SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
BIO-REFERENCE LABORATORIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(i)
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4) Proposed maximum aggregate value of transaction:
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5) Set forth the amount on which the filing fee is calculated and state
how it was determined.
N/A
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[_] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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PRELIMINARY COPY
BIO-REFERENCE LABORATORIES, INC.
481 EDWARD H. ROSS DRIVE
ELMWOOD PARK, NEW JERSEY 07407
201-791-2600
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------
JULY 31, 2003
----------
The annual meeting of the stockholders of Bio-Reference Laboratories,
Inc. (the "Company") will be held at the Sheraton Crossroads Hotel, Crossroads
Corporate Center, Route 17 North, Mahwah, New Jersey 07495-0001, on Thursday,
July 31, 2003 at 9:00 A.M. local time, for the purpose of considering and acting
on the following matters:
1. Election of two directors to the Company's Board of Directors,
each to serve for a term of three years and until his successor is
duly elected and qualified (Proposal One).
2. Amendment of the Company's Certificate of Incorporation, as
amended, to increase the number of authorized shares of Common
Stock, $.01 par value, from 18,333,333 shares to 35,000,000 shares
(Proposal Two).
3. Ratification of Adoption of the 2003 Employee Incentive Stock
Option Plan (Proposal Three).
4. Such other business as may properly be brought before the meeting
or any adjournment thereof.
Pursuant to the provisions of the By-Laws, the Board of Directors has
fixed the close of business on Tuesday, June 17, 2003 as the record date for
determining the stockholders of the Company entitled to notice of, and to vote
at the meeting or any adjournment thereof.
Stockholders who do not expect to be present in person at the meeting are
urged to date and sign the enclosed proxy and promptly mail it in the
accompanying postage-paid envelope.
By Order of the Board of Directors
Marc D. Grodman
President
Dated: June 18, 2003
PLEASE COMPLETE AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE MEETING BUT WILL,
HOWEVER, HELP TO ASSURE A QUORUM AND AVOID ADDED PROXY SOLICITATION COSTS.
PRELIMINARY COPY
BIO-REFERENCE LABORATORIES, INC.
481 EDWARD H. ROSS DRIVE
ELMWOOD PARK, NEW JERSEY 07407
201-791-2600
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PROXY STATEMENT
----------
ANNUAL MEETING OF STOCKHOLDERS
JULY 31, 2003
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This Proxy Statement of Bio-Reference Laboratories, Inc., a New Jersey
corporation (the "Company") is first being mailed to Stockholders on or about
June 20, 2003 in connection with the solicitation of proxies by the Company's
Board of Directors to be used at the Annual Meeting of Stockholders of the
Company to be held on Thursday, July 31, 2003 at 9:00 A.M. (local time) at the
Sheraton Crossroads Hotel, Crossroads Corporate Center, Route 17 North, Mahwah,
New Jersey 07495-0001. Accompanying this Proxy Statement is a Notice of Annual
Meeting of Stockholders, a form of Proxy, a copy of the Company's 2002 Annual
Report and a copy of the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 2003 as filed with the Securities and Exchange Commission, each
containing financial statements and related data.
All proxies which are properly filled in, signed and returned to the
Company prior to or at the Meeting will be voted in accordance with the
instructions thereon. A proxy may be revoked by any stockholder giving the same
prior to the exercise thereof by (a) written notice addressed to the Company's
Chief Information Officer and delivered to the Company's principal offices prior
to the commencement of the Meeting, (b) providing a signed proxy bearing a later
date, or (c) appearing in person and voting at the Meeting. The Company intends
to vote executed but unmarked proxies in favor of Proposals One, Two and Three.
Broker non-votes will be counted for purposes of determining a quorum but
otherwise will be considered not represented with regard to voting on any matter
with respect to which there is a broker non-vote. The Board has fixed the close
of business on Tuesday, June 17, 2003 as the record date for the determination
of stockholders who are entitled to notice of, and to vote at the meeting or any
adjournment thereof.
The expenses of preparing, assembling, printing and mailing the form of
proxy and the material used in solicitation of proxies will be borne by the
Company. In addition to the solicitation of proxies by use of the mails, the
Company may utilize the services of some of its officers and regular employees
(who will receive no additional compensation therefore) to solicit proxies
personally, and by telephone. The Company has requested banks, brokers and other
custodians, nominees and fiduciaries to forward copies of the proxy material to
their principals and to request authority for the execution of proxies and will
reimburse such persons for their services in doing so. The cost of such
additional solicitation incurred otherwise than by use of the mails is estimated
not to exceed $10,000.
At the record date, the Company had 11,429,783 shares of its Common
Stock, $.01 par value (the "Common Stock") and 604,078 shares of its Series A
Senior Preferred Stock ("Series
1
A Preferred Stock") outstanding, the holders of which are each entitled to one
vote per share. The presence in person or by proxy of at least a majority of the
outstanding Common Stock and Series A Preferred Stock voting together as one
class is necessary to constitute a quorum at the meeting. Election of directors
(Proposal One), and ratification of the adoption of the 2003 Employee Incentive
Stock Option Plan (Proposal Three) each requires the affirmative vote of a
majority of the votes cast on the Proposal by the holders of Common Stock and
Series A Preferred Stock voting together as one class present in person or by
proxy at the meeting. Approval of the amendment to the Company's Certificate of
Incorporation, as amended (Proposal Two) requires the affirmative vote of a
majority of the outstanding shares of Common Stock and Series A Preferred Stock
voting together as one class.
The following table sets forth information as of June 17, 2003 with
respect to the ownership of Common Stock by (i) each person known by the Company
to be the beneficial owner of more than 5% of its outstanding Common Stock, (ii)
each director of the Company, (iii) each executive officer of the Company, and
(iv) all directors and executive officers as a group. The percentages have been
calculated on the basis of treating as outstanding for a particular holder, all
shares of Common Stock outstanding on said date owned by such holder and all
shares of Common Stock issuable to such holder in the event of exercise or
conversion of outstanding options, warrants and convertible securities including
Series A Preferred Stock owned by such holder at said date which are exercisable
or convertible within 60 days of such date.
Name and Address of Shares of Common Stock Percentage
Beneficial Owner Beneficially Owned(1) Ownership
---------------- ------------------ ---------
Directors and
Executive Officers*
Marc D. Grodman(2) 1,675,245 14%
Morton L. Topfer(3) 1,527,200 13%
Howard Dubinett(4) 481,001 4%
Sam Singer(5) 347,667 3%
Gary Lederman(6) 37,200 -
John Roglieri(7) 68,667 1%
Executive Officers 4,136,980 34%
and Directors as a group
(six persons)(2)(3)(4)(5)(6)(7)
- ----------
* The address of all of the Company's directors and executive officers is c/o
the Company, 481 Edward H. Ross Drive, Elmwood Park, New Jersey 07407.
(1) Except as otherwise noted, each holder named in the table has sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned.
(2) Includes 885,500 shares owned directly, 549,678 shares issuable upon
conversion of Series A Preferred Stock and 4,000 shares issuable upon
exercise of options. Also includes 141,667 shares owned directly and 54,400
shares issuable upon conversion of Series A Preferred Stock owned by Dr.
Grodman's wife, Pam Grodman, and 40,000 shares owned by their minor
children. Dr. Grodman disclaims beneficial ownership of these 236,067
shares.
2
(3) Includes an aggregate 1,615,200 shares owned individually or by CastleTop
Capital Management, LP of which Morton L. Topfer is the Managing Director;
and 12,000 shares issuable upon exercise of options.
(4) Includes 263,667 shares owned directly, and 217,334 shares issuable upon
exercise of options.
(5) Includes 337,667 shares owned directly, 4,000 shares issuable upon exercise
of options and 6,000 shares owned by children who share Mr. Singer's
household. Mr. Singer disclaims beneficial ownership of these 6,000 shares.
(6) Includes 25,200 shares owned directly and 12,000 shares issuable upon
exercise of options.
(7) Includes 56,667 shares owned directly and 12,000 shares issuable upon
exercise of options.
The Company's executive officers and directors and members of their
immediate families owning and having the right to vote an aggregate 3,875,646
shares (32%) of the Company's outstanding Common Stock and Series A Preferred
Stock on a combined basis have stated their intention to vote their shares FOR
the nominees for election as directors (Proposal One); FOR the amendment to the
Company's Certificate of Incorporation, as amended (Proposal Two) and FOR
ratification of the adoption of the 2003 Employee Incentive Stock Option Plan
(Proposal Three).
ACTION TO BE TAKEN AT THE MEETING
ELECTION OF DIRECTORS
(PROPOSAL ONE)
The number of directors on the Company's Board of Directors is currently
fixed at six. The Company's Certificate of Incorporation divides the Board of
Directors into three classes. The members of each class of directors serve for
staggered three-year terms. The Board is comprised of two Class I directors (Mr.
