached hereto as Exhibit (10)(i). (10)(j) The Landauer, Inc. Executive Special Severance Plan dated May 22, 2002 is attached hereto as Exhibit (10)(j). (21) Subsidiaries of the registrant are: Beijing-Landauer, Ltd. (70%) Beijing, P.R. China HomeBuyer's Preferred, Inc. (100%) 2 Science Road Glenwood, IL 60425-1586 Nagase-Landauer, Ltd. (50%) Tokyo, Japan SAPRA-Landauer, Ltda. (75%) Sao Carlos - SP - Brazil LCIE-Landauer (51%) Paris, France 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibits 10(a), 10(d), 10(f), 10(g), 10(h), 10(i) and 10(j) listed above are the management contracts and compensatory plans or arrangements required to be filed as exhibits hereto pursuant to the requirements of Item 601 of Regulation S-K. B. REPORTS ON FORM 8-K On May 22, 2002, Landauer filed a Form 8-K, Item 4, "Changes in Registrant's Certifying Accountant." On June 26, 2002, Landauer filed a Form 8-K/a, Item 4, "Changes in Registrant's Certifying Accountant." 36 SIGNATURES OF REGISTRANT AND DIRECTORS Pursuant to the requirements of Section 13 or 15(d) 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. LANDAUER, INC. By: /s/ Brent A. Latta December 17, 2002 -------------------- Brent A. Latta President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE - --------- ----- ---- /s/ Brent A. Latta President and Director December 17, 2002 - ----------------------- (Principal Executive Brent A. Latta Officer) /s/ James M. O'Connell Vice President, Finance, December 17, 2002 - ----------------------- Treasurer and Secretary James M. O'Connell (Principal Financial and Accounting Officer) /s/ Robert J. Cronin Director December 17, 2002 - ----------------------- Robert J. Cronin /s/ E. Gail de Planque Director December 17, 2002 - ----------------------- E. Gail de Planque /s/ Gary D. Eppen Director December 17, 2002 - ----------------------- Gary D. Eppen /s/ Thomas M. Fulton Director December 17, 2002 - ----------------------- Thomas M. Fulton /s/ M. Christine Jacobs Director December 17, 2002 - ----------------------- M. Christine Jacobs /s/ Richard R. Risk Director December 17, 2002 - ----------------------- Richard R. Risk /s/ Paul B. Rosenberg Director December 17, 2002 - ----------------------- Paul B. Rosenberg /s/ Michael D. Winfield Director December 17, 2002 - ----------------------- Michael D. Winfield 37 CERTIFICATIONS I, Brent A. Latta, certify that: 1. I have reviewed this annual report on Form 10-K of Landauer, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. December 17, 2002 /s/ Brent A. Latta ----------------------------------- President & Chief Executive Officer 38 CERTIFICATIONS I, James M. O'Connell, certify that: 1. I have reviewed this annual report on Form 10-K of Landauer, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. December 17, 2002 /s/ James M. O'Connell ----------------------------------- Chief Financial Officer 39 QUARTERLY FINANCIAL DATA (UNAUDITED)
(Amount in Thousands, Except per Share) First Second Third Fourth Total Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- --------- Net revenues 2002 $13,741 $14,704 $14,844 $15,319 $58,608 2001 $12,729 $13,833 $12,941 $13,525 $53,028 Operating income 2002 $ 5,776 $ 6,263 $ 5,829 $ 6,531 $24,399 2001 $ 5,039 $ 5,679 $ 5,326 $ 5,830 $21,874 (1) Net income 2002 $ 3,736 $ 4,037 $ 4,234 $ 4,173 $16,180 2001 $ 3,312 $ 3,734 $ 3,479 $ 3,799 $14,324 Diluted net income per share 2002 $ .42 $ .46 $ .48 $ .47 $ 1.83 2001 $ .38 $ .43 $ .40 $ .43 $ 1.64 Cash dividends per share 2002 $ .35 $ .35 $ .35 $ .35 $ 1.40 2001 $ .35 $ .35 $ .35 $ .35 $ 1.40 Common stock price per share 2002 high $ 36.70 $ 38.40 $ 41.91 $ 39.39 $ 41.91 low 29.99 32.60 37.60 30.65 29.99 2001 high $ 20.35 $ 24.40 $ 30.50 $ 35.20 $ 35.20 low 17.50 17.90 20.91 30.10 17.50 Weighted Average Diluted Shares Outstanding 2002 8,829 8,857 8,882 8,855 8,855 2001 8,678 8,708 8,780 8,822 8,747 (1) Includes a one time gain of $511 (net of income taxes) relating to the formation of LCIE-Landauer.
40 SIX YEAR SELECTED FINANCIAL DATA LANDAUER, INC. AND SUBSIDIARIES (Dollars in Thousands, Except Per Share) For the years ended September 30, 1997 1998 1999 2000 2001 2002 - ------------------- ------- ------- ------- ------- ------- ------- OPERATING RESULTS Net revenues. . . $39,914 $42,692 $43,800 $47,174 $53,028 $58,608 Operating income. 17,455 18,732 14,756 19,316 21,874 24,399 Net income. . . . 12,019 12,759 9,489 12,762 14,324 16,180 As a percent of net revenues . . . 30.1% 29.9% 21.7% 27.1% 27.0% 27.6% Diluted net income per share . . . . . $ 1.39 $ 1.47 $ 1.09 $ 1.47 $ 1.64 $ 1.83 Cash dividends per share . . . $ 1.20 $ 1.30 $ 1.40 $ 1.40 $ 1.40 $ 1.40 Total assets. . . $43,735 $46,337 $44,624 $47,061 $50,550 $60,257 41 EX-10.A 3 exh_10a.txt EXHIBIT 10(a) - ------------- LANDAUER, INC. 1996 EQUITY PLAN (As Amended and Restated through November 8, 2001) I. INTRODUCTION 1.1 PURPOSES. The purposes of the 1996 Equity Plan, as Amended and Restated through November 8, 2001 (this "Plan"), of Landauer, Inc. (the "Company") and its subsidiaries from time to time (individually a "Subsidiary" and collectively the Subsidiaries") are (i) to align the interests of the Company's stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Company's growth and success, (ii) to advance the interests of the Company by attracting and retaining officers and other key employees and (iii) to motivate such employees to act in the long-term best interests of the Company's stockholders. For purposes of this Plan, references to employment by the Company shall also mean employment by a Subsidiary. 1.2 CERTAIN DEFINITIONS. "Agreement" shall mean the written agreement evidencing an award hereunder between the Company and the recipient of such award. "Board" shall mean the Board of Directors of the Company. "Bonus Stock" shall mean shares of Common Stock which are not subject to a Restriction Period or Performance Measures. "Bonus Stock Award" shall mean an award of Bonus Stock under this Plan. "Cause" shall mean any willful act of dishonesty, conviction of a felony, significant activities harmful to the reputation or business of the Company, refusal to perform or substantial disregard of duties properly assigned or significant violation of any statutory or common law duty of loyalty to the Company, in each case as determined by not less than two-thirds of the members of the Committee. "Change in Control" shall have the meaning set forth in Section 5.8. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Committee" shall mean the Committee designated by the Board, consisting of two or more members of the Board, each of whom shall be (i) a "Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act and (ii) an "outside director" within the meaning of Section 162(m) of the Code. "Common Stock" shall mean the common stock, par value $.10 per share, of the Company. "Company" shall have the meaning set forth in Section 1.1. "Disability" shall mean the inability of the holder of an award to perform substantially such holder's duties and responsibilities for a continuous period of at least six months, as determined solely by the Committee. "Employment Termination Date" shall mean, in the case of the termination by the Company of an employee's employment, the date that the Company notifies such employee of such termination of employment and, in the case of the termination by an employee of employment with the Company, the date on which the Company shall first receive notification from such employee of such termination of employment. 1 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean the average of the high and low transaction prices of a share of Common Stock as reported on the American Stock Exchange on the date as of which such value is being determined, or, if the Common Stock is not listed on the American Stock Exchange, the average of the high and low transaction prices of a share of Common Stock on the principal national stock exchange on which the Common Stock is traded on the date as of which such value is being determined, or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported; PROVIDED, HOWEVER, that if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate. "Free-Standing SAR" shall mean an SAR which is not issued in tandem with, or by reference to, an option, which entitles the holder thereof to receive, upon exercise, shares of Common Stock (which may be Restricted Stock), cash or a combination thereof with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of such SARs which are exercised. "Incentive Stock Option" shall mean an option to purchase shares of Common Stock that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an Incentive Stock Option. "Non-Statutory Stock Option" shall mean a stock option which is not an Incentive Stock Option. "Performance Measures" shall mean the criteria and objectives, established by the Committee, which shall be satisfied or met (i) as a condition to the exercisability of all or a portion of an option or SAR or (ii) during the applicable Restriction Period or Performance Period as a condition to the holder's receipt, in the case of a Restricted Stock Award, of the shares of Common Stock subject to such award, or, in the case of a Performance Share Award, of payment with respect to such award. Such criteria and objectives may include, but are not limited to, the attainment by a share of Common Stock of a specified Fair Market Value for a specified period of time, earnings per share, return on equity, earnings of the Company, revenues, market share, cash flows or cost reduction goals, or any combination of the foregoing and any other criteria and objectives established by the Committee. In the sole discretion of the Committee, the Committee may amend or adjust the Performance Measures or other terms and conditions of an outstanding award in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in law or accounting principles. "Performance Option" shall mean an Incentive Stock Option or Non-Statutory Stock Option, the exercisability of all or a portion of which is contingent upon the attainment of specified Performance Measures within a specified Performance Period. "Performance Period" shall mean any period designated by the Committee during which the Performance Measures applicable to a Performance Share Award or Performance Option shall be measured. "Performance Share" shall mean a right, contingent upon the attainment of specified Performance Measures within a specified Performance Period, to receive one share of Common Stock, which may be Restricted Stock, or in lieu thereof, the Fair Market Value of such Performance Share in cash. "Performance Share Award" shall mean an award of Performance Shares under this Plan. 2 "Permanent and Total Disability" shall have the meaning set forth in Section 22(e)(3) of the Code or any successor thereto. "Restricted Stock" shall mean shares of Common Stock which are subject to a Restriction Period. "Restricted Stock Award" shall mean an award of Restricted Stock under this Plan. "Restriction Period" shall mean any period designated by the Committee during which the Common Stock subject to a Restricted Stock Award may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating to such award. "SAR" shall mean a stock appreciation right which may be a Free-Standing SAR or a Tandem SAR. "Stock Award" shall mean a Restricted Stock Award or a Bonus Stock Award. "Tandem SAR" shall mean an SAR which is granted in tandem with, or by reference to, an option (including a Non-Statutory Stock Option granted prior to the date of grant of the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion of such option, shares of Common Stock (which may be Restricted Stock), cash or a combination thereof with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Common Stock subject to such option, or portion thereof, which is surrendered. "Tax Date" shall have the meaning set forth in Section 5.5. "Ten Percent Holder" shall have the meaning set forth in Section 2.1(a). 1.3 ADMINISTRATION. This Plan shall be administered by the Committee. Any one or a combination of the following awards may be made under this Plan to eligible officers and other key employees of the Company and its Subsidiaries: (i) options to purchase shares of Common Stock in the form of Incentive Stock Options or Non-Statutory Stock Options (which may include Performance Options), (ii) SARs in the form of Tandem SARs or Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or Bonus Stock and (iv) Performance Shares. The Committee shall, subject to the terms of this Plan, select eligible officers and other key employees for participation in this Plan and determine the form, amount and timing of each award to such persons and, if applicable, the number of shares of Common Stock, the number of SARs and the number of Performance Shares subject to such an award, the exercise price or base price associated with the award, the time and conditions of exercise or settlement of the award and all other terms and conditions of the award, including, without limitation, the form of the Agreement evidencing the award. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and may impose, incidental to the grant of an award, conditions with respect to the award, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties. 3 To the extent permitted by applicable law, the Committee may delegate some or all of its power and authority hereunder to the President and Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority with regard to (i) the grant of an award under this Plan to any person who is a "covered employee" within the meaning of Section 162(m) of the Code or who, in the Committee's judgment, is likely to be a covered employee at any time during the period an award hereunder to such employee would be outstanding or (ii) the selection for participation in this Plan of an officer or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award to such an officer or other person. No member of the Board of Directors or Committee, and neither the President and Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board of Directors and the Committee and the President and Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys' fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company's Certificate of Incorporation and/or By-laws) and under any directors' and officers' liability insurance that may be in effect from time to time. A majority of the Committee shall constitute a quorum. Except as otherwise required by the definition of the term "Cause" in Section 1.2, the acts of the Committee shall be either (i) acts of a majority of the members of the Committee present at any meeting at which a quorum is present or (ii) acts approved in writing by a majority of the members of the Committee without a meeting. 1.4 ELIGIBILITY. Participants in this Plan shall consist of such officers or other key employees of the Company and its Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee's selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. 1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 5.7, 760,000 shares of Common Stock shall be available under this Plan, reduced by the sum of the aggregate number of shares of Common Stock (i) that are issued upon the grant of a Stock Award and (ii) which become subject to outstanding options, outstanding Free-Standing SARs and outstanding Performance Shares. To the extent that shares of Common Stock subject to an outstanding option (other than in connection with the exercise of a Tandem SAR), Free-Standing SAR, Stock Award or Performance Share are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award or by reason of the delivery of shares of Common Stock to pay all or a portion of the exercise price of an award, if any, or the delivery or withholding of shares to satisfy all or a portion of the tax withholding obligations and other taxes referred to in Section 5.5 relating to an award, then such shares of Common Stock shall again be available under this Plan. Shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof. To the extent required by Section 162(m) of the Code and the rules and regulations thereunder, the maximum number of shares of Common Stock with respect to which options or SARs or a combination thereof may be granted during any fiscal year of the Company to any person shall be 75,000, subject to adjustment as provided in Section 5.7. 4 II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS 2.1 STOCK OPTIONS. The Committee may, in its discretion, grant options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. Each option, or portion thereof, that is not an Incentive Stock Option, shall be a Non-Statutory Stock Option. Each Incentive Stock Option shall be granted within ten years of the effective date of this Plan. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which options designated as Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary) exceeds the amount (currently $100,000) established by the Code, such options shall constitute Non-Statutory Stock Options. Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable: (a) NUMBER OF SHARES AND PURCHASE PRICE. The number of shares of Common Stock subject to an option and the purchase price per share of Common Stock purchasable upon exercise of the option shall be determined by the Committee; PROVIDED, HOWEVER, that the purchase price per share of Common Stock purchasable upon exercise of a Non-Statutory Stock Option or an Incentive Stock Option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such option; PROVIDED FURTHER, that if an Incentive Stock Option shall be granted to any person who, at the time such option is granted, owns capital stock possessing more than ten percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary) (a "Ten Percent Holder"), the purchase price per share of Common Stock shall be the price (currently 110% of Fair Market Value) required by the Code in order to constitute an Incentive Stock Option. (b) OPTION PERIOD AND EXERCISABILITY. The period during which an option may be exercised shall be determined by the Committee; PROVIDED, HOWEVER, that no Incentive Stock Option shall be exercised later than ten years after its date of grant; PROVIDED FURTHER, that if an Incentive Stock Option shall be granted to a Ten Percent Holder, such option shall not be exercised later than five years after its date of grant. The Committee may, in its discretion, determine that an option is to be granted as a Performance Option and may establish an applicable Performance Period and Performance Measures which shall be satisfied or met as a condition to the grant of such option or to the exercisability of all or a portion of such option. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. An exercisable option, or portion thereof, may be exercised only with respect to whole shares of Common Stock. (c) METHOD OF EXERCISE. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (A) in cash, (B) by delivery (either actual delivery or by attestation procedures established by the Company) of previously owned whole shares of Common Stock (which the optionee has held for at least six months prior to delivery of such shares and for which the optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) in cash by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise or (D) a combination of (A) and (B), in each case to the extent set forth in the Agreement relating to the option, (ii) if applicable, by surrendering to the Company any Tandem SARs which are cancelled by reason of the exercise of the option and (iii) by executing such documents as the Company may reasonably request. Notwithstanding the foregoing, the Committee shall have the discretion to permit payment to be made, in whole or in part, by a full-recourse note or 5 in installments at such times and upon such terms as the Committee may approve; PROVIDED, HOWEVER, that, in the case of payment by any such note or installments, certificates for any shares of Common Stock issued in respect thereof shall contain such legend, if any, as may be required by, and shall otherwise be subject to the provisions of, the laws of the state of incorporation of the Company relating to the issuance of shares on such terms. Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the optionee. No certificate representing Common Stock shall be delivered until the full purchase price therefor has been paid. 2.2 STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a Free-Standing SAR. SARs shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable: (a) NUMBER OF SARS AND BASE PRICE. The number of SARs subject to an award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted at the same time that such Incentive Stock Option is granted. The base price of a Tandem SAR shall be the purchase price per share of Common Stock of the related option. The base price of a Free-Standing SAR shall be determined by the Committee; PROVIDED, HOWEVER, that such base price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such SAR. (b) EXERCISE PERIOD AND EXERCISABILITY. The Agreement relating to an award of SARs shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash or a combination thereof. The period for the exercise of an SAR shall be determined by the Committee; PROVIDED, HOWEVER, that no Tandem SAR shall be exercised later than the expiration, cancellation, forfeiture or other termination of the related option. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the exercisability of an SAR. The Committee shall determine whether an SAR may be exercised in cumulative or non-cumulative installments and in part or in full at any time. An exercisable SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole shares of Common Stock and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR is exercised for shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c) and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section 3.2(d). Prior to the exercise of an SAR for shares of Common Stock, including Restricted Stock, the holder of such SAR shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such SAR and shall have rights as a stockholder of the Company in accordance with Section 5.10. (c) METHOD OF EXERCISE. A Tandem SAR may be exercised (i) by giving written notice to the Company specifying the number of whole SARs which are being exercised, (ii) by surrendering to the Company any options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents as the Company may reasonably request. A Free- Standing SAR may be exercised (i) by giving written notice to the Company specifying the whole number of SARs which are being exercised and (ii) by executing such documents as the Company may reasonably request. 6 2.3 TERMINATION OF EMPLOYMENT. (a) DISABILITY. Subject to paragraph (f) below and unless otherwise specified in the Agreement relating to an option or SAR, as the case may be, if the employment with the Company of the holder of an option or SAR terminates by reason of Disability, each option and SAR held by such holder shall be fully exercisable and may thereafter be exercised by such holder (or such holder's legal representative or similar person) until and including the earlier to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option or SAR) after such holder's Employment Termination Date and (ii) the expiration date of the term of such option or SAR. (b) RETIREMENT. Subject to paragraph (f) below and unless otherwise specified in the Agreement relating to an option or SAR, as the case may be, if the employment with the Company of the holder of an option or SAR terminates by reason of retirement on or after age 65 (or prior to age 65 with the consent of the Committee) each option and SAR held by such holder shall be fully exercisable and may thereafter be exercised by such holder (or such holder's legal representative or similar person) until and including the earlier to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option or SAR) after such holder's Employment Termination Date and (ii) the expiration date of the term of such option or SAR. (c) DEATH. Subject to paragraph (f) below and unless otherwise specified in the Agreement relating to an option or SAR, as the case may be, if the employment with the Company of the holder of an option or SAR terminates by reason of death, each option and SAR held by such holder shall be fully exercisable and may thereafter be exercised by such holder's executor, administrator, legal representative, beneficiary or similar person, as the case may be, until and including the earlier to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option or SAR) after the date of death and (ii) the expiration date of the term of such option or SAR; provided, however, that, in the event that the date of death is less than six months prior to such expiration date, such holder's executor, administrator, legal representative, beneficiary or similar person, as the case may be, shall have not less than six months from the date of death to so exercise such option or SAR (except that, in the event that such option is an Incentive Stock Option, such period of exercise shall not under any circumstance extend beyond the tenth anniversary of the date of grant of such Incentive Stock Option). (d) OTHER TERMINATION. If the employment with the Company of the holder of an option or SAR is terminated by the Company for Cause, each option and SAR held by such holder shall terminate automatically on such holder's Employment Termination Date. Subject to paragraph (f) below and unless specified in the Agreement relating to an option or SAR, as the case may be, if the employment with the Company of the holder of an option or SAR terminates for any reason other than Disability, retirement on or after age 65 (or prior to age 65 with the consent of the Committee) or death, or Cause, each option and SAR held by such holder shall be exercisable only to the extent that such option or SAR is exercisable on such holder's Employment Termination Date and may thereafter be exercised by such holder (or such holder's legal representative or similar person) until and including the earlier to occur of (i) the date which is three months (or such other period as set forth in the Agreement relating to such option or SAR) after such holder's Employment Termination Date and (ii) the expiration date of the term of such option or SAR. 7 (e) DEATH FOLLOWING TERMINATION OF EMPLOYMENT. Subject to paragraph (f) below and unless otherwise specified in the Agreement relating to an option or SAR, as the case may be, if the holder of an option or SAR dies during the period set forth in Section 2.3(a) following termination of employment by reason of Disability, or if the holder of an option or SAR dies during the period set forth in Section 2.3(b) following termination of employment by reason of retirement on or after age 65 (or prior to age 65 with the consent of the Committee), or if the holder of an option or SAR dies during the period set forth in Section 2.3(d) following termination of employment for any reason other than Disability or retirement on or after age 65 (or prior to age 65 with the consent of the Committee) (or, in each case, such other period as set forth in the Agreement relating to such option or SAR), each option and SAR held by such holder shall be exercisable only to the extent that such option or SAR, as the case may be, is exercisable on the date of such holder's death and may thereafter be exercised by the holder's executor, administrator, legal representative, beneficiary or similar person, as the case may be, until and including the earlier to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option or SAR) after the date of death and (ii) the expiration date of the term of such option or SAR; PROVIDED, HOWEVER, that, in the event that the date of death is less than six months prior to such expiration date, such holder's executor, administrator, legal representative, beneficiary or similar person, as the case may be, shall have not less than six months from the date of death to so exercise such option or SAR (except that, in the event that such option is an Incentive Stock Option, such period of exercise shall not under any circumstance extend beyond the tenth anniversary of the date of grant of such Incentive Stock Option). (f) TERMINATION OF EMPLOYMENT - INCENTIVE STOCK OPTIONS. Unless otherwise specified in the Agreement relating to the option, if the employment with the Company of a holder of an Incentive Stock Option terminates by reason of Permanent and Total Disability, each Incentive Stock Option held by such optionee shall become fully exercisable and may thereafter be exercised by such optionee (or such optionee's legal representative or similar person) until and including the earlier to occur of (i) the date which is one year (or such shorter period as set forth in the Agreement relating to such option) after such optionee's Employment Termination Date by reason of Permanent and Total Disability and (ii) the expiration date of the term of such option. Unless otherwise specified in the Agreement relating to the option, if the employment with the Company of a holder of an Incentive Stock Option terminates by reason of death, each Incentive Stock Option held by such optionee shall become fully exercisable and may thereafter be exercised by such optionee's executor, administrator, legal representative, beneficiary or similar person until and including the earliest to occur of (i) the date which is one year (or such shorter period as set forth in the Agreement relating to such option) after the date of death and (ii) the expiration date of the term of such option. If the employment with the Company of the optionee of an Incentive Stock Option is terminated by the Company for Cause, each Incentive Stock Option held by such optionee shall terminate automatically on the effective date of such optionee's termination of employment. If the employment with the Company of a holder of an Incentive Stock Option terminates for any reason other than Permanent and Total Disability or death or Cause, each Incentive Stock Option held by such optionee shall be exercisable only to the extent such option is exercisable on the effective date of such optionee's termination of employment and may thereafter be exercised by such holder (or such holder's legal representative or similar person) until and including the earlier to occur of (i) the date which is three months after such optionee's Employment Termination Date and (ii) the expiration date of the term of such option. 8 If the holder of an Incentive Stock Option dies during the period set forth in the first paragraph of the Section 2.3(f) following termination of employment by reason of Permanent and Total Disability (or such shorter period as set forth in the Agreement relating to such option), or if the holder of an Incentive Stock Option dies during the period set forth in the third paragraph of this Section 2.3(f) following termination of employment for any reason other than Permanent and Total Disability or death or Cause, each Incentive Stock Option held by such optionee shall be exercisable only to the extent such option is exercisable on the date of the optionee's death and may thereafter be exercised by the optionee's executor, administrator, legal representative, beneficiary or similar person until and including the earlier to occur of (i) the date which is one year (or such shorter period as set forth in the Agreement relating to such option) after the date of death and (ii) the expiration date of the term of such option. III. STOCK AWARDS 3.1 STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Stock Award shall specify whether the Stock Award is a Restricted Stock Award or Bonus Stock Award. 3.2 TERMS OF STOCK AWARDS. Stock Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable. (a) NUMBER OF SHARES AND OTHER TERMS. The number of shares of Common Stock subject to a Restricted Stock Award or Bonus Stock Award and the Performance Measures (if any) and Restriction Period applicable to a Restricted Stock Award shall be determined by the Committee. (b) VESTING AND FORFEITURE. The Agreement relating to a Restricted Stock Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of the shares of Common Stock subject to such award (i) if specified Performance Measures are satisfied or met during the specified Restriction Period or (ii) if the holder of such award remains continuously in the employment of the Company during the specified Restricted Period and for the forfeiture of the shares of Common Stock subject to such award (x) if specified Performance Measures are not satisfied or met during the specified Restriction Period or (y) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period. Bonus Stock Awards shall not be subject to any Performance Measures or Restriction Periods. (c) SHARE CERTIFICATES. During the Restriction Period, a certificate or certificates representing a Restricted Stock Award shall be registered in the holder's name and may bear a legend, in addition to any legend which may be required pursuant to Section 5.6, indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to the Restricted Stock Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate, which would permit transfer to the Company of all or a portion of the shares of Common Stock subject to the Restricted Stock Award in the event such award is forfeited in whole or in part. Upon termination of any applicable Restriction Period (and the satisfaction or attainment of applicable Performance Measures), or upon the grant of a Bonus Stock Award, in each case subject to the Company's right to require payment of any taxes in accordance with Section 5.5, a certificate or certificates evidencing ownership of the requisite number of shares of Common Stock shall be delivered to the holder of such award. 9 (d) RIGHTS WITH RESPECT TO RESTRICTED STOCK AWARDS. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, and subject to the terms and conditions of a Restricted Stock Award, the holder of such award shall have all rights as a stockholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock; PROVIDED, HOWEVER, that a distribution with respect to shares of Common Stock, other than a regular cash dividend, shall be deposited with the Company and shall be subject to the same restrictions as the shares of Common Stock with respect to which such distribution was made. 3.3 TERMINATION OF EMPLOYMENT. (a) DISABILITY, RETIREMENT AND DEATH. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, if the employment with the Company of the holder of such award terminates by reason of Disability, retirement on or after age 65 (or prior to age 65 with the consent of the Committee) or death, the Restriction Period shall terminate as of such holder's Employment Termination Date and all Performance Measures, if any, applicable to such award shall be deemed to have been satisfied at the maximum level. (b) OTHER TERMINATION. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, if the employment with the Company of the holder of a Restricted Stock Award terminates for any reason other than Disability, retirement on or after age 65 (or prior to age 65 with the consent of the Committee) or death, the portion of such award which is subject to a Restriction Period on such holder's Employment Termination Date shall be forfeited and such portion shall be cancelled by the Company. IV. PERFORMANCE SHARE AWARDS 4.1 PERFORMANCE SHARE AWARDS. The Committee may, in its discretion, grant Performance Share Awards to such eligible persons as may be selected by the Committee. 4.2 TERMS OF PERFORMANCE SHARE AWARDS. Performance Share Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable. (a) NUMBER OF PERFORMANCE SHARES AND PERFORMANCE MEASURES. The number of Performance Shares subject to any award and the Performance Measures and Performance Period applicable to such award shall be determined by the Committee. (b) VESTING AND FORFEITURE. The Agreement relating to a Performance Share Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such award, if specified Performance Measures are satisfied or met during the specified Performance Period, and for the forfeiture of such award, if specified Performance Measures are not satisfied or met during the specified Performance Period. (c) SETTLEMENT OF VESTED PERFORMANCE SHARE AWARDS. The Agreement relating to a Performance Share Award (i) shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash or a combination thereof and (ii) may specify whether the holder thereof shall be entitled to receive, on a current or deferred basis, dividend equivalents, and, if determined by the Committee, interest on any deferred dividend equivalents, with respect to the number of shares of Common Stock subject to such award. If a Performance Share Award is settled in shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c) and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section 3.2(d). Prior to the settlement of a Performance Share Award in shares of 10 Common Stock, including Restricted Stock, the holder of such award shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such award. 4.3 TERMINATION OF EMPLOYMENT. (a) DISABILITY, RETIREMENT AND DEATH. Unless otherwise set forth in the Agreement relating to a Performance Share Award, if the employment with the Company of the holder of such award terminates by reason of Disability, retirement on or after age 65 (or prior to age 65 with the consent of the Committee) or death, all Performance Measures applicable to such award shall be deemed to have been satisfied at the maximum level (if none of the Performance Measures are required to be satisfied prior to the date of such termination of employment) or a level proportionate with the actual performance, determined on a weighted average basis during the portion of the Performance Period that shall have expired prior to such termination of employment (if any of the Performance Measures are required to be satisfied prior to the date of such termination of employment), and the Performance Period applicable to such award shall thereupon terminate. (b) OTHER TERMINATION. Unless otherwise set forth in the Agreement relating to a Performance Share Award, if the employment with the Company of the holder of a Performance Share Award terminates for any reason other than Disability, retirement on or after age 65 or death, the portion of such award which is subject to a Performance Period on such holder's Employment Termination Date shall be forfeited and such portion shall be cancelled by the Company. V. GENERAL 5.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the stockholders of the Company for approval and, if approved by the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the 2002 annual meeting of stockholders, shall become effective on the date of such approval. This Plan shall terminate on February 3, 2009, unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination. Awards hereunder may be made at any time prior to the termination of this Plan, provided that no award may be made later than 10 years after the effective date of this Plan. In the event that this Plan is not approved by the stockholders of the Company, this Plan and any awards hereunder shall be void and of no force or effect. 5.