<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997 Commission File Number 34-0-20400
UNIVERSAL STANDARD HEALTHCARE, INC.
Michigan 38-2986640
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ATTN: Alan S. Ker, Chief Financial Officer
26500 Northwestern Hwy., Suite 400, Southfield, Michigan 48076
(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code: (248) 358-0810
Former Name: UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock, no par value, outstanding as of October 31,
1997:
6,583,180.
<PAGE> 2
UNIVERSAL STANDARD HEALTHCARE, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
at September 30, 1997 and December 31, 1996
Condensed Consolidated Statements of 4
Income for the three and nine months ended
September 30, 1997 and 1996
Condensed Consolidated Statements of 5
Cash Flows for the nine months ended
September 30, 1997 and 1996
Notes to Condensed Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risks 14
Part II. OTHER INFORMATION 15
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
-2-
<PAGE> 3
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31
1997 1996
------------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,026 $ 2,227
Accounts receivable, net of allowance for contractual
adjustments and uncollectible accounts of $9,054
and $8,157 at September 30, 1997 and
December 31, 1996, respectively 10,787 7,296
Inventory 1,335 1,053
Prepaid expenses and other 1,236 1,762
--------- ---------
Total current assets 14,384 12,338
Property and equipment, net 8,846 9,695
Intangible assets, net 32,720 33,547
Other assets 1,574 1,492
--------- ---------
Total assets $ 57,524 $ 57,072
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,211 $ 1,534
Accounts payable 6,657 4,348
Accrued liabilities 3,573 5,329
--------- ---------
Total current liabilities 11,441 11,211
Long-term debt, net of current portion 20,061 19,013
Other liabilities (1) 9
--------- ---------
Total liabilities 31,502 30,233
--------- ---------
Common stock, no par; 20,000,000 shares
authorized; 6,578,135 shares issued and outstanding 32,865 32,864
Retained earnings (deficit) (6,842) (6,025)
--------- ---------
Total stockholders' equity 26,023 26,839
--------- ---------
Total liabilities and stockholders' equity $ 57,524 $ 57,072
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net laboratory service revenue:
Fee-for-service $ 9,597 $ 9,437 $ 28,317 $ 30,540
Managed care $ 4,895 4,169 $ 13,744 13,435
-------- -------- --------- ---------
Total net revenue 14,492 13,606 42,061 43,975
Operating expenses:
Laboratory 9,569 9,284 28,216 30,074
Selling, general and administrative 3,017 2,762 8,459 9,331
Provision for doubtful accounts 466 1,012 1,906 2,983
Special Charge 0 0 0 2,407
Depreciation 688 569 1,922 1,712
Amortization 367 563 1,059 1,661
-------- -------- --------- ---------
Total operating expenses 14,107 14,190 41,563 48,168
-------- -------- --------- ---------
Operating income (loss) 385 (584) 498 (4,193)
Interest expense 515 448 1,386 1,341
Other income, net (35) (41) (71) (115)
-------- -------- --------- ---------
Income (loss) before income taxes (95) (991) (817) (5,419)
Income taxes (benefit) 0 (303) 0 (1,733)
Net income (loss) $ (95) $ (688) $ (817) $ (3,686)
======== ======== ========= =========
Net income per share $ (0.014) $ (0.103) $ (0.124) $ (0.553)
Average shares outstanding and
common equivalent shares 6,583 6,661 6,583 6,660
EBITDA $ 1,440 $ $548 $3,480 $ (820)
</TABLE>
The accompanying notes are an integral
part of the condensed consolidated financial statements.
4
<PAGE> 5
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------ ------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (603) $ 217
------- -------
Cash flows from investing activities:
Purchase of property and equipment (741) (1,273)
Restricted cash investment (168)
Other investing activities (75) (7)
------- -------
Net cash used in investing activities (816) (1,448)
------- -------
Cash flows from financing activities:
Payments on long-term debt (6,807) (9,359)
Long-term/Short-term borrowings 7,199 1,000
Proceeds from issuance of Convertible Debenture - - 12,000
Payments of financing costs (163) (1,021)
Other financing activities (10) (29)
------- -------
Net cash provided by (used in) financing activities 219 2,591
------- -------
Net increase (decrease) in cash and cash equivalents (1,201) 1,360
Cash and cash equivalents, beginning of period 2,227 999
------- -------
Cash and cash equivalents, end of period $ 1,026 $ 2,359
======= =======
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE> 6
UNIVERSAL STANDARD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes included
in the Company's Annual Report on Form 10-K for the year ended December
31, 1996.
In the opinion of management, the condensed consolidated financial
statements include all adjustments, consisting of normal recurring items,
necessary for a fair presentation of financial position and results of
operations. The results of operations are not necessarily indicative of
the results which may be expected for the full year.
2. Income Taxes
Under applicable accounting rules, no tax benefits relating to the loss
for the first nine months of 1997 are recorded. This loss is treated as
a net operating loss carry forward for accounting purposes and may be
used to offset future profits of the Company.
3. Earnings Per Share
Earnings per share has been computed using the weighted average number of
shares of common stock and common stock equivalents outstanding. Common
stock equivalents represent the assumed exercise of outstanding stock
options and warrants.
Statement of Financial Accounting Standards No. 128 ("SFAS 128")
"Earnings per Share", was issued in February 1997. Adoption of SFAS 128,
effective for periods ending after December 31, 1997, is not expected to
have a significant effect on reported earnings.
Intangible Assets
Certain assets classified as goodwill in the Company's financial
statements for the year ended December 31, 1996 as included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996
have been reclassified to customer lists. Intangible assets consist of
the following (in thousands):
<TABLE>
<CAPTION>
September 30
1997 1996
<S> <C> <C>
Goodwill $ 16,179 $ 28,470
Covenants not to compete 346 5,427
Customer Lists 22,546 10,456
-------- --------
$ 39,071 $ 44,353
Less accumulated amortization $ (6,351) (8,602)
-------- --------
Intangible assets, net $ 32,720 $ 35,751
======== ========
</TABLE>
6
<PAGE> 7
5. Long-Term Debt
On April 30, 1997, the Company replaced its existing credit facility with
a new credit facility which includes a $9.5 million revolving line of
credit, a $3.0 million acquisition line and a $2.5 million letter of
credit facility. Borrowing levels under the revolving line of credit are
based on accounts receivable, inventory and fixed asset balances. As of
September 30, 1997, permitted borrowings under the new revolving line of
credit were $7,198,944, all of which was outstanding under the line.
Under the credit facility the Company is required to maintain certain
financial covenants including a current ratio of 1.25 to 1; a
consolidated leverage ratio of 7 to 1 through September 29, 1997, 5 to 1
through June 29, 1998 and 3 to 1 thereafter; a consolidated funded debt
to total capitalization ratio of .75 to 1 through September 29, 1997, .70
to 1 through December 30, 1997 and .60 to 1 thereafter; and a
consolidated debt service coverage ratio of 1 to 1 through September 30,
1997 and 1.25 to 1 thereafter. The Bank has waived compliance with the
current ratio covenant through June 30, 1997 and consolidated funded debt
to total capitalization ratio covenant through September 30, 1997.
Borrowing under the acquisition line was at the discretion of the bank.
The line of credit bears interest from .5% below to 1.00% above the prime
rate or from 2% to 3.75% above the LIBOR rate. The interest rate on the
line of credit at September 30, 1997 was 9.5%. Borrowings under the
credit facility are collateralized by substantially all of the assets of
the Company and its subsidiaries (including the stock of the Company's
managed care subsidiaries), except for the assets of the Company's
managed care subsidiaries. The Company has recently completed an
extension of its credit facility through August 31, 1999. The
acquisition line and letter of credit facility expires on June 30, 1998.
Borrowing under the acquisition line is at the discretion of the bank.
6. Contingencies
The Company has from time to time experienced compliance reviews,
including reviews of its billing practices, by its third-party payors.
The Company has not yet received final determination notices or decision
letters relating to compliance reviews conducted by two of its larger
third-party payors. The ultimate effect, if any, of these compliance
revenues cannot be determined at this time and no liability has been
accrued by the Company.
In connection with the acquisition of MML, the Company has agreed to
indemnify MML and its shareholders (including certain officers, directors
and shareholders of the Company) under certain circumstances for income
tax liabilities arising from such acquisition and indemnification. On
July 13, 1995, MML and its shareholders received notices of deficiency
from the Internal Revenue Service (IRS). The IRS deficiency assessments
relating to the acquisition total approximately $4.9 million, excluding
interest and penalties which could be assessed. In October 1995, the
Company (pursuant to its rights under the related acquisition agreement)
filed petitions with the United States Tax Court contesting the
deficiency. The Company believes that the acquisition has been treated
properly for federal income tax purposes and intends to vigorously defend
its position.
In August, 1996, the Company received a thirty-day demand letter from the
IRS proposing adjustments to the Company's federal income taxes for the
years 1991-1994 totaling $3.3 million. The proposed adjustments related
to the timing of certain bad debt deductions and claim expense accruals
and the deductibility of certain sign on bonus and non-compete payments
made in connection with the MML acquisition. The Company has filed a
written protest with the IRS appeals office regarding this matter.
7
<PAGE> 8
There can be no assurance that the Company will resolve these disputes with the
IRS in a manner favorable to the Company. The failure to resolve these disputes
with the IRS in a manner favorable to the Company would result in a current
period charge to earnings and would have a material adverse effect on the
business, financial condition, including working capital, and results of
operations of the Company. The ultimate effect of these matters on the Company,
if any, cannot be determined at this time. The outcome of these disputes with
the IRS involves a number of uncertainties, including those inherent in
interpreting and applying Internal Revenue Code and other federal income tax
authority and precedent to actual transactions, those relating to the valuation
of various assets at the time of the acquisition and those inherent in pursuing
any legal action of the type instituted by the Company. The Company has not
accrued a liability relating to the deficiency assessments or proposed tax
adjustments.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of net revenue represented by items in the statements of income.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fee-for-service 66.2% 69.4% 67.3% 69.5%
Managed care 33.8% 30.6% 32.7% 30.5%
----------------------------------------
Total net revenue 100.0% 100.0% 100.0% 100.0%
Laboratory expenses 66.0% 68.2% 67.1% 68.4%
Selling, general and 20.8% 20.3% 20.1% 21.2%
administrative expenses
Provision for doubtful accounts 3.2% 7.5% 4.5% 6.8%
Special Charge 0.0 0.0% 0.0% 5.5%
Depreciation and amortization 7.3% 8.3% 7.1% 7.6%
----------------------------------------
Operating income (loss) 2.7% (4.3%) 1.2% (9.5%)
Interest expense 3.6% 3.3% 3.3% 3.0%
Other income, net (0.2%) (0.3%) (0.2%) (0.2%)
Income taxes (0.0%) (2.2%) 0.0% (3.9%)
----------------------------------------
Net income (loss) (0.7%) (5.1%) (1.9%) (8.4%)
========================================
EBITDA* 9.9% 4.0% 8.3% (1.9%)
========================================
Net cash provided by 4.2% 0.7% (1.4%) 0.5%
operating activities** ========================================
</TABLE>
* EBITDA represents earnings before interest, taxes, depreciation,
amortization and other (income) expense. The Company and laboratory
industry analysts use EBITDA as a method of measuring and comparing the
financial performance of clinical laboratory companies, many of which
were formed by combining with and acquiring other clinical laboratory
companies, because it eliminates the effects of goodwill amortization and
acquisition expenses on net income. EBITDA should not be considered as
an alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of the Company's liquidity.
** Net cash provided by operating activities is determined in accordance
with generally accepted accounting principles and is included in the
Company's Condensed Consolidated Statements of Cash Flows. The amount for each
period is determined by adjusting net income for the period for non-cash expense
items, including restructuring and special charge, depreciation and
amortization, extraordinary item and deferred income taxes, and for increases
and decreases in asset and liability items other than those relating to
financing and investing activities.
9
<PAGE> 10
Net Revenue. The Company's net revenue is generated from managed care
laboratory programs with major employers, union and government benefit
plans, and from traditional laboratory fee-for-service business. In the
Managed Care Programs, for a fixed monthly payment, the Company is the
designated provider of substantially all non-hospital clinical laboratory
testing which may be ordered by a Program Member's physician of choice
and, in some cases, certain medical equipment and appliances. In the
fee-for-service business, the Company charges a fee based upon the type
of test requested by the patient's physician.
Total net revenue was $14.5 million in the third quarter of 1997,
compared to $13.6 million in the third quarter of 1996. The revenue
increase in the third quarter of 1997 was principally due to increased
managed care revenue and, to a lesser extent, increased fee-for-service
revenue. Total net revenue for the nine months ended September 30, 1997
was $42.1 million, compared to $44.0 million for the nine months ended
September 30, 1996. The revenue decrease in the nine months ended
September 30, 1997 was principally due to fewer fee for service patient
visits due to reduction in unprofitable accounts and attrition, partially
offset by increased managed care revenues.
Managed care revenue increased to $4.9 million for the third quarter of
1997 from $4.2 million for the third quarter of 1996, an increase of $0.7
million, or 17.4%. Managed care revenue for the nine months ended
September 30, 1997 increased to $13.7 million from $13.4 million for the
same period last year, representing an increase of $0.3 million, or 2.3%
from the comparable period of 1996. Increases in managed care revenue in
1997 over the same quarter and nine months periods of 1996 was primarily
due to an expansion of programs nationwide and new product line revenues.
As a percentage of total net revenue, managed care revenue increased
from 30.6% and 30.5% for the three and nine months ended September 30,
1996, respectively, to 33.8% and 32.7% for the three and nine months
ended September 30, 1997, respectively. These increases are primarily
due to the nationwide expansion of programs and new product line revenue
as well as declines in the fee for service revenue.
Fee-for-service revenue was $9.6 million for the third quarter of 1997
compared to $9.4 million for the third quarter of 1996. Fee-for-service
revenue for the third quarter 1997 was up 1.7% as compared to the same
quarter last year, primarily due to higher revenue per patient visit
resulting from improved product and test mix. Higher revenue per patient
visit more than offset the effect of a 9% decrease in fee-for-service
patient visits in the third quarter as compared to the same period last
year. Fee-for-service revenue for the nine months ended September 30,
1997 was $28.3 million, compared to $30.5 million for the nine months
ended September 30, 1996. Fee-for-service revenue for the nine months
ended September 30, 1997 was down 7.3% as compared to the same period
last year, primarily due to an 13.1% decline in fee-for-service patient
visits. Improved revenue per patient visit resulting from changes in
payor and test mix partially offset the effect of the decline in
fee-for-service patient visits. Decreases in fee for service patient
visits in the quarter and nine months were primarily due to the
previously announced reduction of unprofitable accounts and attrition.
The Company's clinical laboratory testing operations are also affected by
seasonal trends common to the clinical laboratory industry. Testing
volume is lower during the summer months
and the year-end holiday periods. These seasonal effects are partially
offset by the Managed Care revenues which are not affected by seasonal
trends.
The Company's fee-for-service net revenue continues to be effected by a
number of factors,
10
<PAGE> 11
including the shift toward managed care alternatives, reductions in
reimbursement levels on certain of its laboratory tests and medical necessity
requirement by the Company's third party payors, and changes in payor and test
mixes being experienced by the Company and the clinical laboratory industry
generally.
Laboratory Expenses. Laboratory expenses were $9.6 million for the third
quarter of 1997 compared to $9.3 million for the third quarter of 1996.
Laboratory expenses for the nine months ended September 30, 1997 were $28.2
million compared to $30.1 million for the nine months ended September 30, 1996.
Laboratory expenses for the three months ended September 30, 1997 were slightly
higher than the comparable periods of 1996 primarily as a result of new managed
care programs and the increased revenues for the quarter. As a percentage of
net revenue, laboratory expenses decreased from 68.2% for the third quarter of
1996 to 66.0% for the third quarter of 1997 primarily due to the increase in
managed care revenue, to the decreased patient visits and to the restructuring
initiative the Company has been implementing.
Laboratory expenses as a percentage of net revenue decreased from 68.4% for the
nine months ended September 30, 1996 to 67.1% for the nine months ended
September 30, 1997. These decreases are primarily due to the increase in
managed care revenue, to the decreased patient visits and to the restructuring
initiative the Company has been implementing.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the third quarter of 1997 were $3.0 million,
compared to $2.8 million for the third quarter of 1996. As a percentage of net
revenue, selling, general and administrative expenses increased from 20.3% for
the third quarter of 1996 to 20.8% for the third quarter of 1997. These
increases were primarily due to increases in the Company's expenditures for
sales and marketing activities in both its fee-for-service and managed care
divisions.