Dubinett and Dr. Grodman), two Class II directors (Mr. Singer and Mr. Topfer)
and two Class III directors (Mr. Lederman and Dr. Roglieri), whose terms expire
upon the election and qualification of their successors at successive Annual
Meetings to be held in 2003, 2004 and 2005 respectively. At each Annual Meeting
of Stockholders, two directors comprising one class are elected for a full term
of three years.
Mr. Lederman and Dr. Roglieri (current Class III directors) are being
proposed for re-election at this Annual Meeting of Stockholders, each to serve
for a three-year term and until his successor is elected and qualifies. The
shares represented by proxies will be voted in favor of the election as
directors of Mr. Lederman and Dr. Roglieri who are the nominees of the Board of
Directors for election, and authority to vote for their election as Class III
directors shall be deemed granted unless specifically withheld. Management has
no reason to believe that either or both of such nominees for the office of
director will not be available for election as a director. However, should
either or both of them become unwilling or unable to accept nomination for
election, it is intended that the individuals named in the enclosed proxy may
vote for the election of such other person or persons as Management may
recommend. The Company does not have a
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Nominating Committee. During the twelve month period ended October 31, 2002, the
Company's Board of Directors held a total of four meetings.
The following table sets forth certain information with respect to each
of the directors and executive officers of the Company.
NAME AGE POSITION
Marc D. Grodman, M.D. 51 Chairman of the Board, President,
Chief Executive Officer and Director
Morton L. Topfer (a)(d) 66 Vice Chairman of the Board and Director
Howard Dubinett 51 Executive Vice President, Chief Operating
Officer and Director
Sam Singer 59 Vice President, Chief Financial Officer,
Chief Accounting Officer and Director
Gary Lederman, Esq. (b)(c) 69 Director
John Roglieri, M.D. (a)(c) 63 Director
- ----------
(a) Member of the Audit Committee
(b) Chairman of the Audit Committee
(c) Member of the Compensation Committee
(d) Chairman of the Compensation Committee
The Audit Committee is comprised of three non-employee members of the
Board of Directors, Gary Lederman (Chairman), John Roglieri and Morton L.
Topfer. The Board of Directors deems each such individual as "independent." The
Audit Committee met four times during fiscal year 2002. The Audit Committee
confers with the Company's auditors and reviews, evaluates and advises the Board
of Directors concerning the adequacy of the Company's accounting systems, its
financial reporting practices, the maintenance of its books and records and its
internal controls. In addition, the Audit Committee reviews the scope of the
audit of the Company's financial statements and the results thereof. See the
Audit Committee Report herein.
The Compensation Committee is comprised of three non-employee members of
the Board of Directors, Morton L. Topfer (Chairman), Gary Lederman and John
Roglieri. The Compensation Committee met once during fiscal year 2002. The
Compensation Committee reviews salaries, cash bonuses and compensation plans for
the Company's executive officers and eligible employees and makes
recommendations concerning same to the Board of Directors.
The Company does not have an Executive Committee. Officers are elected by
and hold office at the discretion of the Board of Directors.
The following is a brief account of the business experience of each
director including each nominee for director of the Company.
Marc D. Grodman, M.D. founded the Company in December 1981 and has been
its Chairman of the Board, President, Chief Executive Officer and a Director
since its formation. Dr. Grodman is an Assistant Professor of Clinical Medicine
at Columbia University College of
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Physicians and Surgeons and Assistant Attending Physician at Presbyterian
Hospital, New York City. From 1980 to 1983, Dr. Grodman attended the Kennedy
School of Government at Harvard University and was a Primary Care Clinical
Fellow at Massachusetts General Hospital. From 1982 to 1984, he was a medical
consultant to the Metal Trades Department of the AFL-CIO. Dr. Grodman received a
B.A. degree from the University of Pennsylvania in 1973 and an M.D. degree from
Columbia University College of Physicians and Surgeons in 1977. Except for his
part time duties as Assistant Professor of Clinical Medicine and Assistant
Attending Physician at Columbia University and Presbyterian Hospital and his
rendering of medical services on a part time basis to the Uniformed Firefighters
Association of New York City, Dr. Grodman devotes all of his working time to the
business of the Company.
Morton L. Topfer became a Director in May 2001 and Vice Chairman of the
Board in March 2002. Mr. Topfer, who holds a bachelor=s degree in physics from
Brooklyn College, was awarded an honorary doctorate in engineering from
Polytechnic Institute of New York in June 2000. At the present time, Mr. Topfer
is principally engaged as the Managing Director of Castletop Capital Management,
L.P., a private investment company located in Austin, Texas. Mr. Topfer also
currently serves as a member of the board of directors of Dell Corporation
("Dell"). From 1999 to 2002, he also served as counselor to Dell=s Chief
Executive Officer, a position to which he was elected in December 1999. Prior
thereto, Mr. Topfer served as Dell=s vice chairman for five years. In that
position, Mr. Topfer shared the office of Chief Executive Officer with Michael
S. Dell, Dell=s chairman and CEO and Kevin B. Rollins, Dell=s vice chairman.
Prior to joining Dell in May 1994, Mr. Topfer served as corporate executive vice
president of Motorola, Inc. and president of Motorola=s Land Mobile Products
Sector. Mr. Topfer was employed in various managerial and executive capacities
during his 23 year career at Motorola. Before joining Motorola in 1971, Mr.
Topfer spent eleven years with RCA Laboratories in various research and
development management positions. In July 1996, Mr. Topfer was conferred the
Darjah Johan Negeri Penang State Award by the Governor of Penang for his
contributions to the development of the electronics industry in Malaysia. In
addition to his serving as a director of the Company and of Dell, Mr. Topfer
also currently serves as chairman of the board and as a director of one other
publicly owned corporation, Measurement Specialties, Inc., a Fairfield, New
Jersey manufacturer of pressure transducers and certain consumer products.
Howard Dubinett has been the Executive Vice-President and Chief Operating
Officer of the Company since its formation in 1981. He became a Director of the
Company in April 1986. Mr. Dubinett attended Rutgers University. Mr. Dubinett
devotes all of his working time to the business of the Company.
Sam Singer has been the Company's Vice President and Chief Financial
Officer since October 1987 and a Director since November 1989. He is responsible
for all of the Company's financial activities. Mr. Singer was the Controller for
Sycomm Systems Corporation, a data processing and management consulting company,
from 1981 to 1987, prior to joining the Company. He received a B.A. degree from
Strayer University and an M.B.A. from Rutgers University. Mr. Singer devotes all
of his working time to the business of the Company.
Gary Lederman, Esq. became a Director of the Company in May 1997. He
received his B.A. degree from Brooklyn College in 1954 and his J.D. degree from
NYU Law School in 1957. He was manager of Locals 370, 491 and 662 of the
U.F.C.W. International Union from 1961 to 1985. He is retired from the unions
and has been a lecturer at Queensboro Community College in
5
the field of insurance. He currently serves on an institutional review board for
RTL, a pharmaceutical drug testing laboratory.
John Roglieri, M.D. became a Director of the Company in September 1995.
He is an Assistant Professor of Clinical Medicine at Columbia University's
College of Physicians and Surgeons and an Assistant Attending Physician at
Presbyterian Hospital, New York City. Dr. Roglieri received a B.S. degree in
Chemical Engineering and a B.A. degree in Applied Sciences from Lehigh
University in 1960, an M.D. degree from Harvard Medical School in 1966, and a
Master's degree from Columbia University School of Business in 1978. From 1969
until 1971, he was a Senior Assistant Surgeon in the U.S. Public Health Service
in Washington. From 1971 until 1973 he was a Clinical and Research Fellow at
Massachusetts General Hospital. From 1973 until 1975, he was Director of the
Robert Wood Johnson Clinical Scholars program at Columbia University. In 1975 he
was appointed Vice-President, Ambulatory Services at Presbyterian Hospital, a
position which he held until 1980. Since 1980, he has maintained a private
practice of internal medicine at Columbia-Presbyterian Medical Center. From 1988
until 1992, he was also Director of the Employee Health Service at Presbyterian
Hospital. From 1992 through 1999, Dr. Roglieri was the Corporate Medical
Director of NYLCare, a managed care subsidiary of New York Life. Dr. Roglieri
was chief medical officer of Physician WebLink, a national physician practice
management company, from 1999 to 2000. Since 2001, he has been Medical Director
for New York Life Insurance Company in Manhattan. He is a member of advisory
boards to several pharmaceutical companies, a member of the Editorial Advisory
Board of the journals Managed Care and Seminars in Medical Practice, and is a
subject of biographical record in Who's Who in America.