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable, subject to any requirement of stockholder approval required by applicable law, rule or regulation including Rule 16b-3 under the Exchange Act and Section 162(m) of the Code; PROVIDED, HOWEVER, that no amendment shall be made without stockholder approval if such amendment would (a) increase the maximum number of shares of Common Stock available for issuance under this Plan (subject to Section 5.7), (b) reduce the minimum purchase price in the case of an option or the base price in the case of an SAR, (c) effect any change inconsistent with Section 422 of the Code or (d) extend the term of this Plan. No amendment may impair the rights of a holder of an outstanding award without the consent of such holder. 5.3 AGREEMENT. Each award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an Agreement is executed by the Company and the recipient of such award and, upon execution by each party and delivery of the Agreement to the Company, such award shall be effective as of the effective date set forth in the Agreement. 11 5.4 NON-TRANSFERABILITY OF STOCK OPTIONS, SARS AND PERFORMANCE SHARES. Unless otherwise specified in the Agreement relating to an option, SAR or Performance Share, no option, SAR or Performance Share shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Each option, SAR or Performance Share may be exercised or settled during the holder's lifetime only by the holder or the holder's legal representative or similar person. Except as permitted by the second preceding sentence, no option, SAR or Performance Share may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any option, SAR or Performance Share, such award and all rights thereunder shall immediately become null and void. 5.5 TAX WITHHOLDING AND OTHER SETTLEMENTS IN LIEU OF TAXES. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an award made hereunder, payment by the holder of such award of any Federal, state, local or other taxes which may be required to be withheld or paid in connection with such award. An Agreement may provide that (i) the Company shall withhold whole shares of Common Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the "Tax Date"), or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash payment to the Company, (B) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole shares of Common Stock having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation, (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, equal to the amount necessary to satisfy any such obligation, (D) in the case of the exercise of an option, a cash payment by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in each case to the extent set forth in the Agreement relating to the award. Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate. Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder. 5.6 RESTRICTIONS ON SHARES. Each award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder. 12 5.7 ADJUSTMENT. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a regular cash dividend, the number and class of securities available under this Plan, the number and class of securities subject to each outstanding option and the purchase price per security, the terms of each outstanding SAR, the number and class of securities subject to each outstanding Stock Award, and the terms of each outstanding Performance Share shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and SARs without an increase in the aggregate purchase price or base price. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. If any such adjustment would result in a fractional security being (i) available under this Plan, such fractional security shall be disregarded, or (ii) subject to an award under this Plan, the Company shall pay the holder of such award, in connection with the first vesting, exercise or settlement of such award, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the vesting, exercise or settlement date over (B) the exercise or base price, if any, of such award. 5.8 CHANGE IN CONTROL. (a) (1) Notwithstanding any provision in this Plan or any Agreement, in the event of a Change in Control pursuant to Section (b)(3) or (4) below in connection with which the holders of Common Stock receive shares of common stock that are registered under Section 12 of the Exchange Act, (i) all outstanding options and SARs shall immediately become exercisable in full, (ii) the Restriction Period applicable to any outstanding Restricted Stock Award shall lapse, (iii) the Performance Period applicable to any outstanding Performance Share shall lapse, (iv) the Performance Measures applicable to any outstanding award shall be deemed to be satisfied at the maximum level and (v) there shall be substituted for each share of Common Stock available under this Plan, whether or not then subject to an outstanding award, the number and class of shares into which each outstanding share of Common Stock shall be converted pursuant to such Change in Control. In the event of any such substitution, the purchase price per share in the case of an option and the base price in the case of an SAR shall be appropriately adjusted by the Committee (whose determination shall be final, binding and conclusive), such adjustments to be made in the case of outstanding options and SARs without an increase in the aggregate purchase price or base price. (2) Notwithstanding any provision in this Plan or any Agreement, in the event of a Change in Control pursuant to Section (b)(1) or (2) below, or in the event of a Change in Control pursuant to Section (b)(3) or (4) below in connection with which the holders of Common Stock receive consideration other than shares of common stock that are registered under Section 12 of the Exchange Act, each outstanding award shall be surrendered to the Company by the holder thereof, and each such award shall immediately be canceled by the Company, and the holder shall receive, within ten days of the occurrence of a Change in Control, a cash payment from the Company in an amount equal to (i) in the case of an option, the number of shares of Common Stock then subject to such option, multiplied by the excess, if any, of the greater of (A) the highest per share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (B) the Fair Market Value of a share of Common Stock on the date of occurrence of the Change in Control, over the purchase price per share of Common Stock subject to the option, (ii) in the case of a Free-Standing SAR, the number of shares of Common Stock then subject to such SAR, multiplied by the excess, if any, of the greater of (A) the highest per share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (B) the Fair Market Value of a 13 share of Common Stock on the date of occurrence of the Change in Control, over the base price of the SAR, (iii) in the case of a Restricted Stock Award or Performance Share Award, the number of shares of Common Stock or the number of Performance Shares, as the case may be, then subject to such award, multiplied by the greater of (A) the highest per share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (B) the Fair Market Value of a share of Common Stock on the date of occurrence of the Change in Control. In the event of a Change in Control, each Tandem SAR shall be surrendered by the holder thereof and shall be canceled simultaneously with the cancellation of the related option. (b) "Change in Control" shall mean: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Common Stock") or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 5.8(b); PROVIDED FURTHER, that for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of 30% or more of the Outstanding Common Stock or 30% or more of the Outstanding Voting Securities by reason of an acquisition by the Company, and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Common Stock or any additional Outstanding Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control; (2) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"); excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities 14 entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Stock and the Outstanding Voting Securities, as the case may be, (ii) no Person (other than: the Company; any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 30% or more of the Outstanding Common Stock or the Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 30% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) the consummation of a plan of complete liquidation or dissolution of the Company. 5.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to participate in this Plan. Neither this Plan nor any award made hereunder shall confer upon any person any right to continued employment by the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate the employment of any person at any time without liability hereunder. 5.10 RIGHTS AS STOCKHOLDER. No person shall have any right as a stockholder of the Company with respect to any shares of Common Stock or other equity security of the Company which is subject to an award hereunder unless and until such person becomes a stockholder of record with respect to such shares of Common Stock or equity security. 5.11 DESIGNATION OF BENEFICIARY. A holder of an award may file with the Committee a written designation of one or more persons as such holder's beneficiary or beneficiaries (both primary and contingent) in the event of the holder's death. To the extent an outstanding option or SAR granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option or SAR. Each beneficiary designation shall become effective only when filed in writing with the Committee during the holder's lifetime on a form prescribed by the Committee. The spouse of a married holder domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Committee of a new beneficiary designation shall cancel all previously filed beneficiary designations. If a holder fails to designate a beneficiary, or if all designated beneficiaries of a holder predecease the holder, then each outstanding option and SAR hereunder held by such holder, to the extent exercisable, may be exercised by such holder's executor, administrator, legal representative or similar person. 5.12 GOVERNING LAW. This Plan, each award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws. 15 EX-10.E 4 exh_10e.txt EXHIBIT 10(e) - ------------- SUPPLEMENTAL KEY EXECUTIVE RETIREMENT PLAN OF LANDAUER, INC. (as amended and restated effective October 1, 2002) TABLE OF CONTENTS Page ---- Article l - Title . . . . . . . . . . . . . . . . . . . . . . . 1 Article 2 - Definitions . . . . . . . . . . . . . . . . . . . . 1 Article 3 - Amount and Commencement of Pensions . . . . . . . . 2 Section 3.1. Supplemental Pension . . . . . . . . . . . . 2 Section 3.2. Termination Prior to 65. . . . . . . . . . . 2 Section 3.3. Survivor's Benefit . . . . . . . . . . . . . 2 Article 4 - Administration. . . . . . . . . . . . . . . . . . . 2 Section 4.1. In General . . . . . . . . . . . . . . . . . 2 Section 4.2. Claims Procedure . . . . . . . . . . . . . . 3 Section 4.3. Notices and Other Communications . . . . . . 3 Section 4.4. Records. . . . . . . . . . . . . . . . . . . 3 Article 5 - Participation by Other Employers. . . . . . . . . . 4 Section 5.1. Adoption of Plan . . . . . . . . . . . . . . 4 Section 5.2 Withdrawal from Participation. . . . . . . . 4 Section 5.3. Company as Agent for Employers . . . . . . . 4 Article 6 - Miscellaneous . . . . . . . . . . . . . . . . . . . 4 Section 6.1. Non-Assignability . . . . . . . . . . . . . . 4 Section 6.2. Employment Non-Contractual. . . . . . . . . . 4 Section 6.3. Employer's Option to Fund Benefits. . . . . . 4 Section 6.4. Governing Law . . . . . . . . . . . . . . . . 4 Section 6.5. Gender and Plurals. . . . . . . . . . . . . . 5 Article 7 - Amendment . . . . . . . . . . . . . . . . . . . . . 5 Section 7.1. Amendment . . . . . . . . . . . . . . . . . . 5 Section 7.2. Termination of the Plan by an Employer. . . . 5 Article 8 - Continuance By a Successor. . . . . . . . . . . . . 5 i SUPPLEMENTAL KEY EXECUTIVE RETIREMENT PLAN OF LANDAUER, INC. (as amended and restated effective October 1, 2002) ARTICLE 1 TITLE AND PURPOSE The title of this plan shall be "Supplemental Key Executive Retirement Plan of Landauer, Inc. (as amended and restated effective October 1, 2002)". The purpose of this Plan is to provide retirement income to a group of employees of the Company that constitutes a "select group of management or highly compensated employees" within the meaning of sections 201, 301 and 401 of ERISA and United States Department of Labor Regulation Section 2520.104-23. ARTICLE 2 DEFINITIONS As used herein the following words and phrases shall when capitalized herein have the following respective meanings. All other capitalized terms shall have the meanings given thereto under the "Qualified Plan," as defined below. (A) PLAN. The plan herein set forth, as from time to time amended. (B) COMPANY. Landauer, Inc., a Delaware corporation, or any corporation which shall succeed to the business of such corporation and adopt the Plan pursuant to Article 8. (C) EMPLOYER. The Company and any other corporation which shall, with the consent of the Company, elect to participate in the Plan in the manner described in Section 5.1 and any successor corporation which shall adopt the Plan pursuant to Article 8. If any such corporation shall withdraw from participation in the Plan pursuant to Section 5.2, or shall terminate its participation in the plan pursuant to Section 7.2, such corporation shall thereupon cease to be an Employer. (D) EMPLOYEE. An individual whose relationship with an Employer is, under common law, that of an employee. (E) PARTICIPANT. A Senior Manager of an Employer designated as a Participant by the Board of Directors of the Company, or a duly appointed committee thereof. The names of participants and their effective dates of participation in the Plan appear in Schedule A to the Plan. (F) QUALIFIED PLAN. The Landauer, Inc. Retirement Plan, or any successor thereto, as in effect from time to time. (G) ACTUARIAL EQUIVALENT. The actuarial equivalent determined using the actuarial assumptions utilized in determining benefits under the Qualified Plan (without regard to the rate which is used under the Qualified Plan to determine the value of lump sum distributions). (H) EFFECTIVE DATE. The effective date of the amended and restated Plan with respect to an Employee's Employer, which in the case of the Company shall be October 1, 2002, and in the case of any other Employer shall be the date designated by such Employer. 1 ARTICLE 3 AMOUNT AND COMMENCEMENT OF PENSIONS SECTION 3.1. SUPPLEMENTAL PENSION. The amount of such supplemental pension payable to a Participant upon retirement on or after attaining age 65 (calculated in each case on the basis that the Participant has elected to receive such benefits in the form of a 50% joint and survivor annuity if married, otherwise in the form of a single life annuity) shall be payable annually, in monthly installments, commencing on or about the first day of the month following the later of the Participant's termination of employment and his 65th birthday and continuing for the life of the Participant, equal to the excess, if any, of (A) over (B) as described below: (A) The product of 2% multiplied by the Participant's years of service (up to a maximum of 25 years) with an Employer (including service with the Company's predecessor Tech/Ops, Inc.) multiplied by the Participant's "compensation", using the following assumptions: (I) "compensation" equals the greater of such Participant's highest five-year average pay or his final pay; and (II) "compensation" includes incentive compensation (as annualized over the five-year period immediately preceding his termination of employment). (B) The amount which is payable under the Qualified Plan and any Company-sponsored profit-sharing plan (other than a 401(k) plan). Notwithstanding anything herein to the contrary, the supplemental pension payable hereunder to with respect to a Participant who is not fully vested under the Qualified Plan on his retirement shall only be payable in the amount determined using the foregoing formula multiplied by such Participant's vested percentage under the Qualified Plan. SECTION 3.2. TERMINATION PRIOR TO AGE 65. A Participant whose employment with an Employer terminates prior to the date on which the Participant attains age 65 shall be entitled to receive the supplemental pension determined under Section 3.1 commencing at the time at which he receives an early retirement benefit under the Qualified Plan, but such supplemental pension shall be reduced in accordance with any early retirement reduction factors utilized in the Qualified Plan. SECTION 3.3. SURVIVOR'S BENEFIT. If the Participant has a living spouse at retirement at age 65 but prior to the commencement of his supplemental pension hereunder and if upon his death the Participant is legally married, the Participant's Employer shall pay a monthly supplemental pension to his spouse, if such spouse survives the Participant, for the lifetime of such spouse. Such survivor's supplemental pension shall be equal to 50% of the amount set forth in Section 3.1. ARTICLE 4 ADMINISTRATION SECTION 4.1. IN GENERAL. (A) The Company shall be responsible for the administration of the provisions of the Plan. 2 (B) The Company shall have the duty and authority to interpret and construe the Plan in regard to all questions of the status and rights of Participants and other persons under the Plan and the manner, time, and amount of payment of any distributions under the Plan. Each Employer shall, from time to time, upon request of the Company, furnish to the Company such data and information as the Committee shall require in the performance of its duties. (C) The Company may designate any person, partnership or corporation to carry out any of its responsibilities. Any such designation shall be reduced to writing and such writing shall be kept with the records of the Plan. SECTION 4.2. CLAIMS PROCEDURE. If any Participant or other person believes he is entitled to benefits in an amount greater than those, which he is receiving or has received, he may file a written claim with the secretary of the Company. Such claim shall state the nature of the claim, the facts supporting the claim, the amount claimed, and the address of the claimant. The secretary of the Company shall review the claim and shall, within 60 days after receipt of the claim, give written notice by registered or certified mail to the claimant of the Secretary's decision with respect to the claim. The notice of the Company's decision with respect to the claim shall be written in a manner designed to be understood by the claimant and, if the claim is wholly or partially denied, set forth the specific reasons for the denial, specific references to the pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the claim review procedure under the Plan. The Company shall also advise the claimant that he or his duly authorized representative may request a review of the denial by the President of the Company by filing with the Company within 65 days after notice of the denial has been received by the claimant, a written request for such review. The claimant shall be informed that he may have reasonable access to pertinent documents and submit comments in writing to the President within the same 65-day period. If a request is so filed, review of the denial shall be made by the President within 60 days after receipt of such request, and the claimant shall be given written notice of the President's final decision. The notice of the President's final decision shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based and shall be written in a manner designed to be understood by the