Selling, general and administrative expenses for the nine months ended September
30, 1997 were $8.5 million, compared to $9.3 million for the nine months ended
September 30, 1996. As a percentage of net revenue, selling, general and
administrative expenses decreased from 21.2% for the nine months ended September
30, 1996 to 20.1% for the nine months ended September 30, 1997. These decreases
are primarily due to the Company's cost reduction/reengineering programs, offset
by increases in the Company's sales and marketing expenditures.
Provision for Doubtful Accounts. The provision for doubtful accounts for the
third quarter of 1997 was $0.5 million, as compared to $1.0 million for the
third quarter of 1996. The provision for doubtful accounts decreased from $3.0
million for the nine months ended September 30, 1996 to $1.9 million for the
same period in 1997. The decrease is mainly due to improved accounts receivable
management and more current accounts receivable aging.
As a percentage of total revenue, the provision for doubtful accounts decreased
from 7.4% and 6.8% for the three and nine months ended September 30, 1996 to
3.2% and 4.5% for the comparable 1997 periods. This decrease is mainly due to
the improved accounts receivable management and more current accounts receivable
aging..
Special Charge. The Company recorded a special charge of $2.4 million in the
second quarter of 1996. This charge principally reflects the Reengineering/Cost
Reduction Plan initiated during the quarter, which includes the addition of key
management personnel, the implementation of process engineering and TQM (total
quality management) processes and personnel and facility cost reductions.
11
<PAGE> 12
EBITDA. EBITDA was $1,440,000, or 9.9% of net revenue for the third quarter of
1997, compared to $548,000, or 4.0% of net revenue for the third quarter of
1996.
EBITDA for the nine months ended September 30, 1997 was $3.5 million, or 8.3% of
net revenue, compared to a loss of $0.8 million, or 1.9% of net revenue, for the
same period ended 1996. EBITDA for the nine months ended September 30, 1996,
without the special charge of $2.4 million, would have been $1.6 million or 3.6%
of net revenue.
The Company attributes these increases principally to the increase in the
managed care revenues, reduction of costs from the reengineering projects,
reduction in unprofitable accounts, and improvements in test and payor mix.
Income Taxes. Under applicable accounting rules, no tax benefit relating to the
1997 loss are recorded. This loss is treated as a net operating loss carry
forward and may be used to offset future profits of the Company.
Liquidity and Capital Resources. The Company's working capital ratio increased
to 1.3 to 1 at September 30, 1997 from 1.1 to 1 at December 31, 1996. Working
capital increased to $1.8 million at September 30, 1997 from $1.1 million at
December 31, 1996. These increases resulted primarily from increases in the
Company's Medicare accounts receivable, which totaled $3.0 million at September
30, 1997, offset by a decrease in cash required to fund the Company's
operations. The increase in the Medicare accounts receivable is due to
collection delays caused by a new requirement for a separate identification
number for each pathologist performing anatomical pathology testing. The
Company is in the process of obtaining the required numbers.
Net cash flow used in operating activities was $0.6 million for the nine months
ended September 30, 1997, compared to net cash flow from operating activities of
$0.2 million for the nine months ended September 30, 1996. The decrease in net
cash flow from operating activities is principally due to the Medicare
anatomical pathology receivable increase discussed above. Days outstanding in
accounts receivable were 99 days at September 30, 1997, compared to 69 days at
December 31, 1996. Included in days outstanding in accounts receivable are
approximately 25 days resulting from the delay in collection of the Medicare
accounts receivable. The additional increase in days outstanding in accounts
receivable is the result of unbilled tests due to missing patient information
caused principally by required medical necessity documentation. The Company is
continuing its efforts to reduce days outstanding, principally by collecting its
Medicare accounts receivable and by working its aged and unbilled accounts
receivable.
On April 30, 1997, the Company replaced its existing credit facility with a new
credit facility which includes a $9.5 million revolving line of credit, a $3.0
million acquisition line and a $2.5 million letter of credit facility.
Borrowing levels under the revolving line of credit are based on accounts
receivable, inventory and fixed asset balances. As of September 30, 1997,
permitted borrowings under the new revolving line of credit were $7,198,944, all
of which was outstanding under the line. Under the credit facility the Company
is required to maintain certain financial covenants including a current ratio of
1.25 to 1; a consolidated leverage ratio of 7 to 1 through September 29, 1997, 5
to 1 through June 29, 1998 and 3 to 1 thereafter; a consolidated funded debt to
total capitalization ratio of .75 to 1 through September 29, 1997, .70 to 1
through December 30, 1997 and .60 to 1 thereafter; and a consolidated debt
service coverage ratio of 1 to 1 through September 30, 1997 and 1.25 to 1
thereafter. The Bank has waived compliance with the current ratio covenant
through June 30, 1997 and consolidated funded debt to total capitalization ratio
covenant through September 30, 1997. Borrowing under the acquisition line was at
the discretion of the bank. The line of credit bears interest from .5% below to
12
<PAGE> 13
1.00% above the prime rate or from 2% to 3.75% above the LIBOR rate. The
interest rate on the line of credit at September 30, 1997 was 9.5%. Borrowings
under the credit facility are collateralized by substantially all of the assets
of the Company and its subsidiaries (including the stock of the Company's
managed care subsidiaries), except for the assets of the Company's managed care
subsidiaries. The Company has recently completed an extension of its credit
facility through August 31, 1999. The acquisition line and letter of credit
facility expires on June 30, 1998. Borrowing under the acquisition line is at
the discretion of the bank.
The ratio of debt to capital was 44.9% at September 30, 1997 and 43.4% at
December 31, 1996. This increase is principally due to increased borrowings
under the Company's new credit facility and the impact of the net loss in the
first nine months of 1997.
The Company expects to incur capital expenditures of approximately $.6 million
during the remainder of 1997 for computer systems and new laboratory equipment.
The Company expects to fund its working capital needs, capital expenditures
required for the operation of its business and debt service requirements from
its operating cash flow, including cash flow from its subsidiary conducting
managed care operations in Michigan, and capitalized leases. From time to time
the Company's managed care subsidiaries may not be able to make cash
distributions to the Company at levels required to fully fund the Company's
operating cash flow needs without violating applicable regulatory requirements.
The Company's managed care subsidiary operating in the State of Michigan (the
"Michigan Managed Care Subsidiary") proposes to enter into an agreement with the
Michigan Insurance Bureau ("MIB") agreeing not to engage in certain transactions
which result in the transfer of cash to affiliates without thirty (30) days
prior notice to the MIB and provided that the MIB does not disapprove such
transactions within such thirty (30) day period. As a result, future cash
transfers from the Michigan Managed Care to the Company are likely to be limited
to payments for services rendered and dividends payable from the Michigan
Managed Care Subsidiary's earned surplus, which is more limited than cash
transfers made in the past. Accordingly, the cash needs of the Company's
laboratory operations will have to be funded from their own operations and the
operation of the Company's unregulated managed care subsidiaries. As a result
of the Company's revenue enhancement initiatives and the reengineering and cost
reduction efforts implemented to date and in the future by the Company, the
Company believes its laboratory operations will generate increased levels of
operating cash flow. The Company expects its managed care subsidiaries,
including the Michigan Managed Care Subsidiary, to generate sufficient operating
cash to fund their current operations and planned expansion. The foregoing
statements may be "forward looking statements" within the meaning of the
Securities Exchange Act of 1934. The Company's ability to generate additional
operating cash flow involves a number of uncertainties. For example, the
Company's revenue enhancement initiatives may not be successful in generating
new revenues or, if successful, such new revenues may not be at the level
required to offset decreases in revenues, particularly if third party
reimbursement levels continue to decrease or the Company continues to experience
declines in patient visits or fee-for-service revenue per patient visit as
described above under "Results of Operations - Net Revenue". In addition, the
Company's operating cash flow could be negatively affected by a number of other
factors, including the impact of reengineering/cost reduction efforts on
revenues, potential offsetting increases in operating expenses, variations in
cost savings from, and timing of, the Company's reengineering/cost reduction
efforts from those anticipated, the impact on revenues and expenses of
governmental and third-party payor requirements and reimbursement levels, the
impact on the Company of recent and continuing changes in the health
13
<PAGE> 14
care industry, and the competitive nature of the laboratory industry. In the
event that the Company's laboratory operations and unregulated managed care
subsidiaries do not generate cash levels to the extent required to fund their
operations, the Company will need to obtain additional financing to meet its
operating cash needs or consider disposition of assets or curtailment of
operations.
The Company has from time to time experienced compliance reviews, including
reviews of its billing practices, by its third-party payors. The Company has not
yet received final determination notices or decision letters relating to
compliance reviews in process by two of its larger third-party payors. The
ultimate effect, if any, of these compliance reviews cannot be determined at
this time and no liability has been accrued by the Company.
In connection with the acquisition of the Company's predecessor (the
"Predecessor"), the Company has agreed to indemnify the Predecessor and its
shareholders (including certain officers and shareholders of the Company) under
certain circumstances for income tax liabilities arising from such acquisition
and indemnification. On July 13, 1995, the Predecessor and its shareholders
received notices of deficiency from the Internal Revenue Service ("IRS"). The
IRS deficiency assessments relating to the acquisition totaled approximately
$4.9 million, excluding interest and penalties which could be assessed. In
October 1995, the Company (pursuant to its rights under the related acquisition
agreement) filed petitions with the United States Tax Court contesting the
deficiency. The Company believes that the acquisition has been treated properly
for federal income tax purposes and intends to vigorously defend its position.
In August, 1996 the Company received a thirty-day demand letter from the IRS
proposing adjustments to the Company's federal income taxes for the years 1991 -
1994 totaling $3.3 million. The proposed adjustments principally relate to the
timing of certain bad debt deductions and claim expense accruals and the
deductibility of certain sign on bonus and non-compete payments made in
connection with the Predecessor acquisition. The Company has filed a written
protest with the IRS appeals office regarding this matter.
There can be no assurance that the Company will resolve these disputes with the
IRS in a manner favorable to the Company. The failure to resolve the disputes
with the IRS in a manner favorable to the Company would result in a current
period charge to earnings and would have a material adverse effect on the
business, financial condition, including working capital, and results of
operations of the Company. The ultimate effect of these matters on the Company,
if any, cannot be determined at this time. The foregoing statement may be a
"forward looking statement" within the meaning of the Securities Exchange Act of
1934. The outcome of these disputes with the IRS involves a number of
uncertainties, including those inherent in interpreting and applying the
Internal Revenue Code and other federal income tax authority and precedent to
actual transactions, those relating to the valuation of various assets at the
time of the acquisition and those inherent in pursuing any legal action of the
type instituted by the Company. The Company has not accrued a liability
relating to the deficiency assessments or proposed tax adjustments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
14
<PAGE> 15
PART II. OTHER INFORMATION
<TABLE>
<S><C>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 (a) Certificate of Amendment to the Articles of Incorporation of
the Company effective August 25, 1997 and Restated Articles of
Incorporation of the Company.
3.2 (a) Bylaws of the Company Amended and Restated August 25, 1997.
4.1 Waiver of Loan Agreement Covenants between National Bank of
Detroit and the Company dated November 5, 1997.
4.2 First Amendment to Revolving Credit and Loan Agreement between
National Bank of Detroit and the Company dated September 26,
1997.
10.1 Employment Agreement between Universal Standard Medical
Laboratories, Inc. and Alan S. Ker dated August 4, 1997.
10.2 Employment Agreement between Universal Standard Medical
Laboratories, Inc. and Perry C. McClung dated June 28, 1997*.
10.3 Universal Standard Healthcare, Inc. 1992 Stock Option Plan, as
Amended and Restated August 25, 1997.
10.4 Universal Standard Healthcare, Inc. Employee Stock Purchase
Plan (as Amended and Restated August 25, 1997).
10.5 Universal Standard Healthcare, Inc. Directors Stock Option Plan
(as Amended and Restated August 25, 1997).
10.6 Fifth Amendment to the Universal Standard Medical Laboratories,
Inc. Tax Deferred Savings Plan effective August 4, 1997.
10.7 Form of Executive Non-Competition and Restrictive Covenant
Agreement.
10.8 Universal Standard Medical Laboratories, Inc. Agreement for
Incentive Stock Option Award Program Incentive Stock
Option Agreement for Alan Ker dated September 27, 1996.
10.9 Executive Form of Universal Standard Medical Laboratories, Inc.
Agreement for Incentive Stock Option Award Program Incentive/
Non-Qualified Stock Option Agreement dated September 27, 1996.
10.10 Universal Standard Medical Laboratories, Inc. Agreement for
Incentive Stock Option Award Program Incentive Stock Option
Agreement for Perry McClung dated May 14, 1997.
11. Computation of Consolidated Net Income Per Common Share
27. Financial Data Schedule
* Portions of Attachment A to this Agreement were filed
separately with the Commission pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934 governing requests for
confidential treatment of information.
(b) Reports on Form 8-K. None.
</TABLE>
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL STANDARD HEALTHCARE, INC.
(Registrant)
Date: November 14, 1997 Eugene Jennings
-----------------------------
Eugene Jennings
President and Chief Executive Officer
Date: November 14, 1997 Alan S. Ker
-----------------------------
Alan S. Ker
Vice President, Finance,
Chief Financial Officer
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ -----------
<S> <C>
3.1 (a) Certificate of Amendment to the Articles of Incorporation of
the Company effective August 25, 1997 and Restated Articles of
Incorporation of the Company.
3.2 (a) Bylaws of the Company Amended and Restated August 25, 1997.
4.1 Waiver of Loan Agreement Covenants between National Bank of
Detroit and the Company dated November 5, 1997.
4.2 First Amendment to Revolving Credit and Loan Agreement between
National Bank of Detroit and the Company dated September 26,
1997.
10.1 Employment Agreement between Universal Standard Medical
Laboratories, Inc. and Alan S. Ker dated August 4, 1997.
10.2 Employment Agreement between Universal Standard Medical
Laboratories, Inc. and Perry C. McClung dated June 28, 1997*.
10.3 Universal Standard Healthcare, Inc. 1992 Stock Option Plan, as
Amended and Restated August 25, 1997.
10.4 Universal Standard Healthcare, Inc. Employee Stock Purchase
Plan (as Amended and Restated August 25, 1997).
10.5 Universal Standard Healthcare, Inc. Directors Stock Option Plan
(as Amended and Restated August 25, 1997).
10.6 Fifth Amendment to the Universal Standard Medical Laboratories,
Inc. Tax Deferred Savings Plan effective August 4, 1997.
10.7 Form of Executive Non-Competition and Restrictive Covenant
Agreement.
10.8 Universal Standard Medical Laboratories, Inc. Agreement for
Incentive Stock Option Award Program Incentive Stock Option
Agreement for Alan Ker dated September 27, 1996
10.9 Executive Form of Universal Standard Medical Laboratories, Inc.
Agreement for Incentive Stock Option Award Program Incentive/
Non-Qualified Stock Option Agreement dated September 27, 1996.
10.10 Universal Standard Medical Laboratories, Inc. Agreement for
Incentive Stock Option Award Program Incentive Stock Option
Agreement for Perry McClung dated May 14, 1997
11. Computation of Consolidated Net Income Per Common Share
27. Financial Data Schedule
* Portions of Attachment A to this Agreement were filed
separately with the Commission pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934 governing requests for
confidential treatment of information.
</TABLE>
<PAGE> 1
EXHIBIT 3.1(a)
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
(a Michigan corporation)
Pursuant to the provision of Act 284, public Acts of 1972, as amended,
the undersigned corporation executes the following certificate:
1. The present name of the Corporation is UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
2. The corporation identification number (CID) assigned by the Bureau is:
301-181.
3. The location of its registered office is: 26500 Northwestern Highway,
Southfield, Michigan 48076.
4. Article I of the Articles of Incorporation is hereby amended to read
as follows:
ARTICLE I
THE PRESENT NAME OF THE CORPORATION IS UNIVERSAL STANDARD HEALTHCARE, INC.
5. This amendment is to be effective on August 25, 1997 at 9:00 a.m.
The foregoing amendment to the Articles of Incorporation was duly
adopted on the 20th day of June, 1997 by vote of the shareholders in accordance
with section 611(2) of the Act. The necessary votes were cast in favor of the
amendment.
Signed this 18th day of August, 1997.
By: /s/ Eugene E. Jennings
-------------------------------------------------
Its: President
<PAGE> 2
EXHIBIT 3.1(a)
RESTATED ARTICLES OF INCORPORATION
OF
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
(domestic profit corporation)
Pursuant to the provisions of Act 284, Public Acts of 1972, as
amended, the undersigned corporation executes the following Restated Articles
of Incorporation:
1. The present name of the corporation is: UNIVERSAL STANDARD
MEDICAL LABORATORIES, INC.