There are no family relationships between or among any directors or
executive officers of Bio-Reference Laboratories. The Company's Certificate of
Incorporation provides for a staggered Board of Directors pursuant to which the
Board is divided into three classes of directors and the members of only one
class or one-third of the Board are elected each year to serve a three-year
term. Officers are elected by and hold office at the discretion of the Board of
Directors.
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4 and any amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) under the Securities Exchange
Act of 1934, or representations that no Forms 5 were required, the Company
believes that with respect to fiscal 2002, its officers, directors and
beneficial owners of more than 10% of its equity securities timely complied with
all applicable Section 16(a) filing requirements.
INFORMATION REGARDING EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid or accrued by the Company during the year ended October 31, 2002 to its
Chief Executive Officer and its other executive officers who were serving as
executive officers of the Company on October 31, 2002. All of the Company's
group life, health, hospitalization or medical reimbursement plans, if any, do
not discriminate in scope, terms or operation in favor of the executive officers
or directors of the Company and are generally available to all salaried
employees.
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SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-------------------------------------------- ----------------------------------------
Other All
Year Annual Restricted LTIP Other
Ended Compen- Stock Options Pay- Compen-
Name and Principal Position October 31, Salary Bonus sation Awards (SARs) outs sation
- --------------------------- ----------- -------- -------- ------ ---------- ------- ---- ------
Marc D. Grodman M.D. 2002 $470,000 $125,000 $-0- -0- 4,000 $-0- $-0-
President and Chief 2001 $415,921 $125,000 $-0- -0- -0- $-0- $-0-
Executive Officer 2000 $366,921 $125,000 $-0- -0- -0- $-0- $-0-
Howard Dubinett 2002 $191,700 $60,000 $-0- -0- 4,000 $-0- $-0-
Executive Vice 2001 $182,004 $60,000 $-0- -0- -0- $-0- $-0-
President and Chief 2000 $160,004 $60,000 $-0- -0- -0- $-0- $-0-
Operating Officer
Sam Singer
Vice President and 2002 $180,300 $60,000 $-0- -0- 4,000 $-0- $-0-
Chief Financial and 2001 $171,004 $60,000 $-0- -0- -0- $-0- $-0-
Accounting Officer 2000 $160,004 $60,000 $-0- -0- -0- $-0- $-0-
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Dr. Grodman serves as President and Chief Executive Officer pursuant to a
seven-year employment agreement which expires on October 31, 2004. Dr. Grodman=s
minimum annual compensation under the agreement ($395,000) is subject to
increases based on increases in the Consumer Price Index as well as to increases
(including bonuses) at the discretion of the Compensation Committee. The
agreement provides (i) typical health insurance coverage and $4,000,000 face
amount of "split dollar" life insurance insuring Dr. Grodman's life and payable
to his estate (excluding benefits required to be paid to the Company pursuant to
the split dollar plan) (ii) the leasing of an automobile for his use; (iii)
participation in fringe benefit, bonus, pension, profit sharing, and similar
plans maintained for the Company's employees; (iv) disability benefits; (v)
certain termination benefits; and (vi) in the event of termination due to a
change in control of the Company, a severance payment equal to 2.99 times Dr.
Grodman's average annual compensation during the preceding five years. See
"Split Dollar Insurance" as to the suspension of premium payments with respect
to Dr. Grodman=s "split dollar" life insurance.
Mr. Dubinett serves as Executive Vice President and Chief Operating
Officer pursuant to a five-year employment agreement which was extended in
fiscal 2002 for two additional years beyond its October 31, 2002 termination
date. Mr. Dubinett=s minimum annual compensation under the extended agreement is
equal to his annual compensation in fiscal 2002 and is subject to increases
based on increases in the Consumer Price Index as well as to increases
(including bonuses) at the discretion of the Compensation Committee. The
agreement provides (i) typical health insurance coverage and $1,100,000 face
amount of "split dollar" life insurance insuring Mr. Dubinett's life and payable
to his estate (excluding benefits required to be paid to the Company pursuant to
the split dollar plan); (ii) the leasing of an automobile for his use; (iii)
participation in fringe benefit, bonus, pension, profit sharing, and similar
plans maintained for the Company's employees; (iv) disability benefits; (v)
certain termination benefits; and (vi) in the event of termination due to a
change in control of the Company, a severance payment equal to 2.99 times Mr.
Dubinett's average annual compensation during the preceding five years. The
Company has the option to extend the extension period of the employment
agreement on the
7
same terms and conditions for up to an additional two years through October 31,
2006. See "Split Dollar Insurance" as to the suspension of premium payments with
respect to Mr. Dubinett=s "split dollar" life insurance.
Mr. Singer serves as Vice President and Chief Financial Officer pursuant
to a five-year employment agreement which was extended in fiscal 2002 for two
additional years beyond its October 31, 2002 termination date. Mr. Singer=s
minimum annual compensation under the extended agreement is equal to his annual
compensation in fiscal 2002 and is subject to increases based on increases in
the Consumer Price Index as well as to increases (including bonuses) at the
discretion of our Compensation Committee. The agreement provides (i) typical
health insurance coverage and $800,000 face amount of "split dollar" life
insurance insuring Mr. Singer's life and payable to his estate (excluding
benefits required to be paid to the Company pursuant to the split dollar plan);
(ii) the leasing of an automobile for his use; (iii) participation in fringe
benefit, bonus, pension, profit sharing, and similar plans maintained for the
Company's employees; (iv) disability benefits; (v) certain termination benefits;
and (vi) in the event of termination due to a change in control of the Company,
a severance payment equal to 2.99 times Mr. Singer's average annual compensation
during the preceding five years. The Company has the option to extend the
extension period of the employment agreement on the same terms and conditions
for up to an additional two years through October 31, 2006. See "Split Dollar
Insurance" as to the suspension of premium payments with respect to Mr. Singer=s
"split dollar" life insurance.
SPLIT DOLLAR INSURANCE
The Company established "split dollar" insurance programs for each of its
three Named Executive Officers and paid the policy premiums. Pursuant to the
programs, if the executive died while employed by the Company, the Company would
be reimbursed for the premiums and the death benefit less such reimbursement
would be paid to the executive's estate. If the executive left the Company's
employ, he would be required to pay back the aggregate premiums the Company paid
on the policy back to the Company but would be entitled to ownership of the
policy. The premiums paid on these policies aggregated $931,638 at October 31,
2001 and $1,138,207 at October 31, 2002. As of October 31, 2002, the cash
surrender value of the policies was less than the aggregate premiums paid. As a
result of the uncertainty caused by passage of the Sarbanes-Oxley Act of 2002
(signed into law on July 30, 2002) the Company has suspended payment of the
premiums on these policies. Premiums are currently being paid by reducing the
policy cash values.
EMPLOYEE STOCK OPTION PLANS
In July 1989, the Company's Board of Directors adopted the 1989 Employees
Stock Option Plan (the "1989 Plan") which was approved by Stockholders in
November 1989. The 1989 Plan provided for the grant of options to purchase up to
666,667 shares of Common Stock. Under the terms of the 1989 Plan, options
granted thereunder could be designated as options which qualify for incentive
stock option treatment ("ISOs") under Section 422 of the Internal Revenue Code,
as amended (the "Code") or options which do not so qualify ("NQOs").
Under the 1989 Plan, the exercise price of an option designated as an ISO
could not be less than the fair market value of the Common Stock on the date the
option was granted. However, in the event an option designated as an ISO was
granted to a 10% shareholder (as defined in the 1989 Plan) such exercise price
was required to be at least 110% of such fair
8
market value. Exercise prices of NQOs could be less than such fair market value.
The aggregate fair market value of shares subject to options granted to a
participant which are designated as ISOs which first become exercisable in any
calendar year could not exceed $100,000. All options under the 1989 Plan were
required to be granted before the Plan=s July 1999 Termination Date so that no
further options can be granted under the 1989 Plan.
At October 31, 2001, there were outstanding ISOs under the 1989 Plan held
by 15 employees exercisable to purchase an aggregate 549,672 shares of
Bio-Reference Common Stock at exercise prices ranging from $.71875 to $.790625
per share. Included were ISOs held by Dr. Grodman exercisable to purchase
100,000 shares at $.790625 per share and ISOs held by Mr. Dubinett and Mr.
Singer exercisable to purchase 213,334 shares and 166,667 shares respectively at
an exercise price of $.71875 per share. During fiscal 2002, a total of eight
employees exercised their ISOs issued under the 1989 Plan and purchased an
aggregate 275,337 shares including Dr. Grodman and Mr. Singer who exercised
their ISOs and purchased 100,000 shares and 166,667 shares respectively on May
3, 2002. At October 31, 2002, there were outstanding ISOs issued under the 1989
Plan exercisable to purchase an aggregate 274,335 shares at an exercise price of
$.71875 per share.