claimant. SECTION 4.3. NOTICES AND OTHER COMMUNICATIONS. All notices, reports and statements given, made, delivered or transmitted to a Participant or any other person entitled to or claiming benefits under the Plan shall be deemed to have been duly given, made or transmitted when mailed by first class mail with postage prepaid and addressed to the Participant or such person at the address last appearing on the records of the Company. A Participant or other person may record any change of his address from time to time by written notice filed with the Company. Written directions, notices and other communications from Participants or any other person entitled to or claiming benefits under the Plan to the Employers or the Company shall be deemed to have been duly given, made or transmitted either when delivered to such location as shall be specified upon the forms prescribed by the Company for the giving of such directions, notices and other communications or when mailed by first class mail with postage prepaid and addressed as specified upon such forms. SECTION 4.4. RECORDS. The Company shall keep a record of all of its proceedings and shall keep or cause to be kept all books of account, records and other data as may be necessary or advisable in its judgment for the administration of the Plan. 3 ARTICLE 5 PARTICIPATION BY OTHER EMPLOYERS SECTION 5.1. ADOPTION OF PLAN. With the consent of the Company, any corporation or other entity may become a participating Employer under the Plan by (a) taking such action as shall be necessary to adopt the Plan, (b) filing with the President of the Company a duly certified copy of the resolution of the board of directors of such corporation adopting the Plan, and (c) executing and delivering such instruments and taking such other action as may be necessary or desirable to put the Plan into effect with respect to such corporation. SECTION 5.2. WITHDRAWAL FROM PARTICIPATION. Any Employer may withdraw from participation in the Plan at any time by filing with the Company a duly certified copy of a resolution of its board of directors to that effect and giving notice of its intended withdrawal to the Company prior to the effective date of withdrawal. SECTION 5.3. COMPANY AS AGENT FOR EMPLOYERS. Each corporation which shall become a participating Employer pursuant to Section 5.1 by so doing shall be deemed to have appointed the Company its agent to exercise on its behalf all of the powers and authorities hereby conferred upon the Company by the terms of the Plan, including, but not by way of limitation, the power to amend and terminate the Plan. ARTICLE 6 MISCELLANEOUS SECTION 6.1. NON-ASSIGNABILITY. It is a condition of the Plan, and all rights of each Participant and any other person entitled to benefits hereunder shall be subject thereto, that no right or interest of any Participant or such other person in the Plan shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy, garnishment, attachment, pledge or bankruptcy, but excluding rights or interests arising by reason of death or mental incompetency, and no right or interest of any Participant or other person in the Plan shall be liable for, or subject to, any obligation or liability of such Participant or other person, including claims for alimony or the support of any spouse or child. SECTION 6.2. EMPLOYMENT NON-CONTRACTUAL. The Plan shall not be interpreted as conferring any right upon any Employee to continue in employment. SECTION 6.3. EMPLOYER'S OPTION TO FUND BENEFITS. Nothing in this Plan shall be interpreted as requiring any Employer to set aside any of its assets for the purpose of funding its obligation under this Plan. No person entitled to benefits under this Plan shall have any right, title or claim in or to any specific assets of any Employer, but shall have the right only as a general creditor of his Employer to receive benefits from his Employer on the terms and conditions herein provided. Notwithstanding the foregoing, any obligation of an Employer under this Plan to the Employee or an other person entitled to payments in respect of the Participant shall be offset by any payments to the Participant or other person from any trust or other funding medium established by the Employers for the purpose of providing benefits of this Plan. SECTION 6.4. GOVERNING LAW. This Plan shall be construed and enforced under the laws of the State of Illinois. 4 SECTION 6.5. GENDER AND PLURALS. Wherever used in the plan, words of the masculine gender shall include both the masculine or feminine gender, and, unless the context otherwise requires, words in the singular shall include the plural, and words in the plural shall include the singular. ARTICLE 7 AMENDMENT SECTION 7.1. AMENDMENT. The Company may at any time and from time to time amend or modify the Plan by written instrument duly adopted by the board of directors of the Company. Any such amendment or modification shall become effective on or as of such date as the Company shall determine and may apply to Participants in the Plan at the effective date thereof as well as to future Participants, PROVIDED, HOWEVER, that no such amendment shall adversely affect the rights under the Plan of any person to receive or be entitled to receive benefits such person has accrued under the Plan as of the date the amendment is adopted. SECTION 7.2. TERMINATION OF THE PLAN BY AN EMPLOYER. Any Employer may at any time terminate its participation in the Plan by resolution adopted by its board of directors to that effect, PROVIDED, HOWEVER, that such termination shall not adversely affect the rights under the Plan of any person to receive or be entitled to receive benefits such person has accrued under the Plan as of the date the resolution is adopted. ARTICLE 8 CONTINUANCE BY A SUCCESSOR In the event that any Employer shall be reorganized by way of merger, consolidation, transfer of assets or otherwise, so that another corporation other than an Employer shall succeed to all or substantially all of such Employer's business, such successor corporation may be substituted for such Employer under the Plan by adopting the Plan. If, within 90 days following the effective date of any such reorganization, such successor corporation shall not have elected to become a party to the Plan, or if the Employer shall adopt a plan of complete liquidation other than in connection with a reorganization, the Plan shall be automatically terminated with respect to Employees of such Employer as of the close of business on the 90th day following the effective date of such reorganization or as of the close of business on the date of adoption of such plan of complete liquidation. 5 IN WITNESS WHEREOF, Landauer, Inc. has caused this Plan to be executed by its duly authorized officers on this 14th day of August, 2002. LANDAUER, INC. /s/ Brent A. Latta ------------------------------ Brent A. Latta President and C. E. O. Attest: /s/ Robert J. Cronin - -------------------------------- Robert J. Cronin Chairman, Compensation Committee 6 EX-10.G 5 exh_10g.txt EXHIBIT 10(g) - ------------- LANDAUER, INC. AMENDED AND RESTATED 1997 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN I. INTRODUCTION 1.1 PURPOSES. The purposes of the Amended and Restated 1997 Non- Employee Directors Stock Option Plan (this "Plan") of Landauer, Inc., a Delaware corporation (the "Company"), and its subsidiaries from time to time (individually a "Subsidiary" and collectively the "Subsidiaries"), are to align the interests of the Company's stockholders and the recipients of options under this Plan by increasing the proprietary interest of such recipients in the Company's growth and success and to advance the interests of the Company by attracting and retaining well-qualified persons who are not employees of the Company for service as directors of the Company. For purposes of this Plan, references to service on behalf of the Company shall also mean service on behalf of a Subsidiary. 1.2 ADMINISTRATION. This Plan shall be administered by a committee (the "Committee") designated by the Board of Directors of the Company (the "Board") consisting of two or more members of the Board. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof and establish rules and regulations it deems necessary or desirable for the administration of this Plan. All such interpretations, rules and regulations shall be conclusive and binding on all parties. Each option hereunder shall be evidenced by a written agreement (an "Agreement") between the Company and the optionee setting forth the terms and conditions applicable to such option. The Committee shall determine the form of the Agreement. No member of the Board of Directors or the Committee shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board of Directors and the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys' fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company's Certificate of Incorporation and/or By-laws) and under any directors' and officers' liability insurance that may be in effect from time to time. A majority of the Committee shall constitute a quorum. The acts of the Committee shall be either (a) acts of a majority of the members of the Committee present at any meeting at which a quorum is present or (b) acts approved in writing by all of the members of the Committee without a meeting. 1.3 ELIGIBILITY. Each member of the Board of Directors of the Company who is not an employee, either full-time or part-time, of the Company or a Subsidiary (a "Non-Employee Director") shall be eligible to participate in this Plan and receive a grant of options to purchase shares of Common Stock (as defined in Section 1.4) in accordance with Article II. 1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 3.6, 100,000 shares of the common stock, par value $.10 per share, of the Company ("Common Stock"), shall be available for grants of options under this Plan, reduced by the sum of the aggregate number of shares of Common Stock which become subject to outstanding options. To the extent that shares of Common Stock subject to an outstanding option are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such option or by reason of the delivery of shares of Common 1 Stock to pay all or a portion of the exercise price of such option, then such shares of Common Stock shall again be available under this Plan. Shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof. II. STOCK OPTIONS 2.1 GRANTS OF STOCK OPTIONS. Each Non-Employee Director shall be granted non-qualified stock options as follows: (a) TIME OF GRANT. On the date of the 2002 annual meeting of stockholders of the Company (or, if later, on the date on which a person is first elected or begins to serve as an Non-Employee Director, other than by reason of termination of employment with the Company), and, thereafter, on the date of each annual meeting of stockholders of the Company, each person who is a Non-Employee Director immediately after such meeting of stockholders shall be granted an option to purchase 1,500 shares of Common Stock (which amount shall be pro-rated if such Non-Employee Director is first elected or begins to serve as a Non-Employee Director on a date other than the date of an annual meeting of stockholders) at a purchase price per share equal to the Fair Market Value of the Common Stock on the date of grant of such option. For purposes of this Plan, "Fair Market Value" shall mean the average of the high and low transaction prices of a share of Common Stock as reported on The American Stock Exchange on the date as of which such value is being determined or, if the Common Stock is not listed on The American Stock Exchange, the average of the high and low transaction prices of a share of Common Stock on the principal national stock exchange on which the Common Stock is traded on the date as of which such value is being determined, or, if there shall be no reported transactions on such date, on the next preceding date for which transactions were reported; PROVIDED, HOWEVER, that if Fair Market Value for any date cannot be determined as above provided, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate. (b) OPTION PERIOD AND EXERCISABILITY. Except as otherwise provided herein, each option granted under this Article II shall not be exercisable during the first year following its date of grant. Thereafter, such option may be exercised: (i) on and after the first anniversary of its date of grant, for up to 500 shares of Common Stock subject to such option on its date of grant, (ii) on and after the second anniversary of its date of grant, for up to an additional 500 (1000 on a cumulative basis) shares of Common Stock subject to such option on its date of grant; and (iii) on and after the third anniversary of its date of grant, for up to the remaining 500 (all shares on a cumulative basis) shares of Common Stock subject to such option on its date of grant. Subject to Section 2.1(d) and (e), each option granted under this Article II shall expire 90 days after the tenth year anniversary of its date of grant. An exercisable option, or portion thereof, may be exercised in whole or in part only with respect to whole shares of Common Stock. (c) METHOD OF EXERCISE. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (A) in cash, (B) by delivery (either by actual delivery or attestation procedures established by the Company) of previously owned whole shares of Common Stock (which the optionee has held for at least six months prior to the delivery of such shares or which the optionee purchased on the open market and for which the optionee has good title, free and clear of all liens and encumbrances) having a Fair Market 2 Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) in cash by a broker- dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise or (D) a combination of (A) and (B), in each case to the extent set forth in the Agreement relating to the option and (ii) by executing such documents as the Company may reasonably request. Notwithstanding the foregoing, the Committee shall have discretion to permit payment to be made, in whole or in part, by a full-recourse note or in installments at such time and upon such terms as the Committee may approve; PROVIDED, HOWEVER, that in the case of payment by any such note or installments, certificates for any shares of Common Stock issued in respect thereof shall contain such legend, if any, as may be required by, and shall otherwise be subject to the provisions of, the laws of the state of incorporation of the Company relating to the issuance of shares on such terms. Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the optionee. No certificate representing Common Stock shall be delivered until the full purchase price therefor has been paid. (d) TERMINATION OF DIRECTORSHIP. Subject to Section 3.7, if the holder of an option granted under this Article II shall cease to be a member of the Board for any reason, each such option held by such optionee shall be exercisable only to the extent that such option is exercisable on the effective date of such holder's ceasing to be a member of the Board and may thereafter be exercised by such optionee (or such optionee's executor, administrator, legal representative, beneficiary or similar person) until and including the earlier to occur of (i) the date which is one year after the date such optionee ceased to be a member of the Board and (ii) the expiration date of the term of such option. (e) DEATH FOLLOWING TERMINATION OF DIRECTORSHIP. If the holder of an option granted under this Article II dies during the one year period following the date on which such optionee ceased to be a member of the Board, each such option held by such holder shall be exercisable only to the extent that such option is exercisable on the date of the holder's death and may thereafter be exercised by such holder's executor, administrator, legal representative, beneficiary or similar person, as the case may be, until and including the earlier to occur of (i) the date which is one year after the date of death and (ii) the expiration date of the term of such option; PROVIDED, HOWEVER, that, in the event that the date of death is less than six months prior to such expiration date, such holder's executor, administrator, legal representative, beneficiary or similar person, as the case may be, shall have not less than six months from the date of death to so exercise such option. III. GENERAL 3.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the stockholders of the Company for approval and, if approved by the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the 2002 annual meeting of stockholders, shall become effective on the date of such approval. In the event that this Plan is not approved by the stockholders of the Company, this Plan shall be null and void and of no force or effect. This Plan shall terminate on January 29, 2007, unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any option granted prior to termination. Options may be granted hereunder at any time prior to the termination of this Plan. 3.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable, subject to any requirement of stockholder approval required by applicable law, rule or regulation. No amendment may impair the rights of a holder of an outstanding option without the consent of such holder. 3 3.3 AGREEMENT. No option shall be valid until an Agreement is executed by the Company and the optionee and, upon execution by the Company and the optionee and delivery of the Agreement to the Company, such option shall be effective as of the effective date set forth in the Agreement. 3.4 NON-TRANSFERABILITY. Unless otherwise specified in the Agreement relating to any option, no option hereunder shall be transferable other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company, as set forth in the Agreement relating to such option. Except to the extent permitted by the foregoing sentence, each option may be exercised during the optionee's lifetime only by the optionee or the optionee's legal representative or similar person. Except as permitted by the second preceding sentence, no option hereunder shall be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any option hereunder, such option and all rights thereunder shall immediately become null and void. 3.5 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares thereunder, such shares shall not be purchased or delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any option hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder. 3.6 ADJUSTMENT. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a regular cash dividend, the number and class of securities available under this Plan, the number and class of securities subject to each outstanding option and the number and class of securities to vest annually, the purchase price per security, and the number of securities subject to each option to be granted to Non-Employee Directors pursuant to Article II shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options without an increase in the aggregate purchase price. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. If any adjustment would result in a fractional security being (a) available under this Plan, such fractional security shall be disregarded, or (b) subject to an option under this Plan, the Company shall pay the optionee, in connection with the first exercise of the option in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (x) the Fair Market Value on the exercise date over (y) the exercise price of the option. 