2. The corporation identification number ("CID") assigned by the
Bureau is: 301-181.
3. All former names of the corporation are: Elan Medical
Diagnostics, Inc.; and Universal-Metric Laboratories, Inc.
4. The date of filing of the original Articles of Incorporation
was: October 16, 1990. The original Articles of Incorporation were
subsequently amended by a Certificate of Amendment to the Articles of
Incorporation filed on April 11, 1991, a Certificate of Amendment filed on May
6, 1991, and a Certificate of Designations filed on June 28, 1991. Restated
Articles of Incorporation were filed on June 28, 1991, as amended by a
Certificate of Amendment filed on July 2, 1991.
The following Restated Articles of Incorporation supersede the
Articles of Incorporation, as amended, and shall be the Articles of
Incorporation for the corporation:
ARTICLE I
Name
The name of the corporation is UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
1
<PAGE> 3
ARTICLE II
Purpose
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Michigan Business Corporation Act, as amended (the "MBCA").
ARTICLE III
Authorized Shares
The total authorized shares of stock which the corporation shall have
authority to issue is 20,000,000, all of which shares shall be Common Stock
(hereinafter referred to as "Common Stock"). The shares of stock of the
corporation may be issued from time to time for such consideration as may be
fixed from time to time by the Board of Directors.
A statement of all or any of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof is as follows:
1. The holders of Common Stock are entitled to receive such
dividends as may be declared from time to time by the Board of
Directors.
2. In the event of any liquidation, dissolution, or winding up of
the corporation, the holders of Common Stock shall be entitled to
receive all of the remaining assets of the corporation available for
distribution.
3. The holders of Common Stock shall have equal voting and other
rights consistent with the MBCA and each holder of Common Stock is
entitled to one (1) vote for each share so held with respect to all
matters voted on by the shareholders of the corporation.
ARTICLE IV
Registered Office and Resident Agent
The address and mailing address of the registered office is The
Corporation Company, 615 Griswold, Suite 1020, Detroit, Michigan 48226.
The name of the resident agent is The Corporation Company.
ARTICLE V
Election of Directors
A. The number of directors of the corporation shall be determined
by and provided for in the manner set forth in the Bylaws of the corporation,
but shall not for any time be less than seven (7), and at least two (2) of the
directors shall be Independent Directors. For purposes
2
<PAGE> 4
of these Restated Articles of Incorporation an Independent Director
shall mean a director who meets all of the following requirements:
1. Is elected by the shareholders.
2. Is designated as an Independent Director by
resolution of the Board.
3. Is not any of the following:
(A) An officer or employee of the corporation or
any Affiliate (as defined in Article X of
these Restated Articles of Incorporation) of
the corporation.
(B) An individual having a relationship which, in
the opinion of the Board, would interfere
with the exercise of independent judgment in
carrying out the responsibilities of a
director.
B. The directors shall be classified, with respect to the time
for which they severally hold office, into three (3) classes, as nearly equal
in number as reasonably possible, with the term of office of the first class to
expire initially at the 1993 annual meeting of shareholders, the term of office
of the second class to expire initially at the 1994 annual meeting of
shareholders, the term of office of the third class to expire initially at the
1995 annual meeting of shareholders, and with the directors of each class to
hold office until their successors are duly elected and qualified. At each
annual meeting of shareholders following such classification and election,
directors elected to succeed those directors whose terms expire shall be
elected for a term of office to expire at the third annual meeting of
shareholders after their election.
C. Advance notice of nominations for the election of directors,
other than by the Board or a committee thereof, shall be given in the manner
provided in the Bylaws.
D. All elections of directors by shareholders shall be determined
by a vote of a majority of the shares present in person or represented by proxy
and voting on such elections.
E. A newly created directorship resulting from any increase in
the authorized number of directors and any vacancies on the Board resulting
from death, resignation, retirement, disqualification, removal from office or
other cause shall be filled only by a majority vote of the remaining directors
then in office though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of shareholders at which the
term of office of the class to which they have been elected expires or until
their successors have been duly elected and qualified. No decrease in the
number of directors constituting the Board shall shorten the term of any
incumbent director.
3
<PAGE> 5
F. Any director, or the entire Board, may be removed from office
at any time, but only for cause and only by the affirmative vote of the holders
of at least a majority of the voting power of all of the then outstanding
shares of capital stock of the corporation entitled to vote generally in the
election of directors, voting together as a single class at a duly convened
meeting of the shareholders.
G. Election of the corporation's directors need not be by written
ballot unless the corporation's Bylaws shall so provide.
ARTICLE VI
Bylaws
The provisions for the regulation of the Corporation's internal
affairs are to be stated in the corporation's Bylaws, as the same may be
amended from time to time.
ARTICLE VII
Limitation of Director Liability
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that the foregoing shall not eliminate or limit
the liability of a director for any of the following: (i) breach of the
director's duty of loyalty to the corporation or its shareholders; (ii) acts or
omissions not in good faith or that involve intentional misconduct or knowing
violation of law; (iii) a violation of Section 551(1) of the MBCA; (iv) a
transaction from which the director derived an improper personal benefit; or
(v) an act or omission occurring prior to October 16, 1990 (i.e. the date of
filing of the original Articles of Incorporation).
If the MBCA hereinafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of
a director of the corporation, in addition to the limitation on personal
liability contained herein, shall be limited to the fullest extent permitted by
the amended MBCA.
No amendment or repeal of this Article VII shall apply to or have any
effect on the liability or alleged liability of any director of the corporation
for or with respect to any acts or omissions of such director occurring prior
to such amendment or repeal.
ARTICLE VIII
Certain Shareholder Rights
A. Any action required or permitted by the MBCA to be taken at
any annual or special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote, if consents in writing, setting for
the action so taken, are signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to
4
<PAGE> 6
authorize or take the action at a meeting at which all shares entitled to vote
thereon were present and voted. The written consents shall bear the date of
signature of each shareholder who signs the consents. No written consents
shall be effective to take the corporate action referred to unless, within 60
days after the record date for determining shareholders entitled to express
consent or to dissent from a proposal without a meeting, written consents
signed by a sufficient number of shareholders to take the action are delivered
to the corporation. Delivery shall be to the corporation's registered office,
its principal place of business, or an officer or agent of the corporation
having custody of the minutes of the proceedings of its shareholders. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to shareholders who have
not consented in writing.
B. Special meetings of the shareholders of the corporation may be
called by the Board of Directors, such person or persons as may be authorized
to call a special meeting by the corporation's Bylaws, or holders of a majority
of the Common Stock. The holders of a majority of the Common Stock shall
constitute a quorum at all meetings of Shareholders. When a quorum is present
or represented by proxy at any meeting, the vote of the holders of a majority
of the Common Stock present in person or represented by proxy and voting shall
decide any question brought before the meeting, except as otherwise provided by
these Restated Articles of Incorporation, the Bylaws or by law. All Common
Stock shall be entitled to one vote per share on any matter submitted to a vote
of shareholders. All proxies, ballots, votes and tabulations that identify the
particular vote of holders of Common Stock shall be confidential and shall not
be disclosed except (i) to independent election inspectors appointed by the
corporation, who shall not be directors, officers, or employees of the
corporation, (ii) as required by law, or (iii) when expressly requested by the
voting shareholder.
C. No holder of the corporation's shares of any class, now or
hereafter authorized, shall have any preferential or preemptive right to
subscribe for, purchase or receive any shares of the corporation of any class,
now or hereafter authorized, or any options or warrants for any securities
convertible into or exchangeable for such shares, that may at any time or from
time to time be issued, sold or offered for sale by the corporation; provided,
however, that in connection with the issuance or sale of any such shares,
options, warrants or securities, the Board may, in it sole discretion, offer
such shares, options, warrants or securities, or any part thereof, for purchase
or subscription by the holders of shares of the corporation.
ARTICLE IX
Certain Authority of Directors
A. In addition to the rights, powers, privileges and
discretionary authority expressly conferred by statute upon the Board, the
Board is hereby authorized and empowered to adopt, amend and repeal the Bylaws
of the corporation and to exercise any and all powers and
5
<PAGE> 7
privileges and to do any and all acts and things as may at any time or from
time to time be exercised or done by the corporation; subject, nevertheless, to
the provisions of the statutes of the State of Michigan of these Restated
Articles of Incorporation, and of any Bylaws of the corporation from time to
time adopted; provided, however, that no Bylaw so adopted shall serve to
invalidate any prior action of the Board which would have been valid if such
Bylaw had not been adopted.
B. Any adoption, amendment or repeal of the corporation's Bylaws
shall be effected in the manner provided in the Bylaws.
ARTICLE X
Business Combinations and Control Share Acquisitions
A. The corporation shall not be governed by Chapters 7A and 7B of
the MBCA.
B. The corporation shall not purchase, directly or indirectly, at
a price above Market Price (as hereinafter defined), any shares of any class,
now or hereafter authorized, of the corporation's capital stock from any
Selling Shareholder (as hereinafter defined) or any Affiliate or Associate (as
hereinafter defined) of a Selling Shareholder, unless such purchase has been
approved in advance by an affirmative vote of the holders of at least a
majority of the voting power of all of the outstanding shares of capital stock
of the corporation held by shareholders other than the Selling Shareholder or
any Affiliate or Associate of the Selling Shareholder who is, or whose
Affiliate or Associate is, a party to the transaction described in this Section
B being voted upon, voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage may be specified, by law or any agreement with any
national securities exchange, or otherwise but no such affirmative vote shall
be required with respect to any purchase or other acquisition of securities
made as part of a tender or exchange offer by the corporation to purchase
securities of the same class made on the same terms to all holders of such
securities and complying with the applicable requirements of the Securities
Exchange Act of 1934 ("1934 Act") and the rules and regulations thereunder as
then in effect.
C. For purposes of this Article X:
(a) "Selling Shareholder" shall mean any Person (other
than the corporation or any Subsidiary (as hereinafter
defined)) who or which proposes to sell to, or cause to be
acquired by, the corporation all or any portion of the capital
stock of the corporation then beneficially owned, directly or
indirectly, by such Person and who or which:
(i) is the beneficial owner, directly or indirectly, of
3% or more of the class of capital stock to be
acquired; or
6
<PAGE> 8
(ii) is an Affiliate of the corporation and at any time
within the two year period immediately prior to
the date in question was the beneficial owner,
directly or indirectly, of 3% or more of the class
of capital stock to be acquired; or
(iii) is an assignee or has otherwise succeeded to any
shares of the class of shares to be acquired which
were at any time within the two-year period
immediately prior to the date in question
beneficially owned by a Selling Shareholder, if
such assignment or succession shall have occurred
in the course of a transaction or transactions not
involving a public offering within the meaning of
the Securities Act of 1933, as amended.
(b) "Person" shall mean any individual, firm,
corporation or other entity and shall include any
group comprising any Person with whom such Person
or any Affiliate or Associate of such Person has
any agreement, arrangement or understanding,
directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of the
corporation's capital stock.
(c) A Person shall be a "beneficial owner" of or shall
"beneficially own" any shares:
(i) which such Person or any of its Affiliates
or Associates beneficially owns, directly
or indirectly, within the meaning of Rule
13d-3 of the General Rules and Regulations
under the 1934 Act, as in effect on the
effective date of these Restated Articles
of Incorporation; or
(ii) which such Person or any of its Affiliates
or Associates has (a) the right to acquire
(whether such right is exercisable
immediately or only after the passage of
time), pursuant to any agreement,
arrangement or understanding or upon the
exercise of conversion rights, exchange
rights, warrants or options, or otherwise,
or (b) the right to vote pursuant to any
agreement, arrangement or understanding;
or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which
such Person or any of its Affiliates or
Associates has any agreement, arrangement
or understanding for the purpose of
acquiring, holding, voting or disposing of
such shares.
(d) "Market Price" shall mean the average closing sale
price during the 30-day period immediately
preceding the date in question of a share of the
7
<PAGE> 9
corporation's capital stock on the principal
United States securities exchange registered under
the 1934 Act on which such stock is listed, or, if
such stock is not listed on any such exchange, the
average closing bid quotation with respect to a
share of such stock during the 30-day period
immediately preceding the date in question on the
National Association of Securities Dealers, Inc.
Automated Quotations System or any comparable
system then in use, or if no such quotations are
available the fair market value on the date in
question of a share of such stock as determined in
good faith by a majority of the directors.
(e) An "Affiliate" of a specified Person, is a Person
that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or
is under common control with, the Person
specified. The term"control" (including the terms
"controlling", "controlled by" and "under common
control with") means the possession, direct or
indirect, of the power to direct or cause the
direction of the management and policies of a
Person, whether through the ownership of voting
capital stock, by contract, or otherwise.
(f) An "Associate" of a specified Person means (i) any
corporation or organization (other than the
corporation or a Subsidiary) of which such Person
is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent
(10%) or more of any class of capital stock, (ii)
any trust or other estate in which such Person has
a substantial beneficial interest or as to which
such Person serves as trustee or in a similar
fiduciary capacity, or (iii) any relative or
spouse of such Person, or any relative of such
spouse, who has the same residence as such Person
or who is a director or officer of the corporation
or a Subsidiary.
(g) Nothing contained in this Article X shall be
construed to relieve any Selling Shareholder or
any other Person from any fiduciary obligation
imposed by law.
(h) The Board shall have the power and duty to
construe and interpret this Article X, including,
without limitation (i) whether a Person is a
Selling Shareholder, (ii) whether a Person is an
Affiliate or Associate of another, (iii) whether
Section B of this Article X is or has become
applicable in respect of a proposed transaction,
(iv) what the Market Price is and whether a price
is above Market Price, and (v) when or whether a
purchase or agreement to purchase any share or
shares of any of the capital stock of the
corporation has occurred and when or whether a
Person has become a beneficial owner of any of the
corporation's shares.
8
<PAGE> 10
(i) "Subsidiary" means any corporation of which a
majority of each class of voting capital stock is
owned, directly or indirectly, by the corporation.
(j) Notwithstanding any other provision of these
Restated Articles of Incorporation or the
corporation's Bylaws (and notwithstanding the fact
that a lesser percentage or separate class vote
may be specified by law, these Restated Articles
of Incorporation or the corporation's Bylaws, the
affirmative vote (excluding votes cast by the
Selling Shareholder or its Affiliate or Associate
who is, or whose Associate or Affiliate is, a
party to the transaction described in Section B of
this Article X being voted upon) of the holders of
at least 66-2/3% of the voting power of all
outstanding capital stock, voting together as a
single class, shall be required to amend, repeal
or adopt any provision inconsistent with this
Article X.
3. In the event that a purchase of shares of any
capital stock by the corporation is subject to and governed by
paragraph B of this Article X and such capital stock is listed on a
national securities exchange, including the National Association of
Securities Dealers, Inc. Automated Quotations Systems, the purchase of
such capital stock, in addition to satisfying all other requirements
of this Article X, shall be made on the open market and not as the
result of a privately negotiated transaction.
ARTICLE XI
1. The Board reserves the right to amend, alter,
change or repeal any provision contained in these Restated Articles of
Incorporation in the manner prescribed by the laws of the State of
Michigan, except that no amendment which would increase or decrease
the aggregate number of authorized shares of a class of shares of the
corporation may be made unless approved by the affirmative vote of the
holders of at least 50% of the then-outstanding shares of such class,
and no amendment which would change any powers, preferences or rights
with respect to any class or series of shares of the corporation,
including but not limited to reducing the amounts payable thereon upon
liquidation of the corporation or diminishing or eliminating any
voting rights pertaining thereto, may be made unless approved by the
affirmative vote of the holders of at least 50% of the
then-outstanding shares of such class or series of shares of the
corporation, and all rights, powers, privileges and discretionary
authority granted or conferred upon shareholders or directors herein
are granted subject to this reservation.
2. Notwithstanding any provision in these Restated
Articles of Incorporation or any provision of law which might
otherwise require a lesser vote or no vote, but in addition to any
vote of the holders of any class or series of the corporation's
capital stock required by these Restated Articles of Incorporation or
by law, the affirmative vote of the holders of at least 80% of the
voting power of all the then-outstanding shares of the corporation's
capital stock entitled to vote generally in the election of directors,
voting
9
<PAGE> 11
together as a single class, shall be required to amend or repeal, or
to adopt any provision inconsistent with, Article X and this Article
XI.