On August 25, 2000, the Board of Directors adopted the 2000 Employee
Incentive Stock Option Plan (the "2000 Plan") reserving an aggregate 800,000
shares of Bio-Reference Common Stock for issuance upon exercise of ISOs which
may be granted under the 2000 Plan. Stockholders ratified the adoption of the
2000 Plan at the December 14, 2000 Annual Meeting of Stockholders. At October
31, 2001, there were outstanding ISOs under the 2000 Plan held by six employees
exercisable to purchase an aggregate 265,000 shares of Bio-Reference Common
Stock at exercise prices ranging from $1.125 to $1.688 per share. During fiscal
2002, the Company granted additional ISOs under the 2000 Plan to a total of 17
employees exercisable to purchase an aggregate 241,000 shares of Bio-Reference
Common Stock at exercise prices ranging from $5.94 to $7.79 per share and one
employee exercised his ISOs issued under the 2000 Plan and purchased 10,000
shares. As a result, at October 31, 2002, there were outstanding ISOs issued
under the 2000 Plan exercisable to purchase an aggregate 496,000 shares at
prices ranging from $1.125 to $7.79 per share.
DESCRIPTION OF THE 2000 PLAN
The 2000 Plan authorizes the grant of options which qualify for ISO
treatment under Section 422 of the Code to purchase up to a maximum aggregate
800,000 shares of Bio-Reference Common Stock. Options may only be granted under
the 2000 Plan to employees of the Company and its subsidiaries (including
officers and directors who are also employees).
The 2000 Plan will be administered by the Board of Directors or by a
Stock Option Committee designated by the Board of Directors. The Board or the
Stock Option Committee, as the case may be, has the discretion to determine the
eligible employees to whom, and the price (not less than the fair market value
on the date of grant) at which options will be granted; the periods during which
each option is exercisable; and the number of shares subject to each option. The
Board or the Stock Option Committee has the authority to interpret the 2000 Plan
and to establish and amend rules and regulations relating thereto.
The 2000 Plan provides that the exercise price of an option granted
thereunder shall not be less than the fair market value of the Common Stock on
the date the option is granted.
9
However, in the event an option is granted under the 2000 Plan to a holder of
10% or more of the Company=s outstanding Common Stock, the exercise price must
be at least 110% of such fair market value. Under the 2000 Plan, options must be
granted before the August 24, 2010 Termination Date. No option may have a term
longer than ten years (limited to five years in the case of an option granted to
a 10% or greater stockholder of the Company). The aggregate fair market value of
the Company=s Common Stock with respect to which options are exercisable for the
first time by a grantee under all of the Company's Stock Option Plans during any
calendar year cannot exceed $100,000. Options granted under the 2000 Plan are
non-transferable and must be exercised by an optionee, if at all, while employed
by the Company or a subsidiary or within three months after termination of such
optionee=s employment due to retirement, or within one year of such termination
if due to disability or death. The Board or the Stock Option Committee, as the
case may be, may, in its sole discretion, cause the Company to lend money to or
guaranty any obligation of an employee for the purpose of enabling such employee
to exercise an option granted under the 2000 Plan provided that such loan or
obligation cannot exceed fifty percent (50%) of the exercise price of such
option.
NON-QUALIFIED OPTIONS (NQOS) AND WARRANTS
At October 31, 2001, there were outstanding NQOs and Warrants owned by
employees, directors, various consultants and a software provider exercisable to
purchase an aggregate 890,350 shares of Bio-Reference Common Stock at exercise
prices ranging from $.71875 to $3.14 per share. During fiscal 2002, the Company
issued an aggregate 292,600 shares upon exercise of NQOs. In addition, NQOs
exercisable to purchase an aggregate 105,000 shares expired by their terms. On
January 16, 2002, the Company issued NQOs to each of its six directors
exercisable to purchase 4,000 shares of Bio-Reference Common Stock at an
exercise price of $6.80 per share (equal to the last sale price for the Common
Stock on NASDAQ on such date). During fiscal 2002, the Company also issued NQOs
to five other employees exercisable to purchase an aggregate 41,000 shares at
exercise prices ranging from $4.20 to $6.80 per share. As a result, at October
31, 2002, there were outstanding NQOs and Warrants exercisable to purchase an
aggregate 557,750 shares at exercise prices ranging from $.71875 to $6.80 per
share.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options to purchase
Bio-Reference Common Stock granted to the Company's three Named Executive
Officers in fiscal 2002.
Percent of
Total Potential Realizable Value
Options at Assumed Annual Rates of
Name Granted to Exercise Stock Price Appreciation
Options Employees Price Expiration for Option Term (3)
Granted (1) in Per Date ---------------------------
Fiscal Year Share (2) 5% 10%
- -------------------- ----------------- --------------- ---------------- ---------------- -------------- ------------
Marc D. Grodman ... ............4000 1.3% $6.80 1/16/07 $7,520 $16,600
Howard Dubinett..... ............4000 1.3% $6.80 1/16/07 $7,520 $16,600
Sam Singer.......... ............4000 1.3% $6.80 1/16/07 $7,520 $16,600
10
(1) All options were granted with an exercise price equal to the closing sale
price for Bio-Reference Common Stock on NASDAQ on the date of the option
grant.
(2) Potential realizable value is based on the assumption that the stock price
for Bio-Reference Common Stock appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the option
term. Potential realizable value is shown net of the exercise price. The
numbers are calculated based on regulations promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate of future
growth of its stock price on the NASDAQ market.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table provides information regarding option exercises in
fiscal 2002 by the Company's Named Executive Officers and the value of such
officer=s unexercised options at October 31, 2002
Value of Unexercised
Number of Number of In-The-Money
Name Shares Unexercised Options
Acquired on Value Options at Fiscal at Fiscal
Exercise Realized (1) Year-End Year-End (2)
------------------------- -------------------------
Exercisable (E) Exercisable (E)
Unexercisable (U) Unexercisable (U)
- -------------------- ------------------------- -------------------------- ------------------------- -------------------------
Marc D. Grodman 100000 $ 720,938 4,000 (E) $ 1,684 (E)
Howard Dubinett -- -- 213,334 (E) 1,387,151 (E)
4,000 (E) 1,684 (E)
Sam Singer 166667 $ 1,213,544 4,000 (E) 1,684 (E)
(1) The Value Realized was calculated by determining the difference between the
market price of Bio-Reference Common Stock on the date of exercise and the
option exercise price paid on such date.
(2) Represents the difference between the exercise price of the options and
$7.221, the closing sale price for Bio-Reference Common Stock on October
31, 2002.
See Proposal Three as to the proposed ratification of the adoption of the
Company's 2003 Employee Incentive Stock Option and the reservation of an
aggregate 800,000 shares of Bio-Reference Common Stock for issuance upon
exercise of ISOs which may be granted under the Plan.
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company is paid a $1,000 per
quarter director's fee but receives no additional compensation for serving on
the Audit Committee or on the Compensation Committee. During fiscal year 2002,
the Company issued 4,000 NQOs to each director.
11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 20, 1993, in order to facilitate the Company's 1993 proposed
public offering, Dr. Grodman canceled his pro rata option contained in his
employment agreement and all other outstanding options and warrants to purchase
shares of common stock held by Dr. Grodman, his wife and an affiliated entity
(the "Grodman Group") exercisable to purchase an aggregate 604,078 shares of
Common Stock at prices ranging from $1.4438 to $1.50 or an average price of
$1.47 per share, in consideration for the issuance to the Grodman Group of
604,078 shares of a new class of senior preferred stock, $.10 par value per
share ("Senior Preferred Stock"). Each share of Senior Preferred Stock had the
same voting rights (one vote per share), dividend rights and liquidation rights
as each share of Common Stock and for a period of ten years after issuance, was
convertible into one share of Common Stock upon payment of a conversion price of
$1.50 per share. The 604,078 shares of Senior Preferred Stock were issued to the
Grodman Group on August 23, 1993.
On May 13, 1997 pursuant to a recapitalization, the Senior Preferred
Stock was retired in exchange for a new class of Series A Senior Preferred Stock
issued to the Grodman Group. The new Series A Preferred Stock is convertible
into an aggregate 604,078 shares of Common Stock on or before May 1, 2007 at a
conversion price of $.75 per share and has the same voting rights (one vote per
share), dividend rights and liquidation rights as each share of Common Stock.