4 3.7 CHANGE IN CONTROL. (a) (1) Notwithstanding any provision in this Plan or any Agreement, in the event of a Change in Control pursuant to Section (b)(3) or (4) below in connection with which the holders of Common Stock receive shares of common stock that are registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (i) all outstanding options shall immediately become exercisable in full and (ii) there shall be substituted for each share of Common Stock available under this Plan, whether or not then subject to an outstanding option, the number and class of shares into which each outstanding share of Common Stock shall be converted pursuant to such Change in Control. In the event of any such substitution, the purchase price per share shall be appropriately adjusted by the Committee (whose determination shall be final, binding and conclusive), such adjustment to be made without an increase in the aggregate purchase price. (2) Notwithstanding any provision in this Plan or any Agreement, in the event of a Change in Control pursuant to Section (b)(1) or (2) below, or in the event of a Change in Control pursuant to Section (b)(3) or (4) below in connection with which the holders of Common Stock receive consideration other than shares of common stock that are registered under Section 12 of the Exchange Act, each outstanding option shall be surrendered to the Company by the holder thereof, and each such option shall immediately be canceled by the Company, and the holder shall receive, within ten days of the occurrence of a Change in Control, a cash payment from the Company in an amount equal to the number of shares of Common Stock then subject to such option, multiplied by the excess, if any, of the greater of (A) the highest per share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (B) the Fair Market Value of a share of Common Stock on the date of occurrence of the Change in Control, over the purchase price per share of Common Stock subject to the option. (b) "Change in Control" shall mean: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Common Stock") or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 3.7(b); provided further, that for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of 30% or more of the Outstanding Common Stock or 30% or more of the Outstanding Voting Securities by reason of an acquisition by the Company, and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Common Stock or any additional Outstanding Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control; 5 (2) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"); excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Stock and the Outstanding Voting Securities, as the case may be, (ii) no Person (other than: the Company; any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 30% or more of the Outstanding Common Stock or the Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 30% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) the consummation of a plan of complete liquidation or dissolution of the Company. 3.8 NO RIGHT OF CONTINUED SERVICE. Neither this Plan nor any option granted hereunder shall confer upon any person any right to continued services as a director of the Company, any Subsidiary or any affiliate of the Company. 3.9 RIGHTS AS STOCKHOLDER. No person shall have any right as a stockholder of the Company with respect to any shares of Common Stock which are subject to an option hereunder until such person becomes a stockholder of record with respect to such shares of Common Stock. 3.10 DESIGNATION OF BENEFICIARY. Each optionee may file with the Committee a written designation of one or more persons as such optionee's beneficiary or beneficiaries (both primary and contingent) in the event of the optionee's death. To the extent an outstanding option granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option. 6 Each beneficiary designation shall become effective only when filed in writing with the Committee during the optionee's lifetime on a form prescribed by the Committee. The spouse of a married optionee domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Committee of a new beneficiary designation shall cancel all previously filed beneficiary designations. If an optionee fails to designate a beneficiary, or if all designated beneficiaries of an optionee predecease the optionee, then each outstanding option hereunder held by such optionee, to the extent exercisable, may be exercised by such optionee's executor, administrator, legal representative or similar person. 3.11 GOVERNING LAW. This Plan, each option hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Internal Revenue Code of 1986, as amended, or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws. 7 EX-10.I 6 exh_10i.txt EXHIBIT 10(i) - ------------- EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of November 9, 2001 between Robert M. Greaney (the "Executive") and Landauer, Inc., a Delaware corporation (the "Company"). WHEREAS, the Company is engaged primarily in the business of providing analytical services to determine personal exposure to occupational and environmental radiation hazards; WHEREAS, the Executive currently serves as the Vice President - Operations of the Company; WHEREAS, the Executive's abilities and services are unique and essential to the prospects of the Company; and WHEREAS, the Company and the Executive desire to enter into this Agreement to provide for the continued employment of the Executive by the Company upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereby agree as follows: 1. EMPLOYMENT; TERM. (a) EMPLOYMENT. The Company hereby employs the Executive, and the Executive hereby agrees to be employed by the Company, upon the terms and subject to the conditions contained in this Agreement. (b) TERM. The term of this Agreement (the "Term") shall commence on the date hereof and shall continue indefinitely thereafter until terminated pursuant to Section 4 hereof. As used herein, the term "Employment Period" shall mean the period commencing on the date hereof and ending on the date of termination of the term hereof or Executive's employment with the Company pursuant to Section 4 hereof. 2. POSITION; DUTIES; RESPONSIBILITIES. (a) POSITION AND DUTIES. The Company shall employ the Executive as the Vice President - Operations of the Company. The Executive shall faithfully and loyally perform to the best of his abilities all the duties reasonably assigned to him hereunder, shall devote such business time, attention and effort to the affairs of the Company as is reasonably necessary for the proper performance of such duties and shall use his reasonable best efforts to promote the interests of the Company. Notwithstanding the foregoing, the Executive may serve as a director, officer or paid consultant of business corporations other than the Company or civic or community organizations or entities, provided that such activities do not violate the terms of any noncompetition agreement between the Executive and the Company and such activities are approved prior to the commencement thereof by the Chairman of the Board of Directors of the Company (the "Board") or the President of the Company. (b) RESPONSIBILITIES. The Executive shall have responsibility and authority for the formulation and execution of the policies relating to processing and other technical operations-related functions of the Company and such other responsibilities and authorities as are customarily exercisable by an executive officer with oversight responsibility for processing and other technical operations, subject in each case to the general supervision and direction of the Board, the Chairman of the Board or the President of the Company. 1 3. COMPENSATION. (a) BASE SALARY. During the Employment Period, the Company shall pay to the Executive an annual base salary at the rate of $ 142,000 per annum, payable in accordance with the Company's executive payroll policy. Such base salary shall be reviewed annually, commencing January 1, 2002, and may be increased (but shall not be decreased), as determined by the Company's Compensation Committee. The Executive's base salary, as increased hereunder, is referred to herein as the "Base Salary." (b) ANNUAL PERFORMANCE BONUS. In the discretion of the Company's Compensation Committee, the Executive shall be eligible to receive an annual performance bonus payable in cash for each full or partial fiscal year of the Company during the Employment Period in accordance with the Company's Incentive Compensation Plan For Executive Officers. (c) STOCK OPTIONS. In the discretion of the Company's Compensation Committee, the Executive shall be eligible to receive from time to time during the Employment Period options to purchase shares of Company common stock ("Common Stock") pursuant to the terms of the Landauer, Inc. Equity Plan. (d) SUPPLEMENTAL KEY EXECUTIVE RETIREMENT PLAN. In addition to the compensation and benefits to which the Executive is entitled hereunder, the Executive shall be entitled during the Employment Period to participate in the Company's Supplemental Key Executive Retirement Plan (the "Supplemental Retirement Plan") in accordance with its terms. (e) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive for all expenses necessarily and reasonably incurred by him during the Employment Period in connection with the business of the Company, upon presentation of proper receipts or other proof of expenditure and subject to such reasonable guidelines or limitations provided to the Executive and applied prospectively, as established by the Company. (f) PARTICIPATION IN BENEFIT PLANS. During the Employment Period, the Executive shall be entitled to participate in any profit sharing plan, retirement plan, group life insurance plan or other insurance plan or medical expense plan maintained by the Company for its senior executives generally. 4. TERMINATION. (a) DEATH. Upon the death of the Executive, this Agreement shall automatically terminate and all rights of the Executive and his heirs, executors and administrators to compensation and other benefits hereunder shall cease, except for (i) compensation which shall have accrued to the date of death, including accrued Base Salary, prorated Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding the Executive's death) and any amounts payable pursuant to the Supplemental Retirement Plan and (ii) the rights to indemnification under Section 5 hereof. 2 (b) DISABILITY. The Company may, at its option, terminate this Agreement upon written notice to the Executive if the Executive, because of physical or mental incapacity or disability, fails in any material respect to perform the services required of him hereunder for a continuous period of 180 days. Upon such termination, all obligations of the Company hereunder shall cease, except for (i) compensation which shall have accrued to the date of termination, including accrued Base Salary, prorated Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding the termination of this Agreement pursuant to this Section 4(b)) and any amounts payable pursuant to the Supplemental Retirement Plan, and (ii) the rights to indemnification under Section 5 hereof. In the event of any dispute regarding the existence of the Executive's incapacity hereunder, the matter shall be resolved by the determination of a majority of three physicians qualified to practice medicine in the state of the Executive's residence, one to be selected by each of the Executive and the Board and the third to be selected by such two designated physicians. For this purpose, the Executive shall submit to appropriate medical examinations. (c) CAUSE. (i) The Company may, at its option, terminate the Executive's employment under this Agreement for "Cause" (as hereinafter defined). A termination for Cause shall not take effect until and unless the Company complies with this Section 4(c)(i). The Executive shall be given written notice by the Company of the intention to terminate his employment hereunder for Cause (the "Cause Notice"). The Cause Notice shall state the particular action(s) or inaction(s) giving rise to termination for Cause. (ii) As used in this Agreement, the term "Cause" shall mean any one or more of the following, in any case as determined to have occurred by not less than two-thirds of the directors then serving on the Board: (A) the Executive's refusal to perform specific directives of the Board which are consistent with the scope and nature of the Executive's duties and responsibilities as set forth herein or a material violation by Executive of the policies, procedures or rules of the Company; (B) the Executive's commission or conviction of a felony or of any act involving fraud, embezzlement, theft or misrepresentation; (C) any gross or willful misconduct of the Executive resulting in substantial loss to the Company or substantial damage to the Company's business or reputation; or (D) any breach by the Executive of any noncompetition agreement between the Executive and the Company. (iii) The exercise of the right of the Company to terminate this Agreement pursuant to this Section 4(c) shall not abrogate the rights or remedies of the Company in respect of the breach giving rise to such termination. (iv) If the Company terminates the Executive's employment for Cause, he shall be entitled to: (A) accrued Base Salary through the date of the termination of his employment; (B) any amounts owing but not yet paid pursuant to Section 3(e); and 3 (C) other or additional benefits to the extent required by any applicable plans and programs of the Company. (v) Notwithstanding anything to the contrary contained in this Agreement, if, following a termination of the Executive's employment for Cause, a court of competent jurisdiction, in a final determination, determines that the Executive was not guilty of the conduct that formed the basis for the termination, the Executive shall be entitled to the payments and the economic equivalent of the benefits he would have received had his employment been terminated by the Company without Cause. (d) TERMINATION WITHOUT CAUSE. If, during the Employment Period, the Company terminates the employment of the Executive hereunder for any reason other than a reason set forth in Section 4(a), 4(b) or 4(c): (i) concurrent with such termination, the Company shall pay to the Executive an amount equal to his Base Salary, prorated Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding such termination of employment) and any amounts payable pursuant to the Supplemental Retirement Plan, in each case accrued through the date of termination; (ii) the Company shall continue to pay the Executive his Base Salary, Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding such termination of employment) and all other benefits which would otherwise be payable hereunder for a period of twelve months following such termination; PROVIDED, HOWEVER, that if, prior to the end of such twelve-month period, the Executive shall obtain employment with another employer, the amounts otherwise payable pursuant to this clause (ii) shall be reduced by the amount of compensation earned by the Executive from his new employment during such period (except that in no event shall any such reduction result in the Executive receiving an amount pursuant to this clause (ii) that would be less than the amount the Executive would have earned if his Base Salary, Bonus and other benefits had been continued for a period of six months following such termination); (iii) all of the Executive's options to purchase Common Stock shall be immediately 100% exercisable; (iv) the Executive shall be entitled to any amounts owing but not yet paid pursuant to Section 3(e); and (v) the Executive shall be entitled to his rights to indemnification under Section 5 hereof. (e) TERMINATION FOR GOOD REASON. (i) If, during the Employment Period, the Executive terminates his employment hereunder for "Good Reason" (as such term is defined in Section 4(e)(ii) hereof, he shall be entitled to all of the payments and benefits specified by Sections 4(d)(i) through 4(d)(v) hereof, inclusive. (ii) For purposes of this Agreement, "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following events: (A) a material breach of this Agreement by the Company; (B) the failure to elect or re-elect the Executive to any position that is at least substantially comparable or more favorable to the positions described in Section 2(a) hereof, removal of the Executive from any such position or any change in the Executive's responsibilities described in Section 2(b) in any respect which is materially adverse to the Executive; 4 (C) a diminution of any of the Executive's significant duties or the assignment to the Executive of any duties inconsistent with his duties or the material impairment of the Executive's ability to function in the positions described in Section 2(a) hereof, in each case only after the Company shall have had an opportunity to cure (any such cure to be effected within 30 days after appropriate written notice of the basis for Good Reason is given to the Company by the Executive); (D) a material reduction of any benefit enjoyed by the Executive or the failure to continue the Executive's participation in any incentive compensation plan, unless a plan providing a substantially similar economic opportunity is substituted or all senior executives suffer a substantially similar reduction or failure; (E) the relocation of the Executive's office to a location more than 50 miles from Glenwood, Illinois; or (F) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within 15 days after a merger, consolidation, sale of assets or similar transaction. (f) VOLUNTARY TERMINATION. If, during the Employment Period, the Executive voluntarily terminates his employment hereunder for any reason other than Good Reason, he shall be entitled to the payments specified by Sections 4(c)(iv)(A) through 4(c)(iv)(C) hereof, inclusive. 5. INDEMNIFICATION. To the fullest extent permitted by law, the Certificate of Incorporation of the Company, the By-laws of the Company or any indemnification agreement entered into between the Company and the Executive, the Executive (and his heirs, executors and administrators) shall be indemnified by the Company and its successors and assigns. The obligations of the Company pursuant to this Section 5 shall survive the termination of the Employment Period, except as otherwise provided herein. 6. INSURANCE. The Company may, at its election and for its benefit, insure the Executive against disability, accidental loss or death and the Executive shall submit to such physical examinations and supply such information as may be required in connection therewith. 7. ASSIGNMENT. The rights and benefits of the Executive hereunder shall not be assignable, whether by voluntary or involuntary assignment or transfer. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Company, and the heirs, executors and administrators of the Executive, and shall be assignable by the Company to any entity acquiring substantially all of the assets of the Company, whether by merger, consolidation, sale of assets or similar transaction. 8. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and personally delivered, sent by certified or registered mail or sent by overnight courier service as follows: if to the Executive, to his address as set forth in the records of the Company, and if to the Company, to the address of its principal executive offices, attention: President, with a copy to Larry A. Barden, Sidley Austin Brown & Wood, Bank One Plaza, Chicago, Illinois 60603, or to any other address designated by any party hereto by notice similarly given. 9. WAIVER OF BREACH. A waiver by the Company or the Executive of any breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other or subsequent breach by the other party. 5 10. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may be modified only by an agreement in writing signed by the parties hereto. 