3. These Restated Articles of Incorporation were duly
adopted on the 31st day of August, 1992, in accordance with the
provisions of Section 642 of the MBCA and were duly adopted by the
written consent of all the shareholders entitled to vote in accordance
with Section 407(2) of the MBCA.
10
<PAGE> 1
EXHIBIT 3.2(a)
BYLAWS
OF
UNIVERSAL STANDARD HEALTHCARE, INC.
AMENDED AND RESTATED AUGUST 25, 1997
ARTICLE I
OFFICES
1.01 Principal Office. The principal office of the corporation shall
be at such place within the State of Michigan as the Board of Directors shall
determine from time to time.
1.02 Other Offices. The corporation also may have offices at such
other places as the Board of Directors from time to time determines or the
business of the corporation requires.
ARTICLE II
SEAL
2.01 Seal. The corporation may, but is not required to, have a seal in
such form as the Board of Directors may from time to time determine. The seal
may be used by causing it or a facsimile to be impressed, affixed, reproduced
or otherwise.
ARTICLE III
CAPITAL STOCK
3.01 Issuance of Shares. The shares of capital stock of the
corporation shall be issued in such amounts, at such times, for such
consideration and on such terms and conditions as the Board shall deem
advisable, subject to the Articles of Incorporation and any requirements of the
laws of the State of Michigan.
3.02 Certificates for Shares. The shares of the corporation shall be
represented by certificates signed by the Chairman of the Board, President or a
Vice President and which also may be signed by the Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary of the corporation, and may be
sealed with the seal of the corporation or a facsimile thereof. A certificate
representing shares shall state upon its face that the corporation is formed
under the laws of the State of Michigan, the name of the person to whom it is
issued, the number and class of shares, and the designation of the series, if
any, which the certificate represents, and such other provisions as may be
required by the laws of the State of Michigan.
3.03 Transfer of Shares. The shares of the capital stock of the
corporation are transferable only on the books of the corporation upon
surrender of the certificate thereto, endorsed for transfer, and the
presentation of such evidences of ownership and validity of the assignment as
the corporation may require.
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3.04 Registered Shareholders. The corporation shall be entitled to
treat the person in whose name any share of stock is registered as the owner
thereof for purposes of dividends and other distributions in the course of
business, or in the course of recapitalization, merger, plan of share exchange,
reorganization, sale of assets, liquidation or otherwise and for the purpose of
votes, approvals and consents by shareholders, and for the purpose of notices
to shareholders, and for all other purposes whatever, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not the corporation shall have notice
thereof, save as expressly required by the laws of the State of Michigan.
3.05 Lost or Destroyed Certificates. Upon the presentation to the
corporation of a proper affidavit attesting the loss, destruction or mutilation
of any certificate or certificates for shares of stock of the corporation, the
Board of Directors shall direct the issuance of a new certificate or
certificates to replace the certificates so alleged to be lost, destroyed or
mutilated. The Board of Directors may require as a condition precedent to the
issuance of new certificates a bond or agreement of indemnity, in such form and
amount and with such sureties, or without sureties, as the Board of Directors
may direct or approve.
ARTICLE IV
SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS
4.01 Place of Meetings. All meetings of shareholders shall be held
at the principal office of the corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of meeting.
4.02 Annual Meeting. The annual meeting of the shareholders of the
corporation shall be held in the fifth calendar month after the end of the
corporation's fiscal year, or at such other date as the Board of Directors
shall determine from time to time, and shall be held at such place and time of
the day as shall be determined by the Board of Directors from tine to time.
Directors shall be elected at each annual meeting and such other business
transacted as may come before the meeting.
4.03 Special Meetings. Special meetings of shareholders may be
called by the Board of Directors, the Chairman of the Board (if such office is
filled) or the President and shall be called by the President or Secretary at
the written request of shareholders holding a majority of the shares of stock
of the corporation outstanding and entitled to vote. The request shall state
the purpose or purposes for which the meeting is to be called.
4.04 Notice of Meetings. Except as otherwise provided by statute,
written notice of the time, place and purposes of a meeting of shareholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each shareholder of record entitled to vote at the
meeting, either personally or by mailing such notice to his last address as it
appears on the books of the corporation. No notice need be given of an
adjourned meeting of the shareholders provided the time and place to which such
meeting is adjourned are announced at the meeting at which the adjournment is
taken and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting. However, if after the
adjournment a new record date is fixed
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for the adjourned meeting a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled to notice as
provided in these Bylaws.
4.05 Record Dates. The Board of Directors my fix in advance a date
as the record date for the purpose of determining shareholders entitled to
notice of and to vote at a meeting of shareholders or an adjournment thereof,
or to express consent or to dissent from a proposal without a meeting, or for
the purpose of determining shareholders entitled to receive payment of a
dividend or allotment of a right, or for the purpose of any other action. The
date fixed shall not be more than sixty (60) nor less than ten (10) days before
the date of the meeting, nor more than sixty (60) days before any other action.
In such case only such shareholders as shall be shareholders of record on the
date so fixed shall be entitled to notice of and to vote at such meeting or
adjournment thereof, or to express consent or to dissent from such proposal, or
to receive payment of such dividend or to receive such allotment of rights, or
to participate in any other action, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation, or otherwise, after any
such record date. Nothing in this Bylaw shall affect the rights of the
shareholder and his transferee or transferor as between themselves.
4.06 List of Shareholders. The Secretary of the corporation or the
agent of the corporation. having charge of the stock transfer records for
shares of the corporation shall make and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof at least 10 days (but not more than 60 days) prior thereto. The list:
shall be arranged alphabetically within each class and series, with the address
of, and the number of shares held by, each shareholder; shall be produced at
the time and place of the meeting; shall be subject to inspection by any
shareholder during the whole time of the meeting; and shall be prima facie
evidence as to who are the the shareholders entitled to examine the list or
vote at the meeting.
4.07 Quorum. Unless a greater or lesser quorum is required by the
laws of the State of Michigan, the shareholders present at a meeting in person
or by proxy who, as of the record date for such meeting, were holders of a
majority of the outstanding shares of the corporation entitled to vote at the
meeting shall constitute a quorum at the meeting. Whether or not a quorum is
present, a meeting of shareholders may be adjourned by a vote of the shares
present in person or by proxy. When the holders of a class or series of shares
are entitled to vote separately on an item of business, this Bylaw applies in
determining the presence of a quorum of such class or series for transaction of
such item of business.
4.08 Proxies. A shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
other persons to act for the shareholder by proxy. A proxy shall be signed by
the shareholder or the shareholder's authorized agent or representative and
shall not be valid after the expiration of three years from its date unless
otherwise provided in the proxy. A proxy is revocable at the pleasure of the
shareholder executing it except as otherwise provided by the laws of the State
of Michigan.
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4.09 Voting.
(a) At any meeting of shareholders every shareholder having the
right to vote shall be entitled to vote in person or by proxy
authorized by an instrument in writing filed in accordance with the
procedure established for the meeting. Except as otherwise
provided by law or by the Articles, each shareholder of record
shall be entitled to one vote (on each matter submitted to a vote)
for each share of capital stock registered in his name on the books
of the corporation.
(b) All elections of directors and, except as otherwise
provided by law or by the Articles, all other matters, shall be
determined by a vote of a majority of the shares present in person
or represented by proxy and voting on such other matters.
(c) All voting, including on the election of directors but
excepting where otherwise required by law, may be by a voice vote;
provided, however, that upon demand therefor by a shareholder
entitled to vote or his proxy, a written share vote shall be
taken. Every written share vote shall be taken by ballots, each of
which shall state the name of the shareholder or proxy voting and
such other information as my be required under the procedure
established for the meeting. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of
the meeting.
(d) The corporation shall solicit proxies and provide proxy
statements for all meetings of shareholders and shall provide
copies of such proxy solicitation to any national securities
exchange ("Exchange") on which the corporation's shares are listed,
including the National Association of Securities Dealers Inc.
Automated Quotations Systems-National Market System ("NASDAQ/NMS").
4.10 Notice of Shareholder Business. At any annual or special meeting of
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a meeting, business
must be (a) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board, (b) properly brought before the
meeting by or at the direction of the Board, or (c) properly brought before an
annual meeting by a shareholder, and if and only if the notice of a special
meeting provides for business to be brought before the special meeting by
shareholders, properly brought before the special meeting by a shareholder.
For business to be properly, brought before a meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the secretary
of the corporation. To be timely, a shareholder's notice must be delivered to
or mailed and received at the principal executive offices of the corporation
not less than 90 days prior to the meeting; provided, however, that if less
than 100 days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Furthermore, shareholders are not permitted to nominate
individuals
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to serve as directors, unless notice of such nomination is given to the
corporation in accordance with Section 5.09 of these Bylaws. A shareholder's
notice to the secretary shall set forth as to each matter the shareholder
proposes to bring before the meeting: (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (b) the name and address, as they appear on the
corporation's books, of the shareholder proposing such business; (c) the class
and number of shares of the corporation which are beneficially owned by the
shareholder; and (d) any material interest of the shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any meeting of shareholders except in accordance with the
procedures set forth in this Section 4.10. The chairman of meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 4.10, and if he should so determine, he shall so declare that the
meeting and any such business not properly brought before the meeting shall not
be transacted. Notwithstanding anything in these Bylaws to the contrary, the
corporation shall be under no obligation to submit for action any shareholder
proposal at any meeting of shareholders, which proposal the corporation would
otherwise be permitted to omit in accordance with Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
ARTICLE V
DIRECTORS
5.01 Number and Eligibility. The business and affairs of the
corporation shall be managed by the Board. The number of directors
constituting the Board shall be that number fixed from time to time by the
Board; provided, however, that the number of directors shall not be less than
seven (7), and at least two of the directors shall be Independent Directors as
that term is defined in the corporation's Articles of Incorporation. The
directors need not be residents of Michigan or shareholders of the corporation.
5.02 Election, Resignation and Removal. The directors shall be
classified, with respect to the time for which they severally hold office, into
three (3) classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire initially at the 1993 annual
meeting of shareholders, the term of office of the second class to expire
initially at the 1994 annual meeting of shareholders, the term of office of the
third class to expire initially at the 1995 annual meeting of shareholders, and
with the directors of each class to hold office until their successors are duly
elected and qualified. At each annual meeting of shareholders following such
classification election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
annual meeting of shareholders after their election. A director may resign by
written notice to the corporation. The resignation is effective upon its
receipt by the corporation or a subsequent time as set forth in the notice of
resignation. A director or the entire Board of Directors may be removed from
office at any time but only for cause and only by vote of the holders of a
majority of the shares entitled to vote at an election of directors, voting
together as a single class at a duly convened meeting of the shareholders.
5.03 Vacancies. Vacancies in the Board of Directors occurring by
reason of death,
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resignation, removal, increase in the number of directors or otherwise shall be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. Each person so elected shall be
a director for a term of office expiring at the annual meeting of shareholders
at which the term of office of the class to which he has been elected expires
or until his successor has been duly elected and qualified. A vacancy that
will occur at a specific date, by reason of a resignation effective at a later
date or otherwise, may be filled before the vacancy occurs, but the newly
elected director may not take office until the vacancy occurs.
5.04 Annual Meeting. The Board of Directors shall meet each year
immediately after the annual meeting of the shareholders, or within three (3)
days of such time excluding Sundays and legal holidays if such later time is
deemed advisable, at the place where such meeting of the shareholders had been
held or such other place as the Board may determine, for the purpose of
election of officers and consideration of such business that may properly be
brought before the meeting; provided, that if less than a majority of the
directors appear for an annual meeting of the Board of Directors the holding of
such annual meeting shall not be required and the matters which might have been
taken upon therein may be taken up at any later special or annual meeting, or
by consent resolution.
5.05 Regular and Special Meetings. Regular meetings of the Board of
Directors may be held at such times and places as the majority of the directors
may from time to time determine at a prior meeting or as shall be directed or
approved by the vote or written consent of all the directors. Special meetings
of the Board may be called by the Chairman of the Board (if such office is
filled) or the President and shall be called by the President or Secretary upon
written request of any two directors.
5.06 Notices. No notice shall be required for annual or regular
meetings of the Board or for adjourned meetings, whether regular or special.
One (1) day's written notice shall be given for special meetings of the Board,
and such notice shall state the time, place and purpose or purposes of the
meeting.
5.07 Quorum and Voting. A majority of the Board of Directors then in
office, or of the members of a committee thereof, constitutes a quorum for the
transaction of business by the Board or the committee, as the case may be. The
vote of a majority of the directors present at any meeting at which there is a
quorum shall be the acts of the Board or of a committee, except as a larger
vote may be required by the laws of the State of Michigan or by the Articles of
Incorporation.
5.08 Participation via Communication Equipment. A member of the
Board or of a committee designated by the Board may participate in a meeting by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can communicate with each other.
Participation in a meeting in this manner constitutes presence person at the
meeting.
5.09 Nomination of Director Candidates. Nominations for the election
of directors my be made by: (a) the Board or a proxy committee appointed by
the Board or (b) any shareholder entitled
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to vote in the election of directors generally; provided, however, any
shareholder entitled to vote in the election of directors generally, may
nominate one or more persons for election as directors at a meeting only if
timely notice of such shareholder's intent to make such nomination or
nominations has been given in writing to the secretary of the corporation. To
be timely, a shareholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not fewer than 90 days
prior to the meeting; provided, however, that in the event that less than 100
days' notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must be so
received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Each such notice shall set forth: (a) the name and
address of the shareholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the shareholder is a
holder of record of stock of the corporation entitled to vote for the election
of directors on the date of such notice and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(c) a description of all arrangements or understanding between the shareholder
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board; and (e) the
consent of each nominee to serve as a director of the corporation if so
elected.
In the event that a person is validly designated as a nominee in
accordance with this Section 5.09 and shall thereafter become unable or
unwilling to stand for election to the Board, the Board or the shareholder who
proposed such nominee, as the case may be, may designate a substitute nominee
upon delivery, not fewer than 10 days prior to the date of the meeting for the
election of such nominee, of a written notice to the Secretary setting forth
such information regarding such substitute nominee as would have been required
to be delivered to the secretary pursuant to this Section 5.09 had such
substitute nominee been initially proposed as a nominee. Such notice shall
include a signed consent to serve as a director of the corporation, if elected,
of each such substitute nominee.
If the chairman of the meeting for the election of directors determines
that a nomination of any candidate for election as a director at such meeting
was not made in accordance with the applicable provisions of this Section 5.09,
such nomination shall be void.
5.10 Formation of Committees.
(a) The Board of Directors shall designate an Executive
Committee to exercise, subject to those limitations imposed by law, all powers
and authorities of the Board in the management of the business and affairs of
the corporation. The Board shall also designate an Audit Committee, a majority
of the members of which shall be Independent Directors as that term is defined
in the Articles, to exercise those powers and authorities designated to it by
the Board. The Executive Committee shall not exercise any powers and
authorities designated to the Audit
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Committee.
(b) The Board may, by resolution passed by a majority of the
entire Board, designate one or more other committees, with each committee
consisting of one or more directors of the corporation. The Board may
designate one or more directors as alternate members of any committee who may
replace any absent or disqualified member at any meeting of the committee
provided, however, that at all times two members of the Audit Committee shall
be Independent Directors. Except as prohibited by law, any such committee, to
the extent provided in the resolution, shall have and may exercise the powers
of the Board conferred upon such committee by the Board in the management of
the business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee
or committees shall have the name or names as may be determined from time to
time by resolution adopted by the Board.
5.11 Other Provisions Regarding Committees.
(a) The Board shall have the power at any time to fill vacancies in,
change the membership of, or discharge any committee.
(b) Members of any committee shall be entitled to such compensation
for their services as from time to time-may be fixed by the Board and in any
event shall he entitled to reimbursement of all reasonable expenses incurred in
attending committee meetings. Any member of a committee may waive compensation
for any meeting. No committee member who receives compensation as a member of
any one or more committees shall be barred from serving the corporation in any
other capacity or from receiving compensation and reimbursement of reasonable
expenses for any or all such other services.
(c) Unless prohibited by law, Section 5. 08 ("Participation via
Communication Equipment") of this Article V shall apply to all committees from
time to time created by the Board.
(d) Each committee may determine the procedural rules for meeting
and conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings. One-third (1/3) of the authorized
members shall constitute a quorum unless the committee shall consist of one or
two members, in which event one member shall constitute a quorum and all
matters shall be determined by a majority vote of the members present.