See "Stock Options" as to the exercise by Marc Grodman and Sam Singer
during fiscal 2002 of ISOs to purchase 100,000 shares and 166,667 shares
respectively of Bio-Reference Common Stock. These ISOs were granted in 1997 and
were exercised in the case of Dr. Grodman at an exercise price of $.790625 per
share and in the case of Mr. Singer at an exercise price of $.71875 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Morton L. Topfer
(Chairman), Gary Lederman and John Roglieri. None of such individuals has ever
been an officer or employee of the Company. Mr. Topfer does serve as Vice
Chairman of the Board of Directors but he receives no compensation for acting in
such capacity.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
Through fiscal 2001, the Board of Directors, including the Company's
three executive officers, were responsible for reviewing the compensation paid
to the Company's executive officers, provided that none of the Company's
executive officers could vote with respect to his own compensation package. In
fiscal 2002, the Company established a Compensation Committee consisting of
three non-employee directors, Morton L. Topfer (Chairman), Gary Lederman and
John Roglieri.
In May 1997 the Company executed employment contracts with Dr. Grodman
(expiring on October 31, 2004) and with Messrs. Dubinett and Singer (each
expiring on October 31, 2002). During fiscal 2002, the Compensation Committee
authorized extensions of both Messrs. Dubinett and Singer's contracts for two
additional years, with the Company having the option to
12
extend each agreement for two consecutive one-year periods in addition. In
consideration for Messrs. Dubinett and Singer executing the extension
agreements, the Company agreed that the base compensation during each extension
year would not be less than the total cash compensation paid to such individual
in fiscal 2002.
REPORT
In determining the bonuses to be awarded to the Company's three executive
officers with respect to fiscal 2002, the Compensation Committee took into
account the backgrounds, employment histories, achievements and prior
compensation of Dr. Grodman, Mr. Dubinett and Mr. Singer, the benefits to be
obtained by the Company from their employment in light of the current state of
the medical testing laboratory industry, the Company's current status and its
anticipated future development. The Compensation Committee determined that the
base salaries and bonuses paid with respect to fiscal 2002, and the terms of the
extension agreements with Messrs. Dubinett and Singer, were reasonable in
relationship to the services performed, the responsibilities assumed and the
results obtained, and were in the best interests of the Company. In connection
with Dr. Grodman's compensation, the Compensation Committee considered the
Company's substantial increase in net revenues and operating income in the first
three quarters of fiscal 2002 compared with the corresponding period in fiscal
2001. Furthermore, the compensation paid to Messrs. Grodman, Dubinett and Singer
for fiscal 2002 comports with the Compensation Committee's perception of base
compensation levels of principal executives employed by other companies, both
public and private.
COMPENSATION COMMITTEE
Morton L. Topfer, Chairman
Gary Lederman, Member
John Roglieri, Member
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. It is the responsibility of the Company's
independent auditors to perform an independent audit of and express an opinion
on the Company's financial statements. The Audit Committee's responsibility is
one of review and oversight. In fulfilling its oversight responsibilities:
(1) The Audit Committee of the Board of Directors has reviewed and
discussed with the Company's management the audited financial
statements.
(2) The Audit Committee has discussed with Moore Stephens, P.C., the
Company's independent auditors, the matters required to be
discussed pursuant to the Codification of Statements on Auditing
Standards, AU ss. 380, as modified or supplemented.
(3) The Audit Committee has also received the written disclosures and
the letter from Moore Stephens, P.C. required by the Independence
Standards Board Standard
13
No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as modified or supplemented,
and has discussed with Moore Stephens, P.C. the independence of
that firm as the Company's auditors.
(4) Based on the Audit Committee's review and discussions referred to
above, the Audit Committee recommended to the Board of Directors
that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the year ended October
31, 2002, for filing with the Securities and Exchange Commission.
On June 9, 2000, the Board of Directors formally adopted a written
charter for the Audit Committee. Each of the Audit Committee members is
independent, as defined in Rule 4200(a) of the National Association of
Securities Dealers' listing standards.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting, auditing, or auditor independence. Members of the Committee rely
without independent verification on the information provided to them and on the
representations made by management and the independent auditors.
AUDIT COMMITTEE
Gary Lederman, Chairman
John Roglieri, Member
Morton L. Topfer, Member
PROPOSED AMENDMENT TO ARTICLE 3(A)
OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK, $.01 PAR VALUE
FROM 18,333,333 SHARES TO 35,000,000 SHARES.
(PROPOSAL TWO)
The Board of Directors has adopted a resolution proposing an amendment to
the Company's Certificate of Incorporation, as amended, to increase the
authorized shares of Common Stock, $.01 par value, from 18,333,333 shares to
35,000,000 shares.
At May 31, 2003, the Company had 11,429,783 shares of Common Stock issued
and outstanding. An additional 1,546,085 shares of Common Stock were reserved
for issuance under the Company's 2000 Employee Incentive Stock Option Plan as
well as upon exercise of outstanding options and warrants and 604,078 shares of
Common Stock were reserved for issuance upon conversion of the Company's
outstanding Series A Senior Preferred Stock. This left 4,753,387 unreserved
authorized shares of Common Stock which are available for future issuances. If
the stockholders approve the Ratification of the Adoption of the 2003 Employee
Incentive Stock Option Plan (Proposal Three) pursuant to which an additional
800,000 shares of Common Stock would be reserved for issuance upon exercise of
ISOs which may be granted
14
under the 2003 Plan, the number of unreserved authorized shares of Common Stock
which would be available for future issuance would be further reduced to
3,953,387 shares.
Adoption of the proposed amendment to the Company's Certificate of
Incorporation (Proposal Two) would increase the number of unreserved authorized
shares of Common Stock available for future issuances to 21,420,054 shares
(20,620,054 shares if Proposal Three is adopted).
The Board of Directors deems the proposed increase in authorized shares
of Common Stock advisable. The additional shares could be used for acquisitions,
financings and other purposes without the delay and expense which would be
incurred to obtain Stockholder authorization of additional shares at some future
date. Any such delay could jeopardize a future acquisition or financing.
There are no present agreements or understandings that would involve the
issuance of shares of the Company's Common Stock (excluding shares reserved for
issuance under the Company's 2000 Employee Incentive Stock Option Plan; shares
reserved for issuance upon exercise of outstanding options and warrants; shares
reserved for issuance upon conversion of the Company's outstanding Series A
Senior Preferred Stock; and if Proposal Three is approved by Stockholders,
shares reserved for issuance upon exercise of ISOs which may be granted under
the 2003 Employee Incentive Stock Option Plan).
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 18,333,333 SHARES TO
35,000,000 SHARES.
RATIFICATION OF ADOPTION OF
THE 2003 EMPLOYEE INCENTIVE STOCK OPTION PLAN
(PROPOSAL THREE)
On June 3, 2003, the Board of Directors adopted the 2003 Employee
Incentive Stock Option Plan (the "2003 Plan") reserving an aggregate 800,000
shares of Common Stock for issuance upon exercise of incentive stock options
("ISOs") which may be granted under the 2003 Plan. Adoption of the 2003 Plan is
subject to Stockholder ratification, which ratification is being sought at this
July 31, 2003 Annual Meeting of Stockholders.
DESCRIPTION OF THE 2003 PLAN
The 2003 Plan authorizes the grant of options which qualify for ISO
treatment under Section 422 of the Internal Revenue Code, as amended (the
"Code") to purchase up to a maximum aggregate 800,000 shares of the Company's
Common Stock. Options may only be granted under the 2003 Plan to employees of
the Company and its subsidiaries (including officers and directors who are also
employees).
The 2003 Plan will be administered by the Board of Directors or by a
Stock Option Committee designated by the Board of Directors. The Board or the
Stock Option Committee, as
15
the case may be, has the discretion to determine the eligible employees to whom,
and the prices (not less than the fair market value on the date of grant) at
which options will be granted; the periods during which each option is
exercisable; and the number of shares subject to each option. The Board or the
Stock Option Committee has the authority to interpret the 2003 Plan and to
establish and amend rules and regulations relating thereto.
The 2003 Plan provides that the exercise price of an option granted
thereunder shall not be less than the fair market value of the Common Stock on
the date the option is granted. However, in the event an option is granted under
the 2003 Plan to a holder of 10% or more of the Company's outstanding Common
Stock, the exercise price must be at least 110% of such fair market value. Under
the 2003 Plan, options must be granted before the June 2, 2013 Termination Date.
No option may have a term longer than ten years (limited to five years in the
case of an option granted to a 10% or greater stockholder of the Company). The
aggregate fair market value of the Company's Common Stock with respect to which
options are exercisable for the first time by a grantee under all of the
Company's Stock Option Plans during any calendar year cannot exceed $100,000.
Options granted under the 2003 Plan are non-transferable and must be exercised
by an optionee, if at all, while employed by the Company or a subsidiary or
within three months after termination of such optionee's employment due to
retirement, or within one year of such termination if due to disability or
death. The Board or the Stock Option Committee, as the case may be, may, in its
sole discretion, cause the Company to lend money to or guaranty any obligation
of an employee for the purpose of enabling such employee to exercise an option
granted under the 2003 Plan provided that such loan or obligation cannot exceed
fifty percent (50%) of the exercise price of such option.