11. COSTS. In the event that a dispute shall arise between the parties hereto with respect to any term or provision of this Agreement or the subject matter hereof, all costs and expenses (including attorney fees) incurred by the Company or the Executive associated with such dispute shall be borne by the respective party incurring such costs and expenses; PROVIDED, HOWEVER, that if such dispute is ultimately determined in favor of Executive by a court of competent jurisdiction, then the Company shall be required to reimburse the Executive for up to an aggregate $100,000 of such costs and expenses actually incurred by the Executive in connection with such dispute. 12. APPLICABLE LAW. The terms of this Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of laws provisions) of the State of Illinois. 13. COMPLETE AGREEMENT. This Agreement supersedes all other prior agreements between the Executive and the Company concerning the Executive's employment with the Company, and none of such agreements shall be of any force or effect whatsoever; provided, however, that nothing contained herein shall be deemed to limit or otherwise affect the provisions of any noncompetition agreement or code of conduct arrangement between the Executive and the Company or the provisions of any other agreement or arrangement between the Executive and the Company that is unrelated to the subject matter of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. LANDAUER, INC. By ____________________________ James M. O'Connell, Vice President & Treasurer EXECUTIVE: ________________________________ Robert M. Greaney 6 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of November 9, 2001 between Joseph M. Zlotnicki (the "Executive") and Landauer, Inc., a Delaware corporation (the "Company"). WHEREAS, the Company is engaged primarily in the business of providing analytical services to determine personal exposure to occupational and environmental radiation hazards; WHEREAS, the Executive currently serves as the Vice President - International of the Company; WHEREAS, the Executive's abilities and services are unique and essential to the prospects of the Company; and WHEREAS, the Company and the Executive desire to enter into this Agreement to provide for the continued employment of the Executive by the Company upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereby agree as follows: 1. EMPLOYMENT; TERM. (a) EMPLOYMENT. The Company hereby employs the Executive, and the Executive hereby agrees to be employed by the Company, upon the terms and subject to the conditions contained in this Agreement. (b) TERM. The term of this Agreement (the "Term") shall commence on the date hereof and shall continue indefinitely thereafter until terminated pursuant to Section 4 hereof. As used herein, the term "Employment Period" shall mean the period commencing on the date hereof and ending on the date of termination of the term hereof or Executive's employment with the Company pursuant to Section 4 hereof. 2. POSITION; DUTIES; RESPONSIBILITIES. (a) POSITION AND DUTIES. The Company shall employ the Executive as the Vice President - International of the Company. The Executive shall faithfully and loyally perform to the best of his abilities all the duties reasonably assigned to him hereunder, shall devote such business time, attention and effort to the affairs of the Company as is reasonably necessary for the proper performance of such duties and shall use his reasonable best efforts to promote the interests of the Company. Notwithstanding the foregoing, the Executive may serve as a director, officer or paid consultant of business corporations other than the Company or civic or community organizations or entities, provided that such activities do not violate the terms of any noncompetition agreement between the Executive and the Company and such activities are approved prior to the commencement thereof by the Chairman of the Board of Directors of the Company (the "Board") or the President of the Company. (b) RESPONSIBILITIES. The Executive shall have responsibility and authority for the formulation and execution of the policies relating to the international operations of the Company and such other responsibilities and authorities as are customarily exercisable by an executive officer with oversight responsibility for international operations, subject in each case to the general supervision and direction of the Board, the Chairman of the Board or the President of the Company. 1 3. COMPENSATION. (a) BASE SALARY. During the Employment Period, the Company shall pay to the Executive an annual base salary at the rate of $ 125,000 per annum, payable in accordance with the Company's executive payroll policy. Such base salary shall be reviewed annually, commencing January 1, 2002, and may be increased (but shall not be decreased), as determined by the Company's Compensation Committee. The Executive's base salary, as increased hereunder, is referred to herein as the "Base Salary." (b) ANNUAL PERFORMANCE BONUS. In the discretion of the Company's Compensation Committee, the Executive shall be eligible to receive an annual performance bonus payable in cash for each full or partial fiscal year of the Company during the Employment Period in accordance with the Company's Incentive Compensation Plan For Executive Officers. (c) STOCK OPTIONS. In the discretion of the Company's Compensation Committee, the Executive shall be eligible to receive from time to time during the Employment Period options to purchase shares of Company common stock ("Common Stock") pursuant to the terms of the Landauer, Inc. Equity Plan. (d) SUPPLEMENTAL KEY EXECUTIVE RETIREMENT PLAN. In addition to the compensation and benefits to which the Executive is entitled hereunder, the Executive shall be entitled during the Employment Period to participate in the Company's Supplemental Key Executive Retirement Plan (the "Supplemental Retirement Plan") in accordance with its terms. (e) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive for all expenses necessarily and reasonably incurred by him during the Employment Period in connection with the business of the Company, upon presentation of proper receipts or other proof of expenditure and subject to such reasonable guidelines or limitations provided to the Executive and applied prospectively, as established by the Company. (f) PARTICIPATION IN BENEFIT PLANS. During the Employment Period, the Executive shall be entitled to participate in any profit sharing plan, retirement plan, group life insurance plan or other insurance plan or medical expense plan maintained by the Company for its senior executives generally. 4. TERMINATION. (a) DEATH. Upon the death of the Executive, this Agreement shall automatically terminate and all rights of the Executive and his heirs, executors and administrators to compensation and other benefits hereunder shall cease, except for (i) compensation which shall have accrued to the date of death, including accrued Base Salary, prorated Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding the Executive's death) and any amounts payable pursuant to the Supplemental Retirement Plan and (ii) the rights to indemnification under Section 5 hereof. 2 (b) DISABILITY. The Company may, at its option, terminate this Agreement upon written notice to the Executive if the Executive, because of physical or mental incapacity or disability, fails in any material respect to perform the services required of him hereunder for a continuous period of 180 days. Upon such termination, all obligations of the Company hereunder shall cease, except for (i) compensation which shall have accrued to the date of termination, including accrued Base Salary, prorated Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding the termination of this Agreement pursuant to this Section 4(b)) and any amounts payable pursuant to the Supplemental Retirement Plan, and (ii) the rights to indemnification under Section 5 hereof. In the event of any dispute regarding the existence of the Executive's incapacity hereunder, the matter shall be resolved by the determination of a majority of three physicians qualified to practice medicine in the state of the Executive's residence, one to be selected by each of the Executive and the Board and the third to be selected by such two designated physicians. For this purpose, the Executive shall submit to appropriate medical examinations. (c) CAUSE. (i) The Company may, at its option, terminate the Executive's employment under this Agreement for "Cause" (as hereinafter defined). A termination for Cause shall not take effect until and unless the Company complies with this Section 4(c)(i). The Executive shall be given written notice by the Company of the intention to terminate his employment hereunder for Cause (the "Cause Notice"). The Cause Notice shall state the particular action(s) or inaction(s) giving rise to termination for Cause. (ii) As used in this Agreement, the term "Cause" shall mean any one or more of the following, in any case as determined to have occurred by not less than two-thirds of the directors then serving on the Board: (A) the Executive's refusal to perform specific directives of the Board which are consistent with the scope and nature of the Executive's duties and responsibilities as set forth herein or a material violation by Executive of the policies, procedures or rules of the Company; (B) the Executive's commission or conviction of a felony or of any act involving fraud, embezzlement, theft or misrepresentation; (C) any gross or willful misconduct of the Executive resulting in substantial loss to the Company or substantial damage to the Company's business or reputation; or (D) any breach by the Executive of any noncompetition agreement between the Executive and the Company. (iii) The exercise of the right of the Company to terminate this Agreement pursuant to this Section 4(c) shall not abrogate the rights or remedies of the Company in respect of the breach giving rise to such termination. (iv) If the Company terminates the Executive's employment for Cause, he shall be entitled to: (A) accrued Base Salary through the date of the termination of his employment; (B) any amounts owing but not yet paid pursuant to Section 3(e); and 3 (C) other or additional benefits to the extent required by any applicable plans and programs of the Company. (v) Notwithstanding anything to the contrary contained in this Agreement, if, following a termination of the Executive's employment for Cause, a court of competent jurisdiction, in a final determination, determines that the Executive was not guilty of the conduct that formed the basis for the termination, the Executive shall be entitled to the payments and the economic equivalent of the benefits he would have received had his employment been terminated by the Company without Cause. (d) TERMINATION WITHOUT CAUSE. If, during the Employment Period, the Company terminates the employment of the Executive hereunder for any reason other than a reason set forth in Section 4(a), 4(b) or 4(c): (i) concurrent with such termination, the Company shall pay to the Executive an amount equal to his Base Salary, prorated Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding such termination of employment) and any amounts payable pursuant to the Supplemental Retirement Plan, in each case accrued through the date of termination; (ii) the Company shall continue to pay the Executive his Base Salary, Bonus (based on the same percentage of Base Salary as the average annual Bonuses paid to the Executive for the three fiscal years of the Company preceding such termination of employment) and all other benefits which would otherwise be payable hereunder for a period of twelve months following such termination; PROVIDED, HOWEVER, that if, prior to the end of such twelve-month period, the Executive shall obtain employment with another employer, the amounts otherwise payable pursuant to this clause (ii) shall be reduced by the amount of compensation earned by the Executive from his new employment during such period (except that in no event shall any such reduction result in the Executive receiving an amount pursuant to this clause (ii) that would be less than the amount the Executive would have earned if his Base Salary, Bonus and other benefits had been continued for a period of six months following such termination); (iii)all of the Executive's options to purchase Common Stock shall be immediately 100% exercisable; (iv) the Executive shall be entitled to any amounts owing but not yet paid pursuant to Section 3(e); and (v) the Executive shall be entitled to his rights to indemnification under Section 5 hereof. (e) TERMINATION FOR GOOD REASON. (i) If, during the Employment Period, the Executive terminates his employment hereunder for "Good Reason" (as such term is defined in Section 4(e)(ii) hereof, he shall be entitled to all of the payments and benefits specified by Sections 4(d)(i) through 4(d)(v) hereof, inclusive. (ii) For purposes of this Agreement, "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following events: (A) a material breach of this Agreement by the Company; (B) the failure to elect or re-elect the Executive to any position that is at least substantially comparable or more favorable to the positions described in Section 2(a) hereof, removal of the Executive from any such position or any change in the Executive's responsibilities described in Section 2(b) in any respect which is materially adverse to the Executive; 4 (C) a diminution of any of the Executive's significant duties or the assignment to the Executive of any duties inconsistent with his duties or the material impairment of the Executive's ability to function in the positions described in Section 2(a) hereof, in each case only after the Company shall have had an opportunity to cure (any such cure to be effected within 30 days after appropriate written notice of the basis for Good Reason is given to the Company by the Executive); (D) a material reduction of any benefit enjoyed by the Executive or the failure to continue the Executive's participation in any incentive compensation plan, unless a plan providing a substantially similar economic opportunity is substituted or all senior executives suffer a substantially similar reduction or failure; (E) the relocation of the Executive's office to a location more than 50 miles from Glenwood, Illinois; or (F) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within 15 days after a merger, consolidation, sale of assets or similar transaction. (f) VOLUNTARY TERMINATION. If, during the Employment Period, the Executive voluntarily terminates his employment hereunder for any reason other than Good Reason, he shall be entitled to the payments specified by Sections 4(c)(iv)(A) through 4(c)(iv)(C) hereof, inclusive. 5. INDEMNIFICATION. To the fullest extent permitted by law, the Certificate of Incorporation of the Company, the By-laws of the Company or any indemnification agreement entered into between the Company and the Executive, the Executive (and his heirs, executors and administrators) shall be indemnified by the Company and its successors and assigns. The obligations of the Company pursuant to this Section 5 shall survive the termination of the Employment Period, except as otherwise provided herein. 6. INSURANCE. The Company may, at its election and for its benefit, insure the Executive against disability, accidental loss or death and the Executive shall submit to such physical examinations and supply such information as may be required in connection therewith. 7. ASSIGNMENT. The rights and benefits of the Executive hereunder shall not be assignable, whether by voluntary or involuntary assignment or transfer. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Company, and the heirs, executors and administrators of the Executive, and shall be assignable by the Company to any entity acquiring substantially all of the assets of the Company, whether by merger, consolidation, sale of assets or similar transaction. 8. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and personally delivered, sent by certified or registered mail or sent by overnight courier service as follows: if to the Executive, to his address as set forth in the records of the Company, and if to the Company, to the address of its principal executive offices, attention: President, with a copy to Larry A. Barden, Sidley Austin Brown & Wood, Bank One Plaza, Chicago, Illinois 60603, or to any other address designated by any party hereto by notice similarly given. 9. WAIVER OF BREACH. A waiver by the Company or the Executive of any breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other or subsequent breach by the other party. 10. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may be modified only by an agreement in writing signed by the parties hereto. 5 11. COSTS. In the event that a dispute shall arise between the parties hereto with respect to any term or provision of this Agreement or the subject matter hereof, all costs and expenses (including attorney fees) incurred by the Company or the Executive associated with such dispute shall be borne by the respective party incurring such costs and expenses; PROVIDED, HOWEVER, that if such dispute is ultimately determined in favor of Executive by a court of competent jurisdiction, then the Company shall be required to reimburse the Executive for up to an aggregate $100,000 of such costs and expenses actually incurred by the Executive in connection with such dispute. 12. APPLICABLE LAW. The terms of this Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of laws provisions) of the State of Illinois. 13. COMPLETE AGREEMENT. This Agreement supersedes all other prior agreements between the Executive and the Company concerning the Executive's employment with the Company, and none of such agreements shall be of any force or effect whatsoever; provided, however, that nothing contained herein shall be deemed to limit or otherwise affect the provisions of any noncompetition agreement or code of conduct arrangement between the Executive and the Company or the provisions of any other agreement or arrangement between the Executive and the Company that is unrelated to the subject matter of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. LANDAUER, INC. By ____________________________ James M. O'Connell, Vice President & Treasurer EXECUTIVE: ________________________________ Joseph M. Zlotnicki 6 EX-10.J 7 exh_10j.txt EXHIBIT 10(j) - ------------- LANDAUER, INC. EXECUTIVE SPECIAL SEVERANCE PLAN Landauer, Inc., a Delaware corporation (the "Company"), hereby adopts the Landauer, Inc. Executive Special Severance Plan, (this "Plan") for the benefit of certain employees of the Company and its subsidiaries. This Plan is intended to secure the continued services and ensure the continued dedication and objectivity of the Employees (as defined in Section 1(g)) in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1(d)) of the Company, by providing to such Employees certain protections so that such Employees need not be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control. 