5.12 Dissents. A director who is present at a meeting of the Board of
Directors, or a committee thereof of which the director is a member, at which
action on a corporate matter is taken is presumed to have concurred in that
action unless the director's dissent is entered in the minutes of the meeting
or unless the director files a written dissent to the action with the person
acting as secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the corporation
promptly after the adjournment of the meeting. Such right to dissent does not
apply to a director who voted in favor of such action. A director who is
absent from a meeting of the Board, or a committee thereof of which the
director is a member, at which any
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such action is taken is presumed to have concurred in the action unless the
director files a written dissent with the Secretary of the corporation within a
reasonable time after the director has knowledge of the action.
5.13 Compensation. The Board of Directors may establish reasonable
compensation of directors for services to the corporation as directors or
officers.
5.14 Action Without a Meeting. Any action required permitted to be
taken at a meeting of the Board or a committee thereof may be taken without a
meeting and without a vote if all members of the Board or the committee, as the
case may be, consent to such action in writing before or after the action is
taken. The written consents shall be filed with the minutes of the proceedings
of the Board or the committee.
ARTICLE VI
NOTICES, WAIVERS OF NOTICE, AND MANNER OF ACTING
6.01 Notices. All notices of meetings required to be given to directors
or any committee of directors may be given by mail, telecopy, telegram,
radiogram or cablegram to the director or committee member at his last address
as it appears on the books of the corporation. Written notice of a
shareholder's meeting shall be given to each shareholder by first class mail.
Such notices shall be deemed to be given at the time when the same shall be
mailed or otherwise dispatched.
6.02 Waiver of Notice. Notice of the time, place and purpose of any
meeting of shareholders, directors or committee of directors may be waived by
telecopy, telegram, radiogram, cablegram or other writing, either before or
after the meeting, or in such other manner as may be permitted by the laws of
the State of Michigan.
A shareholder's attendance at a shareholder's meeting shall result
in both of the following: (i) waiver of objection to lack of notice or
defective notice of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting;
(ii) waiver of objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.
A director's attendance at a director's meeting shall result in a
waiver of objection to lack of notice or defective notice of the meeting,
unless the director, at the beginning of the meeting or upon his arrival at the
meeting, objects to the meeting or the transaction of business at the meeting
and does not thereafter vote for or assent to any action taken at the meeting.
ARTICLE VII
OFFICERS
7.01 Number. The Board of Directors shall elect or appoint a President,
a Secretary and
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a Treasurer, and may select a Chairman of the Board, Vice Chairman, and one or
more Vice Presidents, Assistant Secretaries or Assistant Treasurers. Any two
or more of the above offices, except those of President and Vice President, may
be held by the same person. No officer shall execute, acknowledge or verify an
instrument in more than one capacity if the instrument is required by law, the
Articles of Incorporation or these Bylaws to be executed, acknowledged, or
verified by one or more officers.
7.02 Terms of Office, Resignation and Removal. An officer shall hold
office for the term for which he or she is elected or appointed and until his
or her successor is elected or appointed and qualified, or until his or her
resignation or removal. An officer may resign by written notice to the
corporation. The resignation is effective upon its receipt by the corporation
or at a subsequent time specified in the notice of resignation. An officer may
be removed by the Board with or without cause. The removal of an officer shall
be without prejudice to his or her contract rights, if any. The election or
appointment of an officer does not of itself create contract rights.
7.03 Vacancies. The Board of Directors may fill any vacancies in any
office occurring for whatever reason.
7.04 Authority. All officers, employees and agents of the corporation
shall have such authority and perform such duties in the conduct and management
of the business and affairs of the corporation as may be designated by the
Board of Directors and these Bylaws.
ARTICLES VIII
DUTIES AND OFFICERS
8.01 Chairman of the Board. The Chairman of the Board, if such
office is filled, shall preside at all meetings of the shareholders and of the
Board of Directors at which the Chairman is present and shall perform such
other duties as the Board of Directors may from time to time prescribe.
8.02 Vice Chairman. The Vice Chairman shall perform those duties and
exercise those powers as the Board of Directors or the Chairman of the Board
may from time to time prescribe.
8.03 President. The President shall be the chief executive officer of
the corporation. The President shall see that all orders and resolutions of
the Board are carried into effect and shall have the general powers of
supervision and management usually vested in the chief executive officer of a
corporation, including the authority to vote all securities of other
corporations and business organizations which are held by the corporation. In
the absence or disability of the Chairman of the Board, or if that office has
not been filled, the President also shall perform the duties and execute the
powers of the Chairman of the Board as set forth in these Bylaws.
8.04 Vice Presidents. The Vice Presidents, in order of their
seniority, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties as the Board of Directors or the President may from time to time
prescribe.
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8.05 Secretary. The Secretary shall attend all meetings of the Board of
Directors and of shareholders and shall record all votes and minutes of all
proceedings in a book to be kept for that purpose, shall give or cause to be
given notice of all meetings of the shareholders and of the Board of Directors,
and shall keep in safe custody the seal of the corporation and, when authorized
by the Board, affix the same to any instrument requiring it, and when so
affixed it shall be attested by the signature of the Secretary, or by the
signature of the Treasurer or an Assistant Secretary. The Secretary may
delegate any of the duties, powers and authorities of the Secretary to one or
more Assistant Secretaries, unless such delegation is disapproved by the Board.
8.06 Treasurer. The Treasurer shall have the custody of the corporate
funds and securities; shall keep full and accurate accounts of receipts and
disbursements in books of the corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. The Treasurer
shall render to the President and directors, whenever they my require it, an
account of his or her transactions as Treasurer and of the financial condition
of the corporation. The Treasurer may delegate any of his or her duties,
powers and authorities to one or more Assistant Treasurers unless such
delegation is disapproved by the Board of Directors.
8.07 Assistant Secretaries and Treasurers. The Assistant Secretaries,
in order of their seniority, shall perform the duties and exercise the powers
and authorities of the Secretary in case of his or her absence or disability.
The Assistant Treasurers, in the order of their seniority, shall perform the
duties and exercise the powers and authorities of the Treasurer in case of his
or her absence or disability. The Assistant Secretaries and Assistant
Treasurers shall also perform such duties as may be delegated to them by the
Secretary and Treasurer, respectively, and also such duties as the Board of
Directors may prescribe from time to time.
ARTICLE IX
SPECIAL CORPORATE ACTS
9.01 Orders for Payment of Money. All checks, drafts, notes, bonds,
bills of exchange and orders for payment of money of the corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
9.02 Contracts and Conveyances. The Board of Directors of the
corporation may in any instance designate the officer and/or agent who shall
have authority to execute any contract, conveyance, mortgage or other
instrument on behalf of the corporation, or may ratify or confirm any
execution. When the execution of any instrument has been authorized without
specification of the executing officers or agents, the Chairman of the Board,
the President or any Vice President, and the Secretary or Assistant Secretary
or Treasurer or Assistant Treasurer, may execute the same in the name and on
behalf of this corporation and may affix the corporate seal thereto.
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ARTICLE X
BOOKS AND RECORDS
10.01 Maintenance of Books and Records. The proper officers and agents
of the corporation shall keep and maintain such books, records and accounts of
the corporation's business and affairs, minutes of the proceedings of its
shareholders, Board and committees, if any, and such stock ledgers and lists of
shareholders, as the Board of Directors shall deem advisable, and as shall be
required by the laws of the State of Michigan and other states or jurisdictions
empowered to impose such requirements. Books, records and minutes may be kept
within or without the State of Michigan in a place which the Board shall
determine.
10.02 Reliance on Books and Records. In discharging his or her
duties, a director or an officer of the corporation, when acting in good faith,
may rely upon information, opinions, reports, or statements, including
financial statements and other financial data, if prepared or presented by any
of the following:
(a) One or more directors, officers, or employees of the
corporation, or of a business organization under joint control or common
control, whom the director or officer reasonably believes to be reliable and
competent in the matters presented.
(b) Legal counsel, public accountants, engineers, or other
persons as to matters the director or officer reasonably believes are within
the person's professional or expert competence.
(c) A committee of the Board of which he or she is not a member
if the director or officer reasonably believes the Committee merits confidence.
A director or officer is not entitled to rely on the information set forth
above if he or she has knowledge concerning the matter in question that makes
reliance otherwise permitted unwarranted.
ARTICLE XI
INDEMNIFICATION
11.01 Non-Derivative Actions. Subject to all of the other provisions of
this Article XI, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative and whether formal or informal (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses (including actual
and reasonable attorneys' fees), judgments, penalties, fines, and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of
12
<PAGE> 13
the corporation or its shareholders, and with respect to any criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of the corporation or its shareholders,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
11.02 Derivative Actions. Subject to all of the provisions of this
Article XI, the corporation shall indemnify any person who was or is a party to
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorneys' fees) and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interest of the corporation or its shareholders. However, indemnification
shall not be made for any claim, issue or matter in which such person has been
found liable to the corporation unless and only to the extent that the court in
which such action or suit was brought has determined upon application that,
despite the adjudication of liability but in view of all circumstances of the
case such person is fairly and reasonably entitled to indemnification for the
reasonable expenses incurred.
11.03 Expenses of Successful Defenses. To the extent that a person has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.01 or 11.02 of these Bylaws, or in defense
of any claim, issue or matter in the action, suit or proceeding, the person
shall be indemnified against actual and reasonable expenses (including
attorneys' fees) incurred by such person in connection with the action, suit or
proceeding and any action, suit or proceeding brought to enforce the mandatory
indemnification provided by this Section 11.03.
11.04 Definition. For the purposes of Sections 11.01 and 11.02, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the corporation" shall include any service as a
director, officer, employee, or agent of the corporation which imposes duties
on, or involves services by, the director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner the person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be considered to have acted in a manner "not opposed to the best interest
of the corporation or its shareholders" as referred to in Sections 11.01 and
11.02.
11.05 Contract Right; Limitation on Indemnity. The right to
indemnification conferred in this Article XI shall be a contract right, and
shall apply to services of a director or officer as an employee or agent of the
corporation as well as in such person's capacity as a director or officer.
13
<PAGE> 14
Except as provided in Section 11.03 of these Bylaws, the corporation shall have
no obligations under this Article XI to indemnify any person in connection with
any proceeding, or part thereof, initiated by such person without
authorization by the Board of Directors.
11.06 Determination That Indemnification is Proper. Any indemnification
under Section 11.01 or 11.02 of these Bylaws (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the person is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
Section 11.01 or 11.02, whichever is applicable, and upon an evaluation of the
reasonableness of expenses and amount paid in settlement. Such determination
and evaluation shall be made in any of the following ways:
(a) By a majority vote of a quorum of the Board consisting of
directors who are not parties or threatened to be made parties to such action,
suit or proceeding.
(b) If the quorum described in clause (a) above is not
obtainable, then by a majority vote of a committee of directors duly designated
by the Board of Directors and consisting solely of two or more directors who
are not at the time parties or threatened to be made parties to the action,
suit or proceeding.
(c) By independent legal counsel in a written opinion, which
counsel shall be selected in one of the following ways: (i) by the Board or
its committee in the manner prescribed in subparagraph (a) or (b), or (ii) if
a quorum of the Board cannot be obtained under subparagraph (a) and a committee
cannot be designated under subparagraph (b), by the Board.
(d) By the shareholders, but shares held by directors or officers
who are parties or threatened to be made parties to the action, suit or
proceeding may not be voted.
11.07 Proportionate Indemnity. If a person is entitled to
indemnification under Section 11.01 or 11.02 of these Bylaws for a portion of
expenses, including attorneys' fees, judgments, penalties, fines, and amounts
paid in settlement, but not for the total amount thereof, the corporation shall
indemnify the person for the portion of the expenses, judgments, penalties,
fines, or amount paid in settlement for which the person is entitled to be
indemnified.
11.08 Expenses Advance. The corporation shall pay or reimburse the
reasonable expenses incurred by a person referred to in Section 11.01 or 11.02
of these Bylaws who is a party or threatened to be made a party to an action,
suit, or proceeding in advance of final disposition of the proceeding if all of
the following apply: (a) the person furnishes the corporation a written
affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct set forth in Section 11.01 or 11.02; (b) the
person furnishes the corporation a written undertaking executed personally, or
on his or her behalf, to repay the advance if it is ultimately determined that
he or she did not meet the standard of conduct; (c) the authorization of
payment is made in the manner specified in Section 11.06; and (d) a
determination is made that the facts then known to those making the
determination would not preclude indemnification under Section 11.01 or 11.02.
The
14
<PAGE> 15
undertaking shall be an unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
11.09 Non-Exclusivity of Rights. The indemnification or advancement of
expenses provided under this Article XI is not exclusive of other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under a contractual arrangement with the corporation. However, the
total amount of expenses advanced or indemnified from all sources combined
shall not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
11.10 Indemnification of Employees and Agents of the Corporation. The
corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the corporation to the fullest extent of the
provision of this Article XI with respect to the indemnification and
advancement of expenses of directors and officers of the corporation.
11.11 Former Directors and Officers. The indemnification provided in this
Article XI continues as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such person.
11.12 Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against the person and incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the corporation would
have power to indemnify the person against such liability under these Bylaws or
the laws of the State of Michigan.
11.13 Changes in Michigan Law. In the event of any change of the Michigan
statutory provisions applicable to the corporation relating to the subject
matter of Article XI of these Bylaws, then the indemnification to which any
person shall be entitled hereunder shall be determined by such changed
provisions, but only to the extent that any such change permits the corporation
to provide broader indemnification rights than such provision permitted the
corporation to provide prior to any such change. Subject to Section 11.14, the
Board of Directors is authorized to amend these Bylaws to conform to any such
changed statutory provisions.
11.14 Amendment or Repeal of Article XI. No amendment or repeal of this
Article XI shall apply to or have any effect on any director or officer of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
15
<PAGE> 16
ARTICLE XII
GENERAL PROVISIONS
12.01 Reports.
(a) The Chairman of the Board or the President shall prepare or
cause to be prepared annually a full and correct annual report ("Annual
Report") concerning the operations of the corporation and containing audited
financial statements of the corporation and its subsidiaries for the preceding
fiscal year prepared in accordance with generally accepted accounting
principles.
(b) The Annual Report shall be mailed or delivered to each
shareholder as of a record date after the end of such fiscal year and each
holder of other publicly held securities of the corporation within 120 days
after the end of the fiscal year, and shall be filed at the time the Annual
Report is distributed to the shareholders with any exchange on which the
corporation's shares are listed and traded.
(c) There shall be an annual meeting of the corporation's
shareholders upon reasonable notice following delivery of the Annual Report.
The Annual Report shall also be submitted at the annual meeting and shall be
placed on file thereafter at the principal office of the corporation.
(d) To the extent that the corporation is required to file with the
Securities Exchange Commission ("SEC") quarterly reports, including statements
of operating results, the corporation shall make copies of such quarterly
reports available to the shareholders on a timely basis. The statement of
operations contained in such quarterly reports shall disclose, at a minimum any
substantial items of an unusual or nonrecurrent nature and net income before
and after estimated federal income tax or net income in the amount of estimated
federal taxes.
(e) To the extent that the corporation is required to file with the
SEC or another federal or state regulatory authority interim reports relating
primarily to operations and financial positions, the corporation shall make
reports which reflect the information contained in such interim reports
available to the shareholders before or as soon as practicable after such
interim reports are filed with the SEC or other regulatory authority. If the
form of the report provided to the shareholders differs from the interim report
filed with the SEC or the regulatory authority, the corporation shall file a
copy of the report provided to the shareholders with any Exchange (including
NASDAQ/NMS) on which the corporation's shares are listed and traded.
12.02 Review of Transactions. As long as the corporation's shares are
listed and traded on any Exchange (including NASDAQ/NMS) , the corporation
shall conduct an appropriate review of all related party transactions on an
ongoing basis and shall utilize the corporation's Audit Committee or a
comparable body for the review of potential conflict of interest situations
where appropriate.
12.03 Shareholder Approval Required by Exchange Rules. In addition to any
other matter
16
<PAGE> 17
with respect to which shareholder approval is required by law, the Articles or
these Bylaws, shareholder approval shall be required for any matters with
respect to which shareholder approval is required by the rules and regulations
of any Exchange (including NASDAQ/NMS) on which the corporation's shares are
listed and traded.
Where shareholder approval is required by such rules and regulations,
unless a higher vote is required by law, the Articles or these Bylaws, the
minimum vote which will constitute shareholder approval shall be a majority of
the total votes cast with respect to the matter in person or by proxy.
ARTICLE XIII
AMENDMENTS
13.01 Amendments. Unless otherwise provided herein, the Bylaws of the
corporation may be amended, altered or repealed, in whole or in part, by the
Board and by the shareholders.