OPTIONS GRANTED UNDER THE PLAN
No options have been granted under the 2003 Plan. See "Employee Stock
Option Plans" for information concerning the Company's prior 1989 Plan and its
2000 Plan. Although no further options can be granted under the 1989 Plan, ISOs
granted under the 2000 Plan to purchase an aggregate 563,000 shares of Common
Stock are currently outstanding and ISOs to purchase an additional 192,000
shares under the Plan continue to be available for grant.
TAX INFORMATION
Assuming stockholder approval of the 2003 Plan and qualification of the
option granted pursuant to the Plan as an ISO, the optionee will not recognize
any taxable income at the time of grant nor at the time of exercise of the
option (unless at the time of exercise, the difference between the market price
and the exercise price would subject him to the Alternative Minimum Tax). Upon
an optionee's resale of shares purchased upon exercise of an option (assuming he
was not subject to Alternative Minimum Tax at exercise), any difference between
the sale price and the exercise price not subject to a disqualifying
disposition, will be treated as capital gain or loss and will generally qualify
for long-term capital gain or loss treatment if the shares have been held for
more than one year.
The Company will generally not be entitled to a tax deduction with
respect to an ISO granted under the 2003 Plan.
16
The foregoing does not purport to be a complete summary of the federal
income tax considerations that may be relevant to holders of options or upon the
Company. It also does not reflect provisions of the income tax laws of any
municipality, state or foreign country in which an optionee may reside, nor does
it reflect the tax consequences upon an optionee's death.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION
OF THE ADOPTION OF THE 2003 EMPLOYEE INCENTIVE STOCK OPTION PLAN.
STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the yearly cumulative total
shareholder return on the Company's Common Stock for the five fiscal years ended
October 31, 2002 based on the market price of the Common Stock, with the
cumulative total return of companies in the S&P 500 Composite and with a peer
group of ten publicly owned medical laboratories.
COMPARISON OF FIVE YEAR TOTAL RETURN
FOR BIO-REFERENCE LABORATORIES, INC.,
S&P 500 COMPOSITE AND
MEDICAL LABORATORY PEER GROUP
[CHART TO BE INSERTED]
The Medical Laboratory peer group consists of the following companies:
Ameripath, Inc., Enzo Biochem Inc, Impath Inc, LabOne, Inc, Laboratory CP of
Amer Holdgs, MDS Inc., Pharmchem, Inc., Quest Diagnostics Inc, Specialty
Laboratories Inc, and Unilab Corp.
17
AUDITORS
The firm of Moore Stephens, P.C., certified public accountants, has been
selected by the Board of Directors to audit the accounts of the Company and its
subsidiaries for the fiscal year ending October 31, 2003. Moore Stephens, P.C.
and its predecessor firm have served as the Company's auditors since 1988.
Representatives of such firm are not expected to be present at the June 31, 2003
Annual Meeting of Stockholders.
AUDIT FEES
Moore Stephens, P.C. billed the Company $118,560 for professional
services rendered in connection with the audit of the Company's annual financial
statements for the fiscal year ended October 31, 2002 and the review of the
financial statements included in the Company's quarterly reports on Form 10-Q
for such fiscal year compared with $93,650 in billings for such services for the
fiscal year ended October 31, 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Moore Stephens, P.C. did not render services to the Company during fiscal
year 2002 nor during fiscal year 2001 relating to financial information systems
design or implementation.
ALL OTHER FEES
Moore Stephens, P.C. also billed the Company $30,735 for all other
professional services rendered with respect to fiscal year 2002, primarily for
tax return preparation services, compared with $29,940 in billings for such
services for the fiscal year ended October 31, 2001.
The Audit Committee has considered whether the provision of tax return
preparation and other professional services to the Company by Moore Stephens,
P.C. is compatible with such firm maintaining its independence and has concluded
that such firm is independent with respect to the Company in its role as the
Company's principal accountant and auditor.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Under current rules of the Securities and Exchange Commission,
stockholders wishing to submit proposals for inclusion in the Proxy Statement of
the Board of Directors for the 2003 Annual Meeting of Stockholders (expected to
be held during the first half of calendar year 2004), must submit such proposals
so as to be received by the Company at 481 Edward H. Ross Drive, Elmwood Park,
New Jersey 07407 on or before March 1, 2004.
OTHER MATTERS
Management does not know of any other matters which are likely to be
brought before the Meeting. However, in the event that any other matters
properly come before the Meeting, the persons named in the enclosed proxy will
vote said proxy in accordance with their judgment in said matters.
18
According to SEC rules, the information presented in this Proxy Statement
under the captions "Compensation Committee Report on Compensation" and "Stock
Price Performance" will not be deemed to be "soliciting material" or deemed
filed with the SEC under the Securities Act of 1933 or the Securities Exchange
Act of 1934, and nothing contained in any previous filings made by the Company
under such Acts shall be interpreted as incorporating by reference the
information presented under said specified captions.
BY ORDER OF THE BOARD OF DIRECTORS
Marc D. Grodman, President
Elmwood Park, New Jersey
June 18, 2003
19
10
BIO-REFERENCE LABORATORIES, INC.
2003 EMPLOYEE INCENTIVE STOCK OPTION PLAN
1. PURPOSE
The purpose of the 2003 Employee Incentive Stock Option Plan (the "Plan")
is to advance the interests of BIO-REFERENCE LABORATORIES, INC., a New Jersey
corporation (the "Company"), by strengthening the Company's ability to attract
and retain in its employ people of experience and ability, and to furnish
additional incentives to Employees (as such term is hereinafter defined) of the
Company and its subsidiaries upon whose judgment, initiative and efforts the
successful conduct and development of its business largely depends, by
encouraging them to become owners of the common stock, $.01 par value (the
"Common Stock") of the Company.
Accordingly, the Company may, from time to time, grant to such Employees
as may be selected in the manner hereinafter provided, options to purchase the
shares of the Company's Common Stock, upon the terms and conditions hereinafter
established. The options to be granted shall be options which will qualify for
incentive stock option treatment under the Internal Revenue Code of 1986, as
amended ("ISO's").
2. AMOUNT AND SOURCE OF STOCK
The aggregate number and class of shares which may be the subject of
options granted pursuant to the Plan is 800,000 shares of Common Stock, $.01 par
value, of the Company (the "Shares"), subject to adjustment as provided in
Paragraph 10. Such Shares may be reserved or made available from the Company's
authorized and unissued Shares or from Shares reacquired and held in the
Company's treasury. In the event that any option granted hereunder shall
terminate prior to its exercise in full, for any reason, including, without
limitation, an option exchange pursuant to Paragraph 12 hereof, then any
remaining Shares not purchased pursuant to such option shall be added to the
Shares otherwise available for issuance pursuant to the exercise of options
under the Plan.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the Company
(the "Board"), or if so designated, by resolution of the Board, by a committee
selected by the Board (the "Committee"), and to be composed of not less than two
(2) members to be appointed from time to time by such Board, and who, at any
time they exercise discretion in administering the Plan and within one year
prior thereto, shall have not been eligible for selection as a person to whom
stock could have been allocated or to whom stock options or stock appreciation
rights could have been granted pursuant to the Plan or any other plan of the
Company or any of its affiliates entitling the participants therein to acquire
stock, stock options or stock appreciation rights of the Company or any of its
affiliates.
The Board or, if so designated, the Committee, shall have full authority
to interpret the Plan, to establish and amend rules and regulations relating to
it, to determine the Employees to whom options may be granted under the Plan, to
determine the terms and provisions of the option agreements and to make all
other determinations necessary or advisable for the administration of the Plan.
The Board or, if so designated. the Committee, shall have full authority to
amend the Plan; provided, however, that any amendment that (i) increases the
number of Shares that may be the subject of stock options granted under the
Plan, (ii) increases the period during which options may be granted or the
permissible term of options under the Plan, or (iii) decreases the minimum
exercise price of such options, shall only be adopted by the Board or, if so
designated, the Committee, subject to shareholder approval. No amendment to the
Plan shall, without the consent of the holder of an existing option, materially
and adversely affect his rights under any option. The date of which the Board
or, if so designated, the Committee adopts resolutions granting an option to a
specified individual shall constitute the date of grant of such option (the
"Date of Grant"); provided, however, that if the grant of an option is made
subject to the occurrence of a subsequent event (such as, for example, the
commencement of employment), the date on which such subsequent event occurs
shall be the Date of Grant. The adoption of any such resolution by the majority
of the members of the Board or, if so designated,
2
the Committee, shall complete the necessary corporate action constituting the
grant of said option and an offer of Shares for sale to said individual under
the Plan.