1. DEFINITIONS. As used in this Plan, the following terms shall have the respective meanings set forth below: (a) "Average Prior Bonus" has the meaning set forth in Section 3(a). (b) "Board" means the Board of Directors of the Company. (c) "Cause" means: (1) a material breach by an Employee of those duties and responsibilities of the Employee which do not differ in any material respect from the duties and responsibilities of the Employee during the 90- day period immediately prior to a Change in Control (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Employee's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach; (2) the commission or conviction of a felony or any act involving fraud, embezzlement, theft or misrepresentation; or (3) any gross or willful misconduct of the Employee resulting in substantial loss to the Company or substantial damage to the Company's business or reputation. (d) "Change in Control" means: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Common Stock") or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled 1 by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 1(d); provided further, that for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of 30% or more of the Outstanding Common Stock or 30% or more of the Outstanding Voting Securities by reason of an acquisition by the Company, and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Common Stock or any additional Outstanding Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control; (2) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"); excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Stock and the Outstanding Voting Securities, as the case may be, (ii) no Person (other than: the Company; any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 30% or more of the Outstanding Common Stock or the Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 30% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) the consummation of a plan of complete liquidation or dissolution of the Company. (e) "Code" means the Internal Revenue Code of 1986, as amended. 2 (f) "Company" means Landauer, Inc., a Delaware corporation. (g) "Current Bonus" has the meaning set forth in Section 3(a). (h) "Employee" means any person who is employed by the Company in an executive or officer position and who is designated by the Plan Administrator, in his or her sole discretion, as a participant in this Plan from time to time. The Plan Administrator, in his or her sole discretion, shall designate each Employee as a Benefit Level I Employee, a Benefit Level II Employee or a Benefit Level III Employee for purposes of this Plan. (i) "Good Reason" means, without an Employee's express written consent, the occurrence of any of the following events after a Change in Control: (i) a significant adverse change in the nature or scope of the Employee's authority, powers, functions, duties or responsibilities as in effect immediately prior to such Change in Control; (ii) a reduction by the Company in the Employee's rate of annual base salary or bonus opportunity as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter; (iii)a change in the Employee's primary employment location to a location that is more than 50 miles from the primary location of the Employee's employment at the time of such Change in Control; (iv) the failure of the Company to continue in effect any employee benefit plan or compensation plan in which the Employee is participating immediately prior to such Change in Control, unless the Employee is permitted to participate in other plans providing the Employee with substantially comparable benefits, or the taking of any action by the Company which would adversely affect the Employee's participation in or materially reduce the Employee's benefits under any such plan; or (v) the failure of the Company to obtain from any successor or transferee of the Company an express written and unconditional assumption of the Company's obligations under this Plan, as further described in Section 16 of this Plan. For purposes of this Plan, an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Employee shall not constitute Good Reason. (j) "Nonqualifying Termination" means the termination of an Employee's employment (i) by the Company for Cause, (ii) by the Employee for any reason other than Good Reason, (iii) as a result of the Employee's death or (iv) by the Company due to the Employee's absence from his or her duties with the Company on a full-time basis for at least 180 consecutive days as a result of the Employee's incapacity due to physical or mental illness. Notwithstanding anything contained in this Section 1(j), a termination of an Employee's employment for any reason whatsoever during the "Window Period" (hereinafter defined) shall not constitute a Nonqualifying Termination. (k) "Severance Period" means (i) with respect to a Benefit Level I Employee, the period commencing on the Termination Date and ending on the third anniversary of the Termination Date, (ii) with respect to a Benefit Level II Employee, the period commencing on the Termination Date and ending on the second anniversary of the Termination Date and (iii) with respect to a Benefit Level III Employee, the period commencing on the Termination Date and ending on the first anniversary of the Termination Date. 3 (l) "Termination Date" with respect to an Employee means the date during the Termination Period on which the Employee's employment is terminated other than by reason of a Nonqualifying Termination. (m) "Termination Period" with respect to an Employee means the period commencing upon a Change in Control and ending on the earlier to occur of (i) the date which is two years following such Change in Control and (ii) the Employee's death. (n) "Window Period" means the 30-day period commencing one year after the date of a Change in Control. 2. VESTING OF EQUITY AWARDS UPON A CHANGE IN CONTROL; EXERCISE PERIOD. Immediately upon a Change in Control, all stock options and other equity awards, if any, granted by the Company to an Employee that are not otherwise exercisable or vested shall become exercisable, or become vested, in full. With respect to any and all stock options granted by the Company to an Employee, each such option shall remain exercisable following the Employee's termination of employment until and including the earlier to occur of (i) the date which is one year after the Employee's termination of employment and (ii) the expiration date of the term of the option (as set forth in the written agreement relating to such option). 3. PAYMENTS AND BENEFITS UPON TERMINATION OF EMPLOYMENT. If during the Termination Period the employment of an Employee shall terminate, other than by reason of a Nonqualifying Termination, and the Employee (or the Employee's executor or other legal representative in the case of the Employee's death or disability following such termination) executes a general release and noncompetition, nonsolicitation, intellectual property and confidentiality agreement substantially in the form of Exhibit A hereto (the "Release and Noncompetition Agreement") within 60 days following the Termination Date and has not revoked the Release and Noncompetition Agreement, the Company shall provide to the Employee, as compensation for services rendered to the Company, and in consideration of the general release set forth in Section 2 of the Release and Noncompetition Agreement and the covenants set forth in Sections 3, 4 and 5 of the Release and Noncompetition Agreement, the benefits described in this Section 3. (a) The Company shall pay to the Employee (or the Employee's beneficiary or estate, as the case may be), within 30 days following the date of execution of the Release and Noncompetition Agreement, except with respect to any payment of the Current Bonus, which shall be paid to the Employee at such time as annual bonuses are paid to other employees of the Company who are eligible to receive an annual bonus: (1) a cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 6) equal to the sum of (i) the Employee's full annual base salary from the Company and its affiliated companies through the Termination Date, to the extent not theretofore paid, (ii) notwithstanding anything to the contrary contained in the Company's annual bonus plan in effect at the time of the Employee's termination of employment, an annual bonus equal to (A) the Current Bonus (as defined below) if such termination of employment occurs in the same fiscal year of the Company as the fiscal year in which the Change in Control occurs, or (B) the Average Prior Bonus (as defined below) if such termination of employment occurs in a fiscal year of the Company that is subsequent to the fiscal year in which the Change in Control occurs, in either case multiplied by a fraction, the numerator of which is the number of days in the fiscal year in which the Employee's termination of employment occurs through the Termination Date and the denominator of which is 365 or 366, as applicable, and (iii) any compensation previously deferred by the Employee (together with any interest and earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid; plus 4 (2) a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 6) in an amount equal to: (i) with respect to a Benefit Level I Employee, the sum of (A) three times the Employee's highest annual base salary from the Company and its affiliated companies in effect during the 12-month period prior to the Termination Date and (B) three times the greater of (1) the Employee's target annual bonus in effect immediately prior to the Change in Control or immediately prior to the Termination Date, whichever is higher, and (2) an annual bonus equal to the Average Prior Bonus; (ii) with respect to a Benefit Level II Employee, the sum of (A) two times the Employee's highest annual base salary from the Company and its affiliated companies in effect during the 12-month period prior to the Termination Date and (B) two times the greater of (1) the Employee's target annual bonus in effect immediately prior to the Change in Control or immediately prior to the Termination Date, whichever is higher, and (2) an annual bonus equal to the Average Prior Bonus; and (iii) with respect to a Benefit level III Employee, the sum of (A) one times the Employee's highest annual base salary from the Company and its affiliated companies in effect during the 12-month period prior to the Termination Date and (B) one times the greater of (1) the Employee's target annual bonus in effect immediately prior to the Change in Control or immediately prior to the Termination Date, whichever is higher and (2) an annual bonus equal to the Average Prior Bonus. For purposes of this Plan, (i) the term "Current Bonus" shall mean an annual bonus for the fiscal year in which the Change in Control occurs in an amount equal to the greater of (A) the Employee's target annual bonus for such year and (B) the annual bonus payable under the terms of the annual bonus plan in effect immediately prior to the Change in Control based upon the Company's actual performance for such fiscal year; and (ii) the term "Average Prior Bonus" shall mean the bonus determined by multiplying (A) the average of the percentages of annual base salary representing the Employee's annual bonus for each of the three fiscal years immediately preceding the fiscal year in which the Termination Date occurs by (B) the Employee's highest annual base salary from the Company and its affiliated companies in effect during the 12-month period prior to the Termination Date. (b) The Employee shall become fully (100%) vested in his accrued benefit under the Company's Supplemental Key Executive Retirement Plan (as amended and restated effective October 1, 2001) or successor supplemental executive retirement plan in effect (the "SERP"), and within 10 days following the Employee's Termination Date, the Company shall pay to the Employee a lump sum cash amount equal to the actuarial equivalent of his accrued benefit under the SERP, determined as of the Employee's Termination Date, notwithstanding anything contained in the SERP to the contrary. Such lump sum cash payment shall be computed using the same actuarial assumptions then in use for purposes of computing benefits under the SERP, provided that the interest rate used in making such computations shall not be greater than the interest rate permitted under Section 417(c) of the Code on the date of the Change in Control. 5 (c) For the period commencing on the Termination Date and ending on the earlier of (i) the expiration of the Employee's Severance Period and (ii) the date on which the Employee becomes eligible to participate in and receive medical, dental and life insurance benefits under a plan or arrangement sponsored by another employer having benefits substantially equivalent to the benefits provided pursuant to this Section 3(c), the Company shall continue the Employee's medical, dental and life insurance coverage upon the same terms and otherwise to the same extent as such coverage shall have been in effect immediately prior to the Change in Control or, if more favorable to the Employee, to the same extent as such coverage shall have been in effect immediately prior to the Employee's Termination Date, and the Company and the Employee shall share the costs of the continuation of such medical, dental and life insurance coverage in the same proportion as such costs were shared immediately prior to the Change in Control or, if more favorable to the Employee, immediately prior to the Employee's Termination Date. (d) During the Employee's Severance Period, the Employee shall be entitled to outplacement services to be provided by a firm selected by the Company. The maximum payments to be made by the Company during the Severance Period for outplacement services with respect to a Benefit Level I Employee shall be $30,000, with respect to a Benefit Level II Employee shall be $25,000 and with respect to a Benefit Level III Employee shall be $15,000. Payments shall be made directly to the outplacement firm upon submission of proper documentation to the Company. If an Employee elects not to use such outplacement services, the Employee will not be entitled to any cash payment in lieu thereof. 4. CERTAIN ADDITIONAL PAYMENTS; REDUCTION OF PAYMENTS. (a) Anything in this Plan to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company or its affiliated companies to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this Section 4) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest and penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 4(a), if it shall be determined that the Employee is entitled to a Gross-Up Payment, but that the Employee, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit (taking into account both income taxes and any Excise Tax) which is at least ten percent (10%) greater than the net after-tax proceeds to the Employee resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") that is one dollar less than the smallest amount that would give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Employee and the Payments, in the aggregate, shall be reduced to the Reduced Amount. 6 (b) Subject to the provisions of Section 4(c), all determinations required to be made under this Section 4, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's public accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee within fifteen (15) business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Employee shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 4, shall be paid by the Company to the Employee within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on the Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 4(c) and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii)cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; 7 PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; PROVIDED FURTHER, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and PROVIDED FURTHER, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 4(c), the Employee becomes entitled to receive, and receives, any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 4(c) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 4(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 5. PLAN ADMINISTRATION; CLAIMS PROCEDURE. (a) This Plan shall be interpreted and administered by the person or persons appointed by the Board from time to time to administer this Plan (the "Plan Administrator"), who shall have complete authority, in his or her sole discretion subject to the express provisions of this Plan, to make all determinations necessary or advisable for the administration of this Plan. All questions arising in connection with the interpretation of this Plan or its administration shall be submitted to and determined by the Plan Administrator in a fair and equitable manner. 8 (b) The Plan Administrator may from time to time delegate any of his or her duties hereunder to such person or persons as the Plan Administrator may designate. The Plan Administrator is empowered, on behalf of this Plan, to engage accountants, legal counsel and such other persons as the Plan Administrator deems necessary or advisable for the performance of his or her duties under this Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under this Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the administration of this Plan. All reasonable fees and expenses of such persons shall be borne by the Company. 6. WITHHOLDING TAXES. The Company may withhold from all payments due under this Plan to each Employee (or his or her beneficiary or estate) all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. 7. AMENDMENT AND TERMINATION. The Company shall have the right, in its sole discretion, pursuant to action by the Board, to approve the amendment or termination of this Plan, which amendment or termination shall not become effective until the date fixed by the Board for such amendment or termination, which date, in the case of an amendment which would be adverse to the interests of any Employee or in the case of termination, shall be at least 120 days after notice thereof is given by the Company to the Employees in accordance with Section 18 hereof; PROVIDED, HOWEVER, that no such action shall be taken by the Board during any period when the Board has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the opinion of the Board, such person has abandoned or terminated its efforts to effect a Change in Control; and PROVIDED FURTHER, that on and after a Change in Control, in no event shall this Plan be amended in a manner adverse to the interests of any Employee or terminated. 8. REIMBURSEMENT OF EXPENSES; INTEREST ON LATE PAYMENTS. (a) If any contest or dispute shall arise under this Plan involving termination of the Employee's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse the Employee, on a current basis, for all legal fees and expenses, if any, incurred by the Employee in connection with such contest or dispute, together with interest thereon at a rate equal to the prime rate, as published under "Money Rates" in THE WALL STREET JOURNAL from time to time, plus 300 basis points, but in no event higher than the maximum legal rate permissible under applicable law (the "Interest Rate"), such interest to accrue from the date the Company receives the Employee's written statement for such fees and expenses through the date of payment thereof; PROVIDED, HOWEVER, that in the event the resolution of any such contest or dispute includes a finding denying, in total, the Employee's claims in such contest or dispute, the Employee shall be required to reimburse the Company, over a period of 12 months from the date of such resolution, for all sums advanced to the Employee pursuant to this Section 8(a). (b) With respect to any and all payments that are required to be made by the Company to an Employee pursuant to this Plan and that are not made within the time period specified herein, the Company shall pay to the Employee interest on such payments at the Interest Rate. Such interest shall accrue from the due date of the required payment through the date on which such payment is made to the Employee. 9 9. ENTIRE AGREEMENT. Subject to Section 10(a) hereof, any amount paid pursuant to this Plan shall be paid in lieu of any other amount of severance relating to salary or bonus continuation, any other continuation of medical, dental or life insurance coverage (other than coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985) or any other outplacement services to be received by the Employee upon termination of employment of the Employee under any severance plan, policy or arrangement of the Company. Subject to the foregoing, the rights of, and benefits payable to, an Employee pursuant to this Plan are in addition to any rights of, or benefits payable to, an Employee under any other employee benefit plan or compensation program of the Company. All rights of an Employee under any such plan or program shall be determined in accordance with the provisions of such plan or program. 10. OFFSET; MITIGATION. (a) If the Company is obligated by law or contract to pay severance pay, notice pay or other similar benefits, or if the Company is obligated by law or by contract to provide advance notice of separation ("Notice Period"), then any payments hereunder shall be reduced by the amount of any such severance pay, notice pay or other similar benefits, as applicable, and by the amount of any severance pay, notice pay or other similar benefits received during any Notice Period. (b) In no event shall an Employee be obligated to seek other employment or to take other action by way of mitigation of the amounts payable and the benefits provided to such Employee under any of the provisions of this Plan, and such amounts and benefits shall not be reduced whether or not such Employee obtains other employment, except as otherwise provided in Section 3(c) hereof. 11. UNFUNDED PLAN. This Plan shall not be funded. No Employee entitled to benefits hereunder shall have any right to, or interest in, any specific assets of the Company, but an Employee shall have only the rights of a general creditor of the Company to receive benefits on the terms and subject to the conditions provided in this Plan. 12. PAYMENTS TO MINORS, INCOMPETENTS AND BENEFICIARIES. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of giving a receipt therefor shall be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Company, the Plan Administrator and all other parties with respect thereto. If an Employee shall die while any amounts would be payable to the Employee under this Plan had the Employee continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to such person or persons appointed in writing by the Employee to receive such amounts or, if no person is so appointed, to the estate of the Employee. 13. NON-ASSIGNABILITY. None of the payments, benefits or rights of any Employee shall be subject to any claim of any creditor, and, in particular, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment, trustee's process or any other legal or equitable process available to any creditor of such Employee. Except as otherwise provided herein or by law, no right or interest of any Employee under this Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment or pledge; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Employee under this Plan shall be subject to any obligation or liability of such Employee. 10 14. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither the adoption of this Plan, nor any amendment hereof, nor the creation of any fund, trust or account, nor the payment of any benefits, shall be construed as giving any Employee the right to be retained in the service of the Company, and all Employees shall remain subject to discharge to the same extent as if this Plan had not been adopted. 15. ARBITRATION. Except as otherwise provided in Section 6 of the Release and Noncompetition Agreement, any dispute or controversy between the Company and the Employee, whether arising out of or relating to this Plan, the breach of the provisions of this Plan, or otherwise, shall be settled by arbitration in Chicago, Illinois administered by the American Arbitration Association, with any such dispute or controversy arising under this Plan being so administered in accordance with its Commercial Rules then in effect, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, either party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company and the Employee. The Company and the Employee acknowledge that this Plan evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Plan, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. 16. SUCCESSORS; BINDING AGREEMENT. This Plan shall inure to the benefit of and be binding upon the beneficiaries, heirs, executors, administrators, successors and assigns of the parties, including each Employee, present and future, and any successor to the Company or one of its subsidiaries. This Plan shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Plan shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred. The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in this Section 16, it will cause any surviving or resulting corporation or transferee unconditionally to assume all of the obligations of the Company hereunder. 17. HEADINGS. The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Plan and shall not be employed in the construction of this Plan. 18. NOTICES. Any notice or other communication required or permitted pursuant to the terms hereof shall have been duly given when delivered or mailed by United States mail, first class, postage prepaid, addressed to the intended recipient at his, her or its last known address. 19. EFFECTIVE DATE. This Plan shall be effective as of the date hereof and shall remain in effect unless and until terminated by the Board pursuant to Section 7 hereof. 11 20. EMPLOYMENT WITH SUBSIDIARIES. For purposes of this Plan, employment with the Company shall include employment with any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors. 21. GOVERNING LAW; VALIDITY. This Plan shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Illinois (without regard to principles of conflicts of laws) to the extent not preempted by Federal law, which shall otherwise control. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Plan shall be construed and enforced as if such provision had not been included. IN WITNESS WHEREOF, the Company has caused this Plan to be adopted as of the 22nd day of May, 2002. LANDAUER, INC. By: /s/ Brent A. Latta ------------------------------ Brent A. Latta, President 12 EXHIBIT A LANDAUER, INC. EXECUTIVE SPECIAL SEVERANCE PLAN GENERAL RELEASE AND NONCOMPETITION, NONSOLICITATION, INTELLECTUAL PROPERTY AND CONFIDENTIALITY AGREEMENT This General Release and Noncompetition, Nonsolicitation, Intellectual Property and Confidentiality Agreement (this "Release and Noncompetition Agreement") is executed by _________ (the "Employee") pursuant to the Landauer, Inc. Executive Special Severance Plan (the "Plan"). WHEREAS, the Employee's employment with Landauer, Inc. and its subsidiaries (the "Company") is terminating; WHEREAS, the Employee has had [21][45] days to consider the form of this Release and Noncompetition Agreement; WHEREAS, the Company advised the Employee in writing to consult with an attorney before signing this Release and Noncompetition Agreement; WHEREAS, the Employee acknowledges that the benefits to be provided to the Employee under the Plan are in consideration of, and are sufficient to support, the general release set forth in Section 2 of this Release and Noncompetition Agreement and the covenants set forth in Sections 3, 4 and 5 of this Release and Noncompetition Agreement; and WHEREAS, the Employee understands that the Company regards the representations and covenants by the Employee in this Release and Noncompetition Agreement as material and that the Company is relying on such representations and covenants in paying amounts to the Employee pursuant to the Plan. THE EMPLOYEE THEREFORE AGREES AS FOLLOWS: 1. TERMINATION BENEFITS. The Employee's employment with the Company shall terminate on ________, and the Employee shall receive the termination benefits set forth in the Plan in accordance with the terms and subject to the conditions thereof. 2. GENERAL RELEASE. (a) The Employee, on behalf of the Employee and anyone claiming through the Employee, hereby agrees not to sue the Company or any division, subsidiary, affiliate or other related entity of the Company (whether or not such entity is wholly owned) or any of the past, present or future directors, officers, administrators, trustees, fiduciaries, employees, agents, attorneys or shareholders of the Company or any of such other entities, or the predecessors, successors or assigns of any of them (hereinafter referred to as the "Released Parties"), and agrees to release and discharge, fully, finally and forever, the Released Parties from any and all claims, causes of action, lawsuits, liabilities, debts, accounts, covenants, contracts, controversies, agreements, promises, sums of money, damages, judgments and demands of any nature whatsoever, in law or in equity, both known and unknown, asserted or not asserted, foreseen or unforeseen, which the Employee ever had or may presently have against any of the Released Parties arising from the beginning of time up to and including the effective date of this Release and Noncompetition Agreement, including, without limitation, all matters in any way related to the Employee's employment by the Company or any of its affiliates, the terms and conditions thereof, any failure to promote the Employee and the termination or cessation of the Employee's employment with the Company or any of its affiliates, and including, without limitation, any and all claims arising under the Civil Rights Act of 1964, the Civil Rights Act of A-1 1991, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Older Workers' Benefit Protection Act, the Family and Medical Leave Act, the Americans With Disabilities Act, the Employee Retirement Income Security Act of 1974, the Illinois Human Rights Act, or the Chicago or Cook County Human Rights Ordinance, each as may be amended from time to time, or any other federal, state, local or foreign statute, regulation, ordinance or order, or pursuant to any common law doctrine; PROVIDED, HOWEVER, that nothing contained in this Release and Noncompetition Agreement shall apply to, or release the Company from, any obligation of the Company contained in the Plan. The consideration offered in the Plan is accepted by the Employee as being in full accord, satisfaction, compromise and settlement of any and all claims or potential claims, and the Employee expressly agrees that the Employee is not entitled to, and shall not receive, any further recovery of any kind from the Company or any of the other Released Parties, and that in the event of any further proceedings whatsoever based upon any matter released herein, neither the Company nor any of the other Released Parties shall have any further monetary or other obligation of any kind to the Employee, including any obligation for any costs, expenses or attorneys' fees incurred by or on behalf of the Employee. The Employee agrees that the Employee has no present or future right to employment with the Company or any of the other Released Parties. (b) The Employee expressly represents and warrants that the Employee is the sole owner of the actual and alleged claims, demands, rights, causes of action and other matters that are released herein; that the same have not been transferred or assigned or caused to be transferred or assigned to any other person, firm, corporation or other legal entity; and that the Employee has the full right and power to grant, execute and deliver the general release, undertakings and agreements contained herein. 3. NONCOMPETITION; NONSOLICITATION. (a) GENERAL. The Employee acknowledges that in the course of the Employee's employment with the Company the Employee has become familiar with trade secrets and other confidential information concerning the Company and that the Employee's services were of special, unique and extraordinary value to the Company. (b) NONCOMPETITION; NONSOLICITATION. The Employee agrees that, during the eighteen month period following the Employee's termination of employment with the Company, the Employee shall not directly or indirectly, except as a passive investor beneficially owning not more than two percent of the voting securities of any publicly held company, engage in, or own or control any interest in, or act as director, officer, employee, agent, proprietor or otherwise of, or consult to, any firm or corporation directly or indirectly engaged, as these terms may be reasonable construed, (i) in a business substantially similar to that of the Company or (ii) in competition with the Company. During the foregoing period, the Employee further agrees that the Employee shall not directly or indirectly induce or attempt to induce any of the employees of the Company to terminate such employment. (c) REFORMATION. If, at any time of enforcement of this Section 3 a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the Employee agrees that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. This Agreement shall not authorize a court to increase or broaden any of the restrictions in this Section 3. A-2 4. INTELLECTUAL PROPERTY. The Employee agrees that all research and other information, discoveries, inventions, improvements, formulas, designs, trademarks, products, plans or writings originated, conceived, discovered, made or first reduced to practice by the Employee, either solely or jointly with others during and within the scope of the Employee's employment by the Company, or on the premises, or using the facilities of the Company, whether or not at the request or suggestion or in accordance with the plans of the Company, shall be the sole property of the Company, or its designees, successors or assigns. The Employee shall maintain records thereof in the form and manner prescribed by the Company, and upon request, the Employee will disclose the same to the Company in such form and manner as the Company may provide, and the Employee will execute and deliver to the Company, or its designees, successors or assigns, such written applications, diagrams, plans, assignments, deeds or other assigns, such written applications, diagrams, plans, assignments, deeds or other documents, and do such other acts as may be necessary or appropriate to patent, register, copyright, obtain, perfect, or explain any such research and other information, discoveries, inventions, improvements, formulas, designs, trademarks, products, products, plans or writings, and to perfect the title of the Company, or its assignees, successors or assigns thereto, provided that the Company or its assignees, successors or assigns shall compensate the Employee in such a manner that the Employee will suffer no out-of-pocket expense while so doing. 5. CONFIDENTIALITY. The Employee agrees that the Employee shall not divulge, communicate, or utilize for the benefit of the Employee or any other party or person, any secret or confidential information which the Employee has acquired or may acquire during the Employee's employment by the Company, whether technical or nontechnical, pertaining to the business or affairs of the Company, or of any of its clients, customers, consultants or collaborators, except to such extent as may be necessary in the ordinary course of performing the Employee's particular assigned duties as an employee of the Company. In this connection the Employee has been informed and recognizes that a part of the Company's business connection may relate to research and development of products and processes, some of which may be based on scientific or technological concepts which are themselves recent developments, and to the development of such concepts, any or all of which may include or constitute technical or nontechnical information which the Company has the right to protect by holding it secret or confidential, and that in the Employee's said employment the Employee may be given access to or required to use or develop such proprietary information and/or trade secrets. Upon termination of the Employee's said employment the Employee will promptly deliver to the Company all drawings, blueprints, manuals, letters, notes, notebooks, reports, records, writing and all other materials, originated, conceived, discovered, made or otherwise provided by the Employee or others, pertaining to the business or affairs of the Company which are in the Employee's possession or under the Employee's control, whether or not then on the premises of the Company. 6. ENFORCEMENT. The Employee acknowledges that the Company would be damaged irreparably in the event that any provision of Section 3, 4 or 5 of this Release and Noncompetition Agreement were not performed in accordance with its terms or were otherwise breached and that money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Employee agrees that the Company and its successors and permitted assigns shall be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). The Employee agrees that the Employee will submit to the personal jurisdiction of the courts of the State of Illinois in any action by the Company to obtain injunctive or other relief contemplated by this Section 6. A-3 7. ACKNOWLEDGMENT BY EMPLOYEE. BY EXECUTING THIS RELEASE AND NONCOMPETITION AGREEMENT, THE EMPLOYEE EXPRESSLY ACKNOWLEDGES THAT THE EMPLOYEE HAS READ THIS RELEASE AND NONCOMPETITION AGREEMENT CAREFULLY, THAT THE EMPLOYEE FULLY UNDERSTANDS ITS TERMS AND CONDITIONS, THAT THE EMPLOYEE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE AND NONCOMPETITION AGREEMENT, THAT THE EMPLOYEE HAS BEEN ADVISED THAT THE EMPLOYEE HAS 21 DAYS WITHIN WHICH TO DECIDE WHETHER OR NOT TO EXECUTE THIS RELEASE AND NONCOMPETITION AGREEMENT AND THAT THE EMPLOYEE INTENDS TO BE LEGALLY BOUND BY IT. DURING A PERIOD OF SEVEN DAYS FOLLOWING THE DATE OF THE EMPLOYEE'S EXECUTION OF THIS RELEASE AND NONCOMPETITION AGREEMENT, THE EMPLOYEE SHALL HAVE THE RIGHT TO REVOKE THE RELEASE OF CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT BY SERVING WITHIN SUCH PERIOD WRITTEN NOTICE OF REVOCATION. 8. ENTIRE AGREEMENT. The Plan and this Release and Noncompetition Agreement constitute the entire understanding between the parties. The Employee has not relied on any oral statements that are not included in the Plan or this Release and Noncompetition Agreement. 9. SEVERABILITY. If any provision of this Release and Noncompetition Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Release and Noncompetition Agreement shall be construed and enforced as if such provision had not been included. 10. GOVERNING LAW. This Release and Noncompetition Agreement shall be construed, interpreted and applied in accordance with the internal laws of the State of Illinois without regard to the principles of conflicts of laws. Date: __________________________________________________________________ [NAME] A-4 EX-99.1 8 exh_991.txt EXHIBIT 99.1 - ------------ CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Landauer, Inc. (the "Company") on Form 10-K for the year ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Brent A. Latta, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Brent A. Latta ------------------------------ Brent A. Latta Chief Executive Officer December 30, 2002 EX-99.2 9 exh_992.txt EXHIBIT 99.2 - ------------ CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Landauer, Inc. (the "Company") on Form 10-K for the year ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James M. O'Connell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ James M. O'Connell ------------------------------ James M. O'Connell Chief Financial Officer December 30, 2002 -----END PRIVACY-ENHANCED MESSAGE-----