/s/ Thomas S. Vaughn
----------------------------------------
Thomas S. Vaughn , Secretary
-----------------------------
17
<PAGE> 1
EXHIBIT 4.1
NBD Bank
28660 Northwestern Highway
Southfield, MI 48034
Telephone: (248) 799-5817
Fax: (248) 799-5826
Robert B. Greene
First Vice President
November 5, 1997
Mr. Alan S. Ker
Chief Financial Officer
Universal Standard Healthcare, Inc.
26500 Northwestern Highway
Southfield, MI 48076
Re: Revolving Credit and Loan Agreement dated April 30, 1997
between NBD Bank (the "Bank") and Universal Standard
Healthcare, Inc., Universal Standard Healthcare of Michigan,
Inc., Universal Standard Healthcare of Ohio, Inc., Universal
Standard Healthcare of Delaware, Inc., T.P.A., Inc. and A/R
Credit, Inc. (each, an "Obligor" and collectively, the
"Obligors") as amended by the First Amendment to Revolving
Credit and Loan Agreement dated September 26, 1997 (as amended
and as may be further amended from time to time, the
"Agreement"). Capitalized terms used but not defined in this
letter shall have the same meanings as in the Agreement.
Dear Al:
Based on the covenant calculations exhibit recently submitted, it has come to
my attention that the Obligors are in default of Section 6.1B. of the Agreement
(i.e. minimum consolidated funded debt ratio requirement; .71:1 reported is
above the required .70:1 maximum) at September 30, 1997. The Bank hereby
waives the above described default through September 30, 1997. This waiver
shall not be construed as an agreement to waive any provision on any future
occasion, nor shall it be construed as a waiver with respect to any matter not
specifically addressed in this letter. Except as expressly modified by the
terms of this letter, all of the other terms and conditions of the Agreement
and the other Loan Documents remain in full force and effect and are hereby
ratified, reaffirmed, confirmed and approved.
The Obligors represent and warrant to the Bank that: a) after giving effect to
the waiver contained herein and effected hereunder, all of the representations
and warranties contained in
<PAGE> 2
the Loan Documents are true and correct on and as of the date hereof with the
same force and effect as if made on and as of the date hereof; and b) no Event
of Default or event which would become an Event of Default after the lapse of
time or the giving of notice and the lapse of time, or both, has occurred and
is continuing or will exist under the Loan documents as of the date hereof.
If the foregoing is acceptable, please return a copy of this letter, executed
by the parties listed below to my attention.
Sincerely,
NBD BANK
By: /s/ Robert B. Greene
----------------------------------------
Robert B. Greene
Its: First Vice President
---------------------------------------
Accepted and agreed to this 5th day of November, 1997.
UNIVERSAL STANDARD HEALTHCARE, INC.
By: /S/ Alan S. Ker
---------------------------------------------------
Alan S. Ker, Vice President Finance and Treasurer
UNIVERSAL STANDARD HEALTHCARE OF MICHIGAN, INC.
By:/S/ Alan S. Ker
---------------------------------------------------
Alan S. Ker, Treasurer
UNIVERSAL STANDARD HEALTHCARE OF OHIO, INC.
By:/S/ Alan S. Ker
---------------------------------------------------
Alan S. Ker, Treasurer
UNIVERSAL STANDARD HEALTHCARE OF DELAWARE, INC.
By:/S/ Alan S. Ker
---------------------------------------------------
Alan S. Ker, Treasurer
A/R CREDIT, INC.
By:/S/ Alan S. Ker
---------------------------------------------------
Alan S. Ker, Treasurer
<PAGE> 3
T.P.A., INC.
By:/S/ Alan S. Ker
---------------------------------------------------
Alan S. Ker, Treasurer
<PAGE> 1
EXHIBIT 4.2
FIRST AMENDMENT TO REVOLVING CREDIT AND LOAN AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AND LOAN AGREEMENT (this
"First Amendment to Loan Agreement" or this "First Amendment") is entered into
on September 26, 1997 between NBD Bank ("NBD" or "Bank"), as lender, with
offices at 611 Woodward Avenue, Detroit, Michigan 48226; Universal Standard
Healthcare, Inc., formerly known as Universal Standard Medical Laboratories,
Inc., a Michigan corporation ("USML"); Universal Standard Healthcare of
Michigan, Inc., formerly known as Universal Standard Managed Care of Michigan,
Inc., a Michigan corporation ("Michigan Managed Care"); Universal Standard
Healthcare of Ohio, Inc., formerly known as Universal Standard Managed Care of
Ohio, Inc., an Ohio corporation ("Ohio Managed Care"); Universal Standard
Healthcare of Delaware, Inc., formerly known as Universal Standard Managed
Care, Inc., a Delaware corporation ("Delaware Managed Care"); T.P.A., Inc., a
Michigan corporation ("Processing"); and A/R Credit, Inc., a Michigan
corporation ("AR Credit"), all of whose addresses are 26500 Northwestern
Highway, Southfield, Michigan 48076.
RECITALS
This First Amendment to Loan Agreement is based on the following
recitals ("Recitals"), which are incorporated into and made a part of this
First Amendment:
1. USML, Delaware Managed Care, Ohio Managed Care, Michigan
Managed Care, Processing, AR Credit (each, an "Obligor" and collectively, the
"Obligors"), and ND are parties to a Revolving Credit and Loan Agreement dated
April 30, 1997 (the "Loan Agreement"). In addition to the Loan Agreement, Bank
and Obligors are parties to various other loan and security documents and
guaranties more particularly described in or executed in connection with the
Loan Agreement. For convenience, all loan and security documents referred to
in the immediately preceding sentence, together with the Loan Agreement and all
other agreements that may hereafter be entered into between Bank and any one or
more of the Obligors, as the same may be amended or restated from time to time,
are referred to collectively as the "Loan Documents" and individually as a
"Loan Document". Capitalized terms used but not defined in this First
Amendment have the same meanings given to those terms in the Loan Documents.
2. Obligors have requested and, subject to the terms hereof, Bank
has agreed to amend the Loan Agreement as set forth in this First Amendment.
AGREEMENT
Based on the foregoing Recitals (which are incorporated herein as
representations, warranties, acknowledgments and agreement of the parties, as
the case may be) and for other good and valuable consideration, the receipt and
adequacy of which is mutually acknowledged by the parties hereto, Obligors and
Bank agree as follows:
<PAGE> 2
A. The definition of "Termination Date" appearing in Section 1.1
of the Loan Agreement is amended to read as follows: "Termination Date" means
the earlier to occur of (a) September 30, 1999 and (b) at NBD's option, the
date on which an Event of Default occurs.
B. The date "June 30, 1997" appearing in the first sentence of
Section 2.2(a) of the Loan Agreement is amended to read "September 30, 1998".
C. The date "June 30, 1997" appearing in the first sentence of
Section 2.3 of the Loan Agreement is amended to read "September 30, 1998".
D. Prior to or simultaneously with execution and delivery of this
First Amendment, Obligors must cause to be executed and delivered to Bank such
financing statements, resolutions and other agreements that Bank may require to
effectuate the transactions contemplated by this First Amendment. Obligors
must pay all costs and expenses (including attorneys' fees) incurred by Bank in
connection with this First Amendment.
E. Obligors expressly acknowledge and agree that all collateral
security and security interests, liens, pledges, guaranties, and mortgages
heretofore or hereafter granted Bank including, without limitation, such
collateral, security interests, liens, pledges, and mortgages granted under the
Loan Documents, extend to and cover all of each Obligor's Obligations to Bank,
now existing or hereafter arising including, without limitation, those arising
in connection with this First Amendment and under all guaranty agreements now
or in the future given by one or more of the Obligors in Bank's favor, upon the
terms set forth in such agreements, all of which security interests, liens,
pledges, and mortgages are ratified, reaffirmed, confirmed and approved.
F. From and after the date of this First Amendment, references in
the Loan Documents to the Loan Agreement are to be treated as referring to the
Loan Agreement as amended by this First Amendment.
G. Obligors represent and warrant to NBD that:
(1) (a) The execution, delivery and performance of
this First Amendment by the Obligors and all agreements and
documents delivered by Obligors in connection with this First
Amendment have been duly authorized by all necessary corporate or
other organizational action and does not and will not require any
consent or approval of its stockholders or members, violate any
provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to it or of its articles of incorporation, articles of
organization, or bylaws, or result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which any Obligor is a party or by
which it or its properties may be bound or affected.
2
<PAGE> 3
(b) No authorization, consent, approval, license,
exemption of or filing a registration with any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary to the
valid execution, delivery or performance by Obligors of this First
Amendment and all agreements and documents delivered in connection
with this First Amendment.
(c) This First Amendment and all agreements and
documents delivered by Obligors in connection with this First
Amendment are the legal, valid and binding obligations of Obligors
enforceable against each of them in accordance with the terms thereof.
(2) After giving effect to the amendments contained in
this First Amendment, all of the representations and warranties
contained in the Loan Documents are true and correct on and as of the
date hereof with the same force and effect as if made on and as of the
date hereof.
(3) Obligor's financial statements furnished to the NBD,
fairly present Obligor's financial condition as at such dates
and the results of Obligor's operations for the periods indicated, all
in accordance with generally accepted accounting principles applied on
a consistent basis, and since the date of the last such financial
statement there has been no material adverse change in such financial
condition.
(4) No Default or Event of Default has occurred and is
continuing or will exist on the date of this First Amendment
under the Loan Agreement or any of the other Loan Documents.
H. The terms and provisions of this First Amendment
amend, add to and constitute a part of the Loan Agreement. Except as expressly
modified and amended by the terms of this First Amendment, all of the other
terms and conditions of the Loan Agreement and the other Loan Documents
(including all guaranties) remain in full force and effect and are hereby
ratified, reaffirmed, confirmed, and approved.
I. If there is an express conflict between the terms of
this First Amendment to Loan Agreement and the terms of the Loan Agreement or
the other Loan Documents, the terms of this First Amendment govern and control.
J. This First Amendment may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document. All counterparts must be construed together to constitute one
instrument.
K. Notwithstanding any other provision in the Loan
Agreement to the contrary (including, without limitation, the statement that
the Facility Fee was fully earned by NBD on the date of the Loan Agreement),
NBD and the Obligors acknowledge that an extension of the
3
<PAGE> 4
Termination Date to September 30, 1999 was contemplated (but not agreed to) by
them on the date of the Loan Agreement and that the amount of the Facility Fee
was calculated and negotiated by the parties as if the Termination Date were
September 30, 1999.
L. If no other defaults or Events of Default occur under
the Loan Documents, then NBD agrees to waive for the period from June 30, 1997
through October 1, 1997 any defaults arising under Section 6.1A of the Loan
Agreement on account of the Consolidated Current Ratio being equal to or
greater than 1.20 to 1 but less than 1.25 to 1. This waiver is not an
agreement to waive the same provision or any other provision in the future, nor
is it to be construed as a waiver with respect to any other matter.
M. WAIVER OF JURY TRIAL AND ACKNOWLEDGMENT. THE PARTIES
HERETO ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT,
BUT THAT THIS RIGHT MAY BE WAIVED. NBD AND OBLIGORS EACH HEREBY KNOWINGLY,
VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL
DISPUTES ARISING OUT OF OR IN RELATION TO THIS AGREEMENT, THE LOAN DOCUMENTS OR
ANY OTHER AGREEMENTS BETWEEN ANY OF THE PARTIES. NO PARTY SHALL BE DEEMED TO
HAVE RELINQUISHED THE BENEFIT OF THIS WAIVER OF JURY TRIAL, UNLESS SUCH
RELINQUISHMENT IS IN A WRITTEN INSTRUMENT SIGNED BY THE PARTY TO WHICH SUCH
RELINQUISHMENT WILL BE CHARGED.
NBD BANK
By: /S/ Robert B. Greene
------------------------
Robert B. Greene
First Vice President
UNIVERSAL STANDARD
HEALTHCARE, INC.
By: /S/ Alan S. Ker
------------------------
Alan S. Ker
Vice President Finance and Treasurer
[Signatures continued on following page]
4
<PAGE> 5
[SIGNATURES CONTINUED FROM PRECEDING PAGE]
UNIVERSAL STANDARD HEALTHCARE
OF MICHIGAN, INC.
By: /S/ Alan S. Ker
--------------------------------
Alan S. Ker, Treasurer
UNIVERSAL STANDARD HEALTHCARE
OF OHIO, INC.
By: /S/ Alan S. Ker
--------------------------------
Alan S. Ker, Treasurer
UNIVERSAL STANDARD HEALTHCARE
OF DELAWARE, INC.
By: /S/ Alan S. Ker
--------------------------------
Alan S. Ker, Treasurer
A/R CREDIT, INC.
By: /S/ Alan S. Ker
--------------------------------
Alan S. Ker, Treasurer
T.P.A., INC.
By: /S/ Alan S. Ker
--------------------------------
Alan S. Ker, Treasurer
5
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of August 4, 1997 between
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC., a Michigan corporation (the
"Company"), and ALAN S. KER ("Employee").
WHEREAS, the Company is engaged in the business of operating clinical
laboratories and marketing and administrating capitated laboratory and other
health care services plans; and
WHEREAS, Employee is experienced with the management of entities such
as Company; and
WHEREAS, the Company desires to employ Employee, and Employee desires
to continue as an employee of the Company, pursuant to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Employment. The Company shall employ Employee, and
Employee accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 5 hereof (the "Employment Period").
SECTION 2. Position and Duties.
(a) During the Employment Period, Employee shall serve as the Vice
President, Finance, Chief Financial Officer and Treasurer of the Company, as
well as the Vice-President, Finance, Chief Financial Officer, Treasurer and
Secretary of the Company's subsidiaries, Universal Standard Managed Care, Inc.,
Universal Standard Managed Care of Michigan, Inc. and Universal Standard
Managed Care of Ohio, Inc. (collectively "USMC"), and shall have the normal
duties, responsibilities and authority consistent with such positions, subject
to the power of the Chief Executive Officer of the Company to expand or limit
such duties, responsibilities and authority. During the term of this Agreement,
the Employee shall also serve without additional compensation in such other
office to which he may be elected or appointed by the Board of Directors or
Chief Executive Officer of the Company.
(b) Employee shall report directly to the Chief Executive Officer of
the Company. During the Employment Period, Employee shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and periods of illness) to the business and affairs of the Company and
its affiliates. Employee shall perform his duties and responsibilities to the
best of his abilities in a diligent, trustworthy, businesslike and efficient
manner.
<PAGE> 2
SECTION 3. Compensation and Benefits.
(a) During the Employment Period, Employee shall be paid a salary
(the "Salary"), which Salary shall be as set forth to Section 3(b) below, and
shall be payable in accordance with Section 3(c) below.
(b) During the Employment Period, the Company shall pay to Employee,
as compensation for his services, an annual salary equal to One Hundred and
Fifty-Three Thousand Dollars ($153,000).
(c) The Company shall pay Employee's Salary to Employee in regular
installments in accordance with the Company's standard payroll practices.
(d) During the Employment Period, Employee shall be entitled to
participate in all of the Company's employee benefit programs for which
executive officer employees of the Company are generally eligible, including
medical, dental, life and disability insurance, paid vacation time, and the
non-matching 401(k) Retirement Plan.
(e) During the Employment Period, the Company shall reimburse
Employee for all reasonable expenses incurred by him with respect to travel,
entertainment and other business expenses which are required to perform his
duties under this Agreement to the extent consistent with the Company's
applicable policies in effect from time to time; provided, however, that
Employee shall not be reimbursed for expenses incurred by him in connection
with business use of his automobile since the Employee's salary has been
increased by an amount to be used by the Employee to pay such expenses.
(f) In addition, during the Employment Period, Employee shall be
entitled to participate in any stock option or stock purchase plans established
by the Company, as determined from time to time by the Company's Compensation
Committee or Stock Option Committee.
SECTION 4. Bonus. During the Employment Period, Employee shall be
eligible to participate in the same bonus plans as other executive officers,
with Employee's potential annual bonus determined by the Company's Board of
Directors, or a committee thereof, in connection with its approval of the bonus
plan. For the fiscal year ending December 31, 1997, Employee shall participate
in the Executive and Key Manager Compensation Plan.
SECTION 5. Term; Termination.
(a) The Employment Period shall be for a period, commencing on the
date of this Agreement and ending on December 31, 1999 or, if earlier, (i)
termination of Employee's employment with Company for Cause (as defined below),
(ii) termination of Employee's employment with the Company without Cause (as
defined below), (iii) termination by the Employee's of his employment with the
Company ("resignation"), (iv) Employee's death or (v)
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<PAGE> 3
Employee's physical or mental disability which prevents him from performing his
obligations hereunder for a period of ninety (90) consecutive days. This
Agreement shall terminate at the end of the Employment Period. Any such
termination of this Agreement shall not affect the Company's obligation to pay
Salary to Employee accrued through the effective date of such termination or
severance payments required to be paid pursuant to Section 7 of the Agreement.