4. ELIGIBILITY
(a) Employees of the Company or subsidiaries of the Company, as
determined by the Board or, if so designated, the Committee, shall be eligible
to receive options hereunder; provided, however , that no option shall be
granted hereunder to any person who, together with his spouse, children and
trusts and custodial accounts for their benefit, immediately at the time of the
grant of such option and assuming its immediate exercise, would beneficially
own, within the meaning of Section 424(d) of the Internal Revenue Code of 1986,
as amended (the "Code"), Shares possessing more than ten percent (10%) of the
total combined voting power of all of the outstanding stock of the Company (a
"Ten Percent Shareholder"), unless such an option granted to the Ten Percent
Shareholder satisfies the additional conditions for options, designated as an
ISO, granted to Ten Percent Shareholders set forth in subparagraph (c)(5) of
Section 422 of the Code. For purposes of the Plan, an "Employee" shall include
full and part time employees of the Company or any subsidiary of the Company who
may also be officers and/or directors of the Company and/or any subsidiary;
provided, however, that such options shall only be issued to employees eligible
to receive such options as ISOs under the Code. Furthermore, for purposes of the
Plan, a subsidiary shall mean any corporation of which the Company owns or
controls, directly or indirectly, fifty percent (50%) or more of the outstanding
shares of capital stock normally entitled to vote for the election of directors
and any partnership of which the Company or a corporate subsidiary is a general
partner. From time to time the Board or, if so designated, the Committee shall,
in its sole discretion, within the applicable limits of the Plan, select from
among the eligible individuals those persons to whom options shall be granted
under the Plan, the number of Shares subject to each option, and the exercise
price, terms and conditions of any options to be granted hereunder .
(b) Notwithstanding anything to the contrary herein, the Board, or if
so designated, the Committee, shall only grant an option designated as an ISO to
such persons who are eligible to receive an ISO pursuant to Section 422 of the
Code.
3
5. OPTION PRICE; MAXIMUM GRANT
(a) The exercise price for the Shares purchasable under options
granted pursuant to the Plan shall not be less than 100%, or, in the case of an
option granted to a Ten Percent Shareholder, 110% of the fair market value per
share of the Shares subject to option under the Plan at the Date of Grant, as
determined by the Board or, if so designated, the Committee, in good faith. In
determining the exercise price of an option granted pursuant to the Plan, the
Board, or if so designated, the Committee, shall consider the closing price of
the Common Stock on the date the option is granted (if listed on a national
securities exchange), or the last sale price as reported by NASDAQ, or such
other reasonable method as it selects based on market quotations. The exercise
price for options granted pursuant to the Plan shall be subject to adjustment as
provided in Paragraph 10.
(b) With respect to those options granted pursuant to the Plan, the
aggregate fair market value, determined as of the Date of Grant, of the Shares
subject to such options which may be granted to an individual and which are
initially exercisable in anyone calendar year , under this Plan and all other
stock option plans of the Company and of any parent or subsidiary of the Company
pursuant to which incentive stock options may be granted, shall not exceed
$100,000. The Board, or Committee, may adopt a vesting schedule as it may
determine in connection with any option granted under the Plan; provided,
however, in no event shall an option granted pursuant to the Plan vest more than
$100,000 in anyone year, determined at the time of grant.
6. TERM OF OPTION
(a) Subject to the provisions of the Plan, the Board, or if so
designated, the Committee, shall have absolute discretion in determining the
period during which, the rate at which, and the terms and conditions upon which
any option granted hereunder may be exercised, and whether any option
exercisable in installments is to be exercisable on a cumulative or
non-cumulative basis; provided, however, that no option granted hereunder shall
be exercisable for a period exceeding ten (10) years or, in the case of an
option granted to a Ten Percent Shareholder, five (5) years from the Date of
Grant. Unless the resolution granting an option provides
4
otherwise, each option granted hereunder shall, subject to the provisions of
Paragraph 9 hereof, be exercisable for a period of ten (10) years or, in the
case of an option granted to a Ten Percent Shareholder, five (5) years from the
Date of Grant.
(b) The grant of options by the Board or, if so designated, the
Committee, shall be effective as of the date on which the Board or, if so
designated, the Committee, shall authorize the option; provided, however, that
no option granted hereunder shall be exercisable unless and until the holder
shall enter into an individual option agreement with the Company which shall set
forth the terms and conditions of such option. Each such agreement shall
expressly incorporate by reference the provisions of this Plan and shall state
that in the event of any inconsistency between the provisions hereof and the
provisions of such agreement, the provisions of this Plan shall govern.
7. EXERCISE OF OPTIONS
An option shall be exercised when written notice of such exercise, signed
by the person entitled to exercise the option, has been delivered or transmitted
by registered or certified mail to the Secretary of the Company at its then
principal office. Said notice shall specify the number of Shares for which the
option is being exercised and shall be accompanied by (i) such documentation, if
any, as may be required by the Company as provided in subparagraph II(b), and
(ii) payment in full of the aggregate option price. Such payment shall be in the
form of (i) cash or (ii) a certified check (unless such certification is waived
by the Company) payable to the order of the Company in the amount of the
aggregate option price. Delivery of said notice shall constitute an irrevocable
election to purchase the Shares specified in said notice, and the date on which
the Company receives the last of said notice, documentation and the aggregate
option exercise price for all of the Shares covered by the notice shall be the
date as of which the Shares so purchased shall be deemed to have been issued.
The person entitled to exercise the option shall not have the right or status as
a holder of the Shares to which such exercise relates prior to receipt by the
Company of the payment, notice and documentation expressly referred to in this
Paragraph 7.
5
8. EXERCISE AND CANCELLATION OF OPTIONS UPON TERMINATION OF EMPLOYMENT OR DEATH.
Except as set forth below, if a holder shall voluntarily or involuntarily
terminate his service as an Employee of the Company or any subsidiary of the
Company, or if his employment is terminated by the Company or a subsidiary for
what the Company deems justifiable "cause," the option of such holder shall
terminate upon the date of such termination of employment regardless of the
expiration date specified in such option. If the termination of employment is
due to retirement (as defined by the Board or, if so designated, the Committee,
in its sole discretion), the holder shall have the privilege of exercising any
option which the holder could have exercised on the day upon which he ceased to
be an employee of the Company or any subsidiary of the Company; provided,
however, that such exercise must be accomplished within the term of such option
and within three (3) months of the holder's retirement. If the termination of
employment is due to disability (to an extent and in a manner as shall be
determined by the Board or, if so designated, the Committee, in its sole
discretion), he (or his duly appointed guardian or conservator) shall have the
privilege of exercising any option that be could have exercised on the day upon
which he ceased to be an employee of the Company or any subsidiary of the
Company; provided, however, that such exercise must be accomplished within the
term of such option and within one (1) year of the termination of his employment
with the Company or any subsidiary of the Company. If termination of employment
is due to the death of the holder, the duly appointed executor or administrator
of his estate shall have the privilege at any time of exercising any option that
the holder could have exercised on the date of his death; provided, however,
that such exercise must be accomplished within the term of such option and
within one (1) year of the holder's death. For all purposes of the Plan, an
approved leave of absence as defined under the Code or Regulations thereunder
for an ISO shall not constitute interruption or termination of employment.
Nothing contained herein or in any option agreement shall be construed to
confer on any option holder any right to be continued in the employ of the
Company or any subsidiary of the Company or derogate from any right of the
Company or any subsidiary of the Company to retire,
6
request the resignation of or discharge such option holder, or to layoff or
require a leave of absence of such option holder (with or without pay), at any
time, with or without cause.
9. NON-TRANSFERABILITY OF OPTIONS
No option granted under the Plan shall be sold, pledged, assigned or
transferred in any manner except to the extent that options may be exercised by
an executor or administrator as provided in Paragraph 8 hereof. An option may be
exercised, during the lifetime of the holder thereof, only by such holder or his
duly appointed guardian or conservator in the event of his disability.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the outstanding Shares are subdivided, consolidated, increased,
decreased, changed into, or exchanged for a different number or kind of shares
or other securities of the Company through reorganization, merger,
recapitalization, reclassification, capital adjustment or otherwise, or if the
Company shall issue additional Shares as a dividend or pursuant to a stock
split, then the number and kind of Shares available for issuance pursuant to the
exercise of options to be granted under this Plan and all Shares subject to the
unexercised portion of any option theretofore granted and the option price of
such options shall be adjusted to prevent the inequitable enlargement or
dilution of any rights hereunder; provided, however, that any such adjustment in
outstanding options under the Plan shall be made without change in the aggregate
exercise price applicable to the unexercised portion of any such outstanding
option. Distributions to the Company's shareholders consisting of property other
than shares of Common Stock of the Company or its successors and distributions
to shareholders of rights to subscribe for Common Stock shall not result in the
adjustment of the Shares purchasable under outstanding options or the exercise
price of outstanding options. Adjustments under this paragraph shall be made by
the Board or, if so designated, by the Committee, whose determination thereof
shall be conclusive and binding. Any fractional Share resulting from adjustments
pursuant to this paragraph shall be eliminated from any then outstanding option.
Nothing contained herein or in any option agreement shall be construed to affect
in any way the right or power of the Company to make or become a party to any
adjustments, reclassifications, reorganizations or changes in its capital or
7
business structure or to merge, consolidate, dissolve, liquidate or otherwise
transfer all or any part of its business or assets.
(b) If, in the event of a merger or consolidation, the Company is not
the surviving corporation, and in the event that the agreement governing such
merger or consolidation do not provide for the substitution of new options or
other rights in lieu of the options granted hereunder or for the express
assumption of such outstanding options by the surviving corporation, or in the
event of the dissolution or liquidation of the Company, the holder of any option
theretofore granted under this Plan shall have the right not less than five (5)
days prior to the record date for the determination of shareholders entitled to
participate in such merger, consolidation, dissolution or liquidation, to
exercise his option, in whole or in part, without regard to any installment
provisions that may have been made part of the terms and conditions of such
option; provided, that any conditions precedent to such exercise set forth in
any option agreement granted under this Plan, other than the passage of time,
have been satisfied. In any such event, the Company will mail or cause to be
mailed to each holder of an option hereunder a notice specifying the date that
is to be fixed as of which all holders of record of the Shares shall be entitled
to exchange their Shares for securities, cash or other property issuable or
deliverable pursuant to such merger , consolidation, dissolution or liquidation.
Such notice shall be mailed at least ten (10) days prior to the date therein
specified. In the event any then outstanding option is not exercised in its
entirety on or prior to the date specified therein, all remaining outstanding
options granted hereunder and any and all rights thereunder shall terminate as
of said date.
11. GENERAL RESTRICTIONS
(a) No option granted hereunder shall be exercisable if the Company
shall, at any time and in its sole discretion, determine that (i) the listing
upon any securities exchange, registration or qualification under any state or
federal law of any Shares otherwise deliverable upon such exercise, or (ii)
consent or approval of any regulatory body or the satisfaction of withholding
tax or other withholding liabilities, is necessary or appropriate in connection
with such exercise prior thereto. In any such events, the exerciseability of
such options shall be suspended and shall not be effective unless and until the
grantee of such option has paid such
8
withholding tax or listing, registration, qualification or approval shall have
been effected or obtained free of any conditions not acceptable to the Company
in its sole discretion, notwithstanding any termination of any option or any
portion of any option during the period when exerciseability has been suspended.
(b) The Board or, if so designated, the Committee, may require, as a
condition to the right to exercise an option, that the Company receive from the
option holder, at the time of any such exercise, representations, warranties and
agreements to the effect that the Shares are being purchased by the holder only
for investment and without any present intention to sell or otherwise distribute
such Shares and that the option holder will not dispose of such Shares in
transactions which, in the opinion of counsel to the Company, would violate the
registration provisions of the Securities Act of 1933, as then amended, and the
rules and regulations thereunder. The certificates issued to evidence such
Shares shall bear appropriate legends summarizing such restrictions on the
disposition thereof.
12. EXCHANGE OF OPTIONS
The Board, or if so designated, the Committee, shall have the right to
grant options hereunder that are granted subject to the condition that the
grantee shall agree with the Company to terminate all or a portion of another
option or options previously granted under the Plan. The Shares that had been
issuable pursuant to the exercise of the option terminated in the exchange of
options shall, upon such termination, again become available for issuance
pursuant to the exercise of options under the Plan.
13. LOANS TO EMPLOYEES
The Board, or if so designated, the Committee, acting on behalf of the
Company, shall have the authority and may, in its sole discretion, lend money
to, or guaranty any obligation of, an Employee for the purpose of enabling such
Employee to exercise an option granted hereunder; the amount of such loan or
obligation, however, shall be limited to an amount equal to fifty percent (50% )
of the exercise price of such option. Any loan made hereunder shall bear
interest at the rate of not less than the Base Rate of Chase Manhattan Bank,
N.A. at the time of such loan
9
plus one percent (1%) per annum; may be unsecured or secured in such manner as
the Board, or the Committee, shall determine, including, without limitation, a
pledge of the subject shares; and shall be subject to such other terms and
conditions as the Board, or the Committee, may determine.
14. TERMINATION
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on June 2, 2013, which date is ten (10) years
from the date of the original adoption hereof by the Board, and no options under
the Plan shall thereafter be granted, provided, however, the Board at any time
may, in its sole discretion, terminate the Plan prior to the foregoing date. No
termination of the Plan shall, without the consent of the holder of an existing
option, materially and adversely affect his rights under such option.
The Plan shall be submitted to the shareholders of the Company for
approval in accordance with the applicable provisions of the New Jersey Business
Corporation Act as promptly as practicable and in any event within one year
after the date of the original adoption hereof by the Board. Any options granted
hereunder prior to such shareholder approval shall not be exercisable unless and
until such approval is obtained. If such approval is not obtained on or before
June 2, 2004, which date is one ( 1) year from the date of the original adoption
hereof by the Board, the Plan and any options granted hereunder shall be
terminated.
10
PRELIMINARY COPY
BIO-REFERENCE LABORATORIES, INC.
REVOCABLE PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - July 31, 2003
The undersigned, a Stockholder of BIO-REFERENCE LABORATORIES, INC. (the
"Company") hereby appoints Marc D. Grodman and Howard Dubinett or either of
them, as proxy or proxies of the undersigned, with full power of substitution,
to vote, in the name, place and stead of the undersigned, with all of the powers
which the undersigned would possess if personally present, on behalf of the
undersigned, all the shares which the undersigned is entitled to vote at the
Annual Meeting of the Stockholders of BIO-REFERENCE LABORATORIES, INC. to be
held at 9:00 A.M. (local time) on Thursday, July 31, 2003 at the Sheraton
Crossroads Hotel, Crossroads Corporate Center, Route 17 North, Mahwah, New
Jersey 07495-0001 and at any and all adjournments thereof. The undersigned
directs that this proxy be voted as follows:
1) To elect two Class III directors, each to serve for a term of three
years and until his successor is elected and qualified (Proposal One).
FOR [_] all nominees listed below WITHHOLD AUTHORITY [_]
(except as marked to the to vote for all nominees
contrary below) listed below
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
NOMINEES: GARY LEDERMAN, JOHN ROGLIERI
2) To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 18,333,333 shares to
35,000,000 shares (Proposal Two)
FOR [_] AGAINST [_] ABSTAIN [_]
3) To ratify adoption of the 2003 Employee Incentive Stock Option Plan
(Proposal Three)
FOR [_] AGAINST [_] ABSTAIN [_]
4) In their discretion, on all other matters as shall properly come
before the meeting
AUTHORITY GRANTED [_] AUTHORITY WITHHELD [_]
(Continued and To be Signed on the Reverse Side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE FOREGOING. UNLESS
OTHERWISE SPECIFIED AS ABOVE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS (PROPOSAL ONE), "FOR" THE PROPOSED AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION (PROPOSAL TWO), AND "FOR" RATIFICATION OF THE
ADOPTION OF THE 2003 EMPLOYEE INCENTIVE STOCK OPTION PLAN (PROPOSAL THREE) AS
SET FORTH IN THE PROXY STATEMENT. IN ADDITION, DISCRETIONARY AUTHORITY IS
CONFERRED AS TO ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING UNLESS SUCH
AUTHORITY IS SPECIFICALLY WITHHELD. STOCKHOLDERS WHO ARE PRESENT AT THE MEETING
MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON IF THEY SO DESIRE.
PLEASE MARK, SIGN, AND RETURN YOUR PROXY PROMPTLY. No postage is required
if returned in the enclosed envelope and mailed in the United States. Receipt of
the Notice of Annual Meeting of Stockholders, the accompanying Proxy Statement
of the Board of Directors, the Company's Annual Report for the year ended
October 31, 2002 and the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 2003, is acknowledged.
Dated: -------------------------- , 2003
----------------------------------------
----------------------------------------
(Signature of Stockholder)
Please date and sign exactly as name
appears on this Proxy. If shares are
registered in more than one name, the
signatures of all such persons are
required. A corporation should sign in
its full corporate name by a duly
authorized officer, stating his title.
Trustees, guardians, executors and
administrators should sign in their
official capacity, giving their full
title as such. If a partnership, please
sign in partnership name by authorized
person.
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY
No Postage is Required
if returned in the Enclosed Envelope and Mailed in the United States