In no event shall the Company be obligated to pay Employee compensation for any
period of absence pursuant to a physical or mental disability (i) for a period
extending beyond the date payments are first made under the Company's long-term
disability insurance or (ii) once the Employee has been disabled for more than
ninety (90) consecutive days, if earlier than the period set forth in (i).
(b) For purposes of this Agreement, "for Cause", shall mean (i) the
Employee's personal dishonesty directly affecting the Company or its
affiliates; (ii) gross incompetence as demonstrated by the Employee's inability
to perform and carry out the functions required of Employee in a manner
consistent and equal to the standards of other employees with similar
responsibilities in the industry; (iii) willful or reckless misconduct of
Employee; (iv) breach by Employee of fiduciary duty to the Company or its
affiliates, involving personal profit; (v) Employee's indictment for any
violation of the Medicare or Medicaid laws or other similar laws or regulations
or Employee's plea of nolo contenders or conviction under any laws or
regulations relating to the Medicare or Medicaid programs or conviction for
violation of any law, rule or regulation (other than traffic violations or
other minor misdemeanor offenses); (vi) the issuance by any regulatory
authority to which the business of the Company or its affiliates is subject of
a final and nonappealable order against Employee imposing sanctions against
Employee which adversely affect the business and operations of the Company or
its affiliates; (vii) repeated and intentional failure of Employee to perform
duties required under this Agreement or a material breach of any provision of
this Agreement; or (viii) Employee's violation of the Company's Code of Ethics;
provided, however, that with respect to clauses (ii), (iii), (iv), (vii) and
(viii) above, such events, occurrences, violations or problems shall constitute
"Cause" only if Employee fails to cure such event, occurrence, violation or
problem within five (5) days following the date on which written notice
specifically identifying such event, occurrence, violation or problem is
delivered to Employee. The Company's Board of Directors shall make any
determination regarding acts that constitute Cause under this Agreement,
provided that all such determinations shall be made in good faith. For
purposes of this Agreement, "without Cause" shall mean termination of
Employee's employment for any reason other than Employee's death or disability,
termination of employment by the Employee or termination of the Employee's
employment for Cause.
(c) Employee hereby understands and agrees that, in the event of the
termination of his employment for Cause or due to death, disability or
resignation, no severance or other compensation shall be payable to Employee by
the Company or its affiliates, and Employee hereby waives any and all claims
for severance or other compensation in event of any for Cause termination, or
Employee's death, disability or resignation. All compensation and other
benefits shall cease to accrue upon the Employee's death, disability,
resignation or termination of the Employee's employment for Cause.
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<PAGE> 4
SECTION 6. Suspension. In the event Employee is indicted for any
violation of the Medicare or Medicaid laws or other similar laws or
regulations, the Company may suspend Employee and Employee shall cease all of
his duties for the Company pursuant to this Agreement or otherwise. During any
period of suspension, the Company may cease all payments of all compensation
and any other benefits to which Employee may be entitled, in which case the
Company shall have no obligation to pay such amounts in respect of such period
of suspension or to provide such benefits at any future time.
SECTION 7. Severance. In the event that Employee is terminated by the
Company or any successor of the Company without Cause during the Employment
Period, the Company shall pay to Employee, as a severance package, his Salary
for up to nine (9) months from the date of termination, and the Employee shall
be entitled to the continuation of all employee benefit programs which Employee
participates in at the time of such termination (other than those benefits
which by law or the terms of the program the Employee can no longer participate
in) for such nine (9) month period, except that the Company is not required to
continue any employee benefit program which duplicate employee benefits
received by Employee in connection with his subsequent employment. Any
severance compensation paid to Employee pursuant to this Section shall be paid
in the same manner as Salary would have been paid to Employee during the
Employment Period. For purposes of COBRA, the Employee's employment shall be
deemed to have terminated as of the date of actual termination of employment
irrespective of the continuation of salary and benefits for periods thereafter
as provided above.
SECTION 8. Notices. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made
for all purposes if (i) sent by certified or registered mail, return receipt
requested and postage prepaid, (ii) hand delivered, (iii) sent by a nationally
recognized overnight courier or (iv) sent by telephone facsimile transmission
(with a confirming copy by First Class mail) as follows:
If to the Company:
Universal Standard Medical Laboratories, Inc.
26500 Northwestern Hwy., Suite 400
Southfield, MI 48076
Attention: Chief Executive Officer
Facsimile No.: (810) 358-0704
If to Employee:
Alan S. Ker
2497 Tranquil Drive
Troy, MI 48098
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<PAGE> 5
or at such other address as any party may specify by notice given to the other
party in accordance with this paragraph. The date of giving of any such notice
shall be the date of hand delivery, the date three days following the posting
of the mail, the date sent by telephone facsimile, the day after delivery to
the overnight courier service.
SECTION 9. Code of Ethics. Employee hereby acknowledges that he has
received and has signed a copy of the Company's Code of Ethics and further
agrees to abide by and comply with all of the provisions contained therein. In
the event that any of Employee's required duties or responsibilities hereunder
would conflict with the provisions of the Company's Code of Ethics, Employee
shall so notify the Company in writing, in which case the Company may either
waive such provision of the Code of Ethics or waive the requirement of Employee
to perform such conflicting duty or responsibility.
SECTION 10. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Michigan,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Michigan or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Michigan.
(b) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but when taken
together shall constitute but one instrument.
(c) Successors and Assigns. Neither this Agreement nor any rights
or obligations hereunder may be assigned by Employee. The Company may freely
assign this Agreement and all of its rights and obligations hereunder to any
affiliate or to any person or entity in connection with a sale of all or
substantially all of the assets of the Company or a sale of 50% or more of the
capital stock of the Company. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns.
(d) Delegation. The Company may perform its obligations under the
Agreement directly or may delegate all or a portion of its responsibility for
the same to a professional employer organization ("PEO") through which the
Employee's services are made available to the Company. The institution of a
professional employer arrangement with respect to the Employee's services for
the Company does not constitute the termination of the Employee's engagement
with the Company for purposes of the Agreement, nor does the transfer of the
Employee's from one PEO to another PEO constitute such a termination, so long
as his or her services for the Company continue uninterrupted. In the event of
the institution of a professional employer arrangement with respect to the
Employee's services for the Company, a termination of the engagement of the
Employee shall be deemed to have occurred under the Agreement only in the event
that the Employee is no longer rendering services to the Company as
contemplated by the Agreement. In the event of the institution of a
professional employer arrangement with respect to the Employee's services for
the Company,
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<PAGE> 6
Employee acknowledges that (i) the PEO, under the terms of its agreement with
the Company, has the right to immediately terminate the Employee's employment
without prior notice and without payment of any post-termination compensation
to the Employee and (ii) the PEO shall have no liability under the Agreement
except to make compensation payments to the Employee as directed by the
Company. In the event of the institution of a professional employer
arrangement with respect to the Employee's services for the Company, if the
Company desires to terminate continued service from the Employee as
contemplated by the Agreement, the Company agrees to either cause the PEO to
terminate Employee's employment in accordance with the terms of the Agreement
and to pay all amounts due to Employee under the Agreement resulting from such
termination or to pay directly to the Employee all amounts that would be due to
Employee under the Agreement upon such termination.
(e) Descriptive Headings. The descriptive headings contained in
this Agreement are for convenience only and do not constitute a part of this
Agreement.
(f) Invalidity. In the event that one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement. This
Agreement was negotiated, drafted and prepared jointly by the Company and
Employee and all provisions hereof shall be construed without prejudice to
either party.
(g) Waiver. No failure on the part of either party to exercise, and
no delay in exercising or course of dealing with respect to, any right, power
or privilege under this Agreement (or breach of any obligation under any other
agreement) shall operate as a waiver thereof , nor shall any single or partial
exercise of any right, power or privilege under this Agreement or any other
agreement (or breach of any obligation under any other agreement) preclude any
other or further exercise thereof or hereunder, or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
(h) Amendments. This Agreement may not be amended, modified or
abrogated except in writing executed by each of the parties hereto.
(i) Entirety. All negotiations and agreements between the parties
relating to the subject matter of this Agreement are merged into this Agreement
and there are no representations, covenants or agreements of either party other
than those expressly set forth herein and that certain Employment
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<PAGE> 7
Agreement dated July 30, 1991, as amended, between Employee and the Company be
and is hereby terminated.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
By: /s/ Eugene Jennings
-----------------------------------
Eugene Jennings
Its: President
/s/ Alan S. Ker
- ------------------------- --------------------------------------
Witness ALAN S. KER
7
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of June 28, 1997 between
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC., a Michigan corporation (the
"Company"), and PERRY C. McCLUNG ("Employee").
WHEREAS, the Company is engaged in the business of operating clinical
laboratories and marketing and administrating capitated laboratory and other
health care services plans; and
WHEREAS, Employee is experienced with the management of entities such
as Company; and
WHEREAS, the Company desires to employ Employee, and Employee desires
to continue as an employee of the Company, pursuant to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Employment. The Company shall employ Employee, and
Employee accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 5 hereof (the "Employment Period").
SECTION 2. Position and Duties.
(a) During the Employment Period, Employee shall serve as the
Executive Vice President of the Company, as well as the Executive
Vice-President of the Company's wholly owned subsidiary, Universal Standard
Managed Care, Inc. ("USMC"), and shall have the normal duties, responsibilities
and authority consistent with such positions, subject to the power of the Chief
Executive Officer of the Company to expand or limit such duties,
responsibilities and authority.
(b) In the event that, Employee shall serve as a consultant to the
Company and USMC as provided in Section 3(b) below, Employee shall have the
title, duties, responsibilities and authority as shall be defined at that time
by the Chief Executive Officer of the Company in his sole discretion.
(c) Employee shall report directly to the Chief Executive Officer of
the Company. During the Employment Period, Employee shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and periods of illness) to the business and affairs of the Company and
its affiliates. Employee shall perform his duties and responsibilities to the
best of his abilities in a diligent, trustworthy, businesslike and efficient
manner.
<PAGE> 2
SECTION 3. Compensation and Benefits.
(a) During the Employment Period, Employee shall be paid a salary
(the "Salary"), which Salary shall be as set forth to Section 3(b) below, and
shall be payable in accordance with Section 3(c) below.
(b) During the Year One of the Employment Period, which begins June
28, 1997 and ends on December 31, 1997, the Company shall pay to Employee, as
compensation for his services to USMC, a pro rata portion of an annual salary
equal to One Hundred and Fifty-Nine Thousand Dollars ($159,000); during Year
Two of the Employment Period, which begins on January 1, 1998 and ends on
December 31, 1998, the Company shall pay to Employee an annual salary equal to
One Hundred and Fifty-Nine Thousand Dollars ($159,000); during Year Three of
the Employment Period, which begins on January 1, 1999 and ends on December 31,
1999, the Company shall pay to Employee an annual salary equal to One Hundred
Thirty-Four Thousand Dollars ($134,000); during Year Four of the Employment
Period, which begins on January 1, 2000 and ends on December 31, 2000, the
Company shall pay to Employee an annual salary which is to be mutually agreed
upon by the Company and the Employee at a later date. In the event that the
Company and Employee cannot reach an agreement as to the Employee's Year Four
annual salary or the parties otherwise agree, Employee's employment with the
Company shall terminate effective January 1, 2000 and Employee shall, instead,
serve as a consultant to the Company during calendar year 2000 (the "Consulting
Period"). During the Consulting Period, the Company shall pay to the Employee
a monthly consulting fee equal to $6,222 multiplied by a fraction (which cannot
be greater than one), the numerator of which is the managed care revenue
derived from Base Accounts (as defined in Attachment A) and recorded as revenue
in the prior month for financial accounting purposes and the denominator of
which is one-twelfth of the managed care revenue derived from the Base Accounts
and recorded as revenue in calendar year 1999 for financial accounting
purposes.
(c) The Company shall pay Employee's Salary to Employee in regular
installments in accordance with the Company's standard payroll practices.
(d) During the Employment Period (but not the Consulting Period),
Employee shall be entitled to participate in all of the Company's employee
benefit programs for which executive officer employees of the Company are
generally eligible, including medical, dental, life and disability insurance,
paid vacation time, and the non-matching 401(k) Retirement Plan.
(e) Beginning in Year Three of the Employment Period and through the
end of the Employment Period, the Company shall provide Employee with office
space in Stuart, Florida as approved by the Chief Executive Officer of the
Company in his sole discretion. During Year Two of the Employment Period,
Employee is expected to spend approximately half of his time in Florida and
half of his time in Michigan while providing services to the Company; provided
that the Chief Executive Officer of the Company may require the Employee to
spend more than half of his time in Michigan during Year Two in his sole
discretion. Beginning in Year Three of the Employment Period, Employee is
expected to spend approximately half of his time in Florida and half of his
time
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in Michigan while providing services to the Company, subject to change by the
Chief Executive Officer of the Company in his sole discretion. The Company
shall pay reasonable airfare for Employee's travel to and from Florida and
Michigan in connection with Employee providing services under this Agreement;
provided however, Employee must receive prior approval from the Chief Executive
Officer or the Chief Financial Officer of the Company of the cost of all
flights proposed to be taken by Employee to or from Michigan or Florida which
are to be paid for by the Company.
(f) Subject to Section 3(e), during the Employment Period and the
Consulting Period, the Company shall reimburse Employee for all reasonable
expenses incurred by him with respect to travel, entertainment and other
business expenses which are required to perform his duties under this Agreement
to the extent consistent with the Company's applicable policies in effect from
time to time; provided, however, that Employee shall not be reimbursed for
expenses incurred by him in connection with business use of his automobile
since the Employee's salary has been increased by an amount to be used by the
Employee to pay such expenses.
(g) In addition, during the Employment Period (but not the
Consulting Period), Employee shall be entitled to participate in any stock
option or stock purchase plans established by the Company, as determined from
time to time by the Company's Compensation Committee or Stock Option Committee.
SECTION 4. Bonus.
(a) Regular Bonus: During the Employment Period (but not the
Consulting Period), Employee shall be eligible to participate in the same bonus
plans as other executive officers, with potential annual bonuses of up to 42%
of the Employee's annual salary paid in such year. For the fiscal year ending
December 31, 1997, Employee shall participate in the Executive and Key Manager
Compensation Plan attached hereto as Exhibit A, with 50% of Employee's bonus
subject to the Corporate Bonus and 50% of Employee's bonus subject to the
Divisional Bonus for the Company's managed care division.
(b) Special Sales Bonus:
(i) The Employee shall be eligible for a bonus in the first
calendar year ending during the Employment Period (but not the Consulting
Period) in which Employee Revenue exceeds Base Revenue by $15 million, as
follows:
In the first calendar year that Employee Revenue exceeds Base Revenue
by $15 million, Employee will become eligible for one of the following
bonuses, depending on the year in which Employee Revenue first exceeds
Base Revenue by $15 million, as follows:
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<PAGE> 4
<TABLE>
<CAPTION>
Year Employee Revenue
Employee First Exceeds Base Revenue By $15 Million
Revenue -----------------------------------------
Threshold 1998 1999 2000
--------- ---- ---- ----
<S> <C> <C> <C>
Base Revenue
plus $15 million $150,000 $ 50,000 --
Base Revenue
plus $25 million $375,000 $200,000 $ 50,000
Base Revenue
plus $35 million $600,000 $400,000 $200,000
</TABLE>
A Special Sales Bonus is payable only for the first calendar year during the
Employment Period that Employee Revenue exceeds Base Revenue by at least $15
million and not for any calendar year thereafter.
(ii) "Base Revenue" is equal to managed care revenues generated
from Existing Accounts during the 1997 calendar year which are recorded as
revenue for financial accounting purposes during 1997 and managed care revenues
generated from New Programs initiated during the 1997 calendar year which are
recorded as revenue for financial accounting purposes during 1997, annualized
as if they had been in effect for the entire year; provided that if any
Existing Account, listed on Attachment A, or any New Program initiated during
the 1997 calendar year, generated no managed care revenues during the 1997
calendar year, then an estimated amount of annual managed care revenue expected
to be generated from such program shall be included in Base Revenue, as
determined by the Chief Executive Officer or Chief Financial Officer of the
Company. "Employee Revenue" is equal to managed care revenues generated from
Existing Accounts and New Programs during a single calendar year, except for
managed care revenues from any Existing Account or New Program which resulted
in a net profit percentage (after allocation of corporate overhead and
administration expenses) ("Profit Percentage") in such calendar year of less
than ten (10%) percent (the "Excluded Employee Revenue"); provided that no
managed care revenue generated from an Existing Account or new Program shall be
included in Employee Revenue if, at the Payment Date (as defined below), such
Existing Account or New Program is not generating managed care revenues at the
same or a greater level than in the calendar year for which Employee Revenue is
being calculated. Excluded Employee Revenue may be included in Employee
Revenue, if the Chief Executive Officer or Chief Financial Officer of the
Company approve in writing of the inclusion of Excluded Employee Revenue in
Employee Revenue, but only to the following extent: the Excluded Employee
Revenue multiplied by a fraction the numerator of which is the Profit
Percentage on such revenues in such calendar year and the denominator of which
is ten (10%) percent. For example, if a New Program which started in 1998
produces $1,000,000 of managed care revenues in 1998, and the net profit on
such revenue to USMC is $40,000, the Profit Percentage from such revenue is
four (4%) percent and, if approved by the Chief Executive Officer or Chief
Financial Officer, the Employee Revenue in 1998 from such New Program is
$400,000 ($1,000,000 X 4%/10%). The
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<PAGE> 5
pricing of all managed care programs is subject to the prior written approval of
the Chief Executive Officer and/or the Chief Financial Officer of the Company.
(iii) Employee Revenue in excess of a RevenueThreshold level,
but between two Revenue Threshold levels set forth above, shall be payable at
the lower of the two levels.
(iv) Any bonus for which Employee becomes eligible under this
Section 4(b) is payable in twelve equal monthly payments, with the first such
payment due within five (5) business days of the release of the Company's
earnings to the public for the year in which the bonus is earned. In order to
receive bonus payments under this Section 4(b)(iv), Employee must be a full
time regular employee of the Company on the date of payment of each such bonus
payment. If the Employee's employment is terminated before all payments of
this bonus for which Employee becomes eligible under Section 4(b) are paid, any
unpaid bonus payments shall not be paid.
SECTION 5. Term; Termination.
(a) The Employment Period shall be for a period, commencing on the
date of this Agreement and ending on December 31, 2000 or, if earlier, (i) the
beginning of the Consulting Period, (ii) termination of Employee's employment
with Company for Cause (as defined below), (iii) termination of Employee's
employment with the Company without Cause (as defined below), (iv) termination
by the Employee's of his employment with the Company ("resignation"), (v)
Employee's death or (vi) Employee's physical or mental disability which
prevents him from performing his obligations hereunder for a period of ninety
(90) consecutive days. This Agreement shall terminate at the end of the
Employment Period, or, if later, the end of the Consulting Period. Any such
termination of this Agreement shall not affect the Company's obligation to pay
Salary or consulting fees to Employee accrued through the effective date of
such termination or severance payments required to be paid pursuant to Section
7 of the Agreement.
(b) For purposes of this Agreement, "for Cause", shall mean (i) the
Employee's personal dishonesty directly affecting the Company or its
affiliates; (ii) gross incompetence as demonstrated by the Employee's inability
to perform and carry out the functions required of Employee in a manner
consistent and equal to the standards of other employees with similar
responsibilities in the industry; (iii) willful or reckless misconduct of
Employee; (iv) breach by Employee of fiduciary duty to the Company or its
affiliates, whether or not involving person profit; (v) Employee's indictment
for any violation of the Medicare or Medicaid laws or other similar laws or
regulations or Employee's plea of nolo contenders or conviction under any laws
or regulations relating to the Medicare or Medicaid programs or conviction for
violation of any law, rule or regulation (other than traffic violations or
other minor misdemeanor offenses); (vi) the issuance by any regulatory
authority to which the business of the Company or its affiliates is subject of
a final and nonappealable order against Employee imposing sanctions against
Employee which adversely affect the business and operations of the Company or
its affiliates; (vii) repeated and intentional failure of Employee to perform
duties required under this Agreement or a material breach of any provision of
this Agreement; or (viii) Employee's violation of the Company's Code of Ethics;
provided, however, that with respect to
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<PAGE> 6
clauses (ii), (iii), (iv), (vii) and (viii) above, such events, occurrences,
violations or problems shall constitute "Cause" only if Employee fails to cure
such event, occurrence, violation or problem within five (5) days following the
date on which written notice specifically identifying such event, occurrence,
violation or problem is delivered to Employee. For purposes of this Agreement,
"without Cause" shall mean termination of Employee's employment for any reason
other than Employee's death or disability, termination of employment by the
Employee or termination of the Employee's employment for Cause.
(c) Employee hereby understands and agrees that, in the event of the
termination of his employment for Cause or due to death, disability or
resignation, no severance or other compensation shall be payable to Employee by
the Company or its affiliates, and Employee hereby waives any and all claims
for severance or other compensation in event of any for Cause termination, or
Employee's death, disability or resignation. All compensation and other
benefits shall cease to accrue upon the Employee's death, disability,
resignation or termination of the Employee's employment for Cause.
SECTION 6. Suspension. In the event Employee is indicted for any
violation of the Medicare or Medicaid laws or other similar laws or regulations,
the Company may suspend Employee and Employee shall cease all of his duties for
the Company or its affiliates pursuant to this Agreement or otherwise. During
any period of suspension, the Company may cease all payments of all compensation
and any other benefits to which Employee may be entitled, in which case the
Company shall have no obligation to pay such amounts in respect of such period
of suspension or to provide such benefits at any future time.
SECTION 7. Severance. In the event that Employee is terminated by the
Company or any successor of the Company without Cause during the Employment
Period, the Company shall pay to Employee, as a severance package, his Salary
for up to nine (9) months from the date of termination, reduced by any amount
that Employee earns during the nine month period following his termination from
any subsequent employment or otherwise. In the event that Employee is
terminated without Cause during the last nine months of the Employment Period,
the maximum severance pay to which Employee shall be entitled shall be limited
to Employee's salary for the remaining term of the Employment Period. Any
severance compensation paid to Employee pursuant to this Section shall be paid
in the same manner as Salary would have been paid to Employee during the
Employment Period.
SECTION 8. Non-Competition.
(a) As consideration for Employee's covenant not to compete with the
Company or any of its affiliates in accordance with this Section 8 of this
Agreement, Company shall pay to Employee an amount equal to $125,000 pursuant
to the following payment schedule:
(i) $75,000, which was paid on January 6, 1997; and
(ii) $50,000 on or before January 1, 1998.
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<PAGE> 7
(b) Definitions - The term "affiliates" shall mean, with respect to
any person, partnership, corporation or other entity, any and all persons,
partnerships, corporations or other entities directly or indirectly controlling
(including, without limitation, all directors and officers), controlled by or
under direct or indirect common control with such person, partnership,
corporation or other entity, including, without limitation, any joint venture
to which such person, partnership, corporation or other entity is a party. The
term "Clinical Laboratory Business" shall mean any business, endeavor,
enterprise, activity, arrangement or undertaking engaged in the performance or
provision of any Laboratory Testing, including, without limitation, any entity
that is required to be licensed under the Clinical Laboratory Improvement
Amendments of 1988, codified at 42 U.S.C. Section 263a. The term "Laboratory
Testing" shall mean any and all clinical laboratory analysis or testing
(including, without limitation, any sampling, testing and reporting on medical,
biological or diagnostic specimens or products (including all clinical and
anatomical procedures)) and any activity substantially similar thereto. The
term "Managed Care Business", shall mean any business, endeavor, enterprise,
activity, arrangement or undertaking engaged in the provision of health care
services, including, but not limited to Laboratory Testing, DME, HMS or
diagnostic imaging services, by or through capitated plans. The term
"Participate" shall mean any direct or indirect interest or position in or any
financial or other arrangement or relationship with any business, arrangement
or enterprise whether as an officer, director, employee, partner, shareholder,
sole proprietor, joint venturer, agent, representative, independent contractor,
consultant, franchisor, franchisee, creditor, owner or otherwise; provided that
the term "Participate" shall not include ownership of less than two percent of
the stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over- the-counter market.
(c) Employee hereby covenants and agrees that during the Employment
Period and for an additional period of five (5) years after the date on which
Employee's employment with the Company terminates for any reason (the
"Noncompetition Period"), Employee will not, and will not permit any of his
affiliates or his affiliates' officers, directors, employees or agents to,
directly or indirectly, (i) engage or Participate in any Clinical Laboratory
Business (other than the Company and its affiliates) located in or providing
any services to or for any person or entity whatsoever in or otherwise doing
business an area within 100 miles of any facility of the Company or its
affiliates in existence as of the date on which Employee's employment with the
Company terminates, (ii) engage or Participate in any Managed Care Business
(other than the Company and its affiliates) located in or providing services
within the United States of America or (ii) induce or attempt to influence any
person or entity who or which is or was a customer or client of the Company or
its affiliates at any time during the Employment Period to transact business
with any competitor of the Company or its affiliates or to cease to do
business, in whole or in part, with the Company or its affiliates.
(d) Employee hereby acknowledges and agrees that this covenant is
reasonable with respect to its duration, geographic area and scope.
(e) Enforceability. Notwithstanding the intent of the parties
hereto that all of the provisions contained herein be fully enforceable and the
terms of this paragraph, if at any time a
7
<PAGE> 8
court holds that the restrictions agreed to by the parties and stated in this
Agreement are unreasonable or otherwise unenforceable under circumstances then
existing, the parties hereto agree that the maximum period, scope or geographic
area determined to be reasonable under such circumstances by such court will be
substituted for the stated period, scope or area. The parties hereto agree
that money damages would be inadequate for any breach of any of the provisions
contained in Sections 8, 9, 10, or 13 of this Agreement. In the event of
Employee's breach of any of such provisions, the Company or any of its
affiliates or its or their successors or assigns may, in addition to other
available rights and remedies, apply to any court of competent jurisdiction for
specific performance and/or injunctive relief in order to enforce, or prevent
any violation of, any of the provisions of this Agreement.
(f) Any termination of this Employment Agreement pursuant to Section
5 above shall not relieve Company of its obligation to pay the consideration
for the noncompete pursuant to Section 8(a) hereof, nor Employee of his
obligations under Section 8.
SECTION 9. Confidential Information. Employee acknowledges and agrees
that the information, observations and data obtained by him while employed by
the Company concerning the business or affairs of the Company or any of its
affiliates, including, without limitation, all information with respect to the
Company's and its affiliates' managed care business (Confidential Information)
are the sole property of the Company or its affiliates, respectively. Employee
agrees that he shall not disclose to any unauthorized person or use for his own
account any Confidential Information without the prior written consent of the
Board of the Company unless and to the extent that the Confidential Information
becomes generally known to and available for use by the public by means other
than a breach of this covenant or until the Confidential Information becomes
obsolete, whichever is earlier. Employee shall deliver to the Company at the
termination of the Employment Period or at any other time the Company may
request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined below) or the business of the
Company or any subsidiary which he may then possess or have under his control.
SECTION 10. Inventions and Patents. Employee agrees that all
inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports, and all similar or related information which
relates to the Company's or any of its affiliates' actual or anticipated
business, research and development or existing or future products or services
and which are conceived, developed or made by Employee while employed by the
Company or its affiliates ("Work Product") shall belong to and be the sole
property of the Company and its affiliates. Employee agrees to promptly
disclose such Work Product to the Chief Executive Officer of the Company and
the Board and to perform all actions reasonably requested by the Chief
Executive officer of the Company or the Board (whether during or after the
Employment Period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments).
8
<PAGE> 9
SECTION 11. Survival. Sections 8, 9 and 10 hereof shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period, Consulting Period or this Agreement for
any reason.
SECTION 12. Notices. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made
for all purposes if (i) sent by certified or registered mail, return receipt
requested and postage prepaid, (ii) hand delivered, (iii) sent by a nationally
recognized overnight courier or (iv) sent by telephone facsimile transmission
(with a confirming copy by First Class mail) as follows:
If to the Company:
Universal Standard Medical Laboratories, Inc.
26500 Northwestern Hwy., Suite 400
Southfield, MI 48076
Attention: Chief Executive Officer
Facsimile No.: (810) 358-0704
If to Employee:
Perry C. McClung
42867 Potomac
Novi, Michigan 48375
or at such other address as any party may specify by notice given to the other
party in accordance with this paragraph. The date of giving of any such notice
shall be the date of hand delivery, the date three days following the posting
of the mail, the date sent by telephone facsimile, the day after delivery to
the overnight courier service.
SECTION 13. Code of Ethics. Employee hereby acknowledges that he has
received and has signed a copy of the Company's Code of Ethics and further
agrees to abide by and comply with all of the provisions contained therein. In
the event that any of Employee's required duties or responsibilities hereunder
would conflict with the provisions of the Company's Code of Ethics, Employee
shall so notify the Company in writing, in which case the Company may either
waive such provision of the Code of Ethics or waive the requirement of Employee
to perform such conflicting duty or responsibility.
SECTION 14. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Michigan,
without giving effect to any choice of law or
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<PAGE> 10
conflict of law provision or rule (whether of the State of Michigan or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Michigan.
(b) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but when taken
together shall constitute but one instrument.
(c) Successors and Assigns. Neither this Agreement nor any rights
or obligations hereunder may be assigned by Employee. The Company may freely
assign this Agreement and all of its rights and obligations hereunder to any
affiliate or to any person or entity in connection with a sale of all or
substantially all of the assets of the Company or a sale of 50% or more of the
capital stock of the Company. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns.
(d) Delegation. The Company may perform its obligations under the
Agreement directly or may delegate all or a portion of its responsibility for
the same to a professional employer organization ("PEO") through which the
Employee's services are made available to the Company. The institution of a
professional employer arrangement with respect to the Employee's services for
the Company does not constitute the termination of the Employee's engagement
with the Company for purposes of the Agreement, nor does the transfer of the
Employee's from one PEO to another PEO constitute such a termination, so long
as his or her services for the Company continue uninterrupted. In the event of
the institution of a professional employer arrangement with respect to the
Employee's services for the Company, a termination of the engagement of the
Employee shall be deemed to have occurred under the Agreement only in the event
that the Employee is no longer rendering services to the Company as
contemplated by the Agreement. In the event of the institution of a
professional employer arrangement with respect to the Employee's services for
the Company, Employee acknowledges that (i) the PEO, under the terms of its
agreement with the Company, has the right to immediately terminate the
Employee's employment without prior notice and without payment of any
post-termination compensation to the Employee and (ii) the PEO shall have no
liability under the Agreement except to make compensation payments to the
Employee as directed by the Company. In the event of the institution of a
professional employer arrangement with respect to the Employee's services for
the Company, if the Company desires to terminate continued service from the
Employee as contemplated by the Agreement, the Company agrees to either cause
the PEO to terminate Employee's employment in accordance with the terms of the
Agreement and to pay all amounts due to Employee under the Agreement resulting
from such termination or to pay directly to the Employee all amounts that would
be due to Employee under the Agreement upon such termination.
(e) Descriptive Headings. The descriptive headings contained in
this Agreement are for convenience only and do not constitute a part of this
Agreement.
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<PAGE> 11
(f) Invalidity. In the event that one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement.
(g) Waiver. No failure on the part of either party to exercise, and
no delay in exercising or course of dealing with respect to, any right, power
or privilege under this Agreement (or breach of any obligation under any other
agreement) shall operate as a waiver thereof , nor shall any single or partial
exercise of any right, power or privilege under this Agreement or any other
agreement (or breach of any obligation under any other agreement) preclude any
other or further exercise thereof or hereunder, or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
(h) Amendments. This Agreement may not be amended, modified or
abrogated except in writing executed by each of the parties hereto.
(i) Entirety. All negotiations and agreements between the parties
relating to the subject matter of this Agreement are merged into this Agreement
and there are no representations, covenants or agreements of either party other
than those expressly set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
By: /s/ Eugene Jennings
-----------------------------------
Eugene Jennings
Its: President
/s/ Alan S. Ker /s/ Perry C. McClung
- ---------------------------- --------------------------------------
Witness PERRY C. McCLUNG
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<PAGE> 12
ATTACHMENT A
BASE ACCOUNTS
Base Accounts consist of the Existing Accounts, as listed below, plus any
New Program. A New Program is defined as any USMC program or plan which
commenced subsequent to the execution date of this Agreement, provided that any
such program or plan was procured solely and directly by Employee and that no
other USMC employee is paid a commission in connection with the procurement of
such program or plan.
EXISTING ACCOUNTS
All USMC programs or plans in effect as of the execution date of this
Agreement providing laboratory services ("LS"), home medical services ("HMS")
or imaging services ("IS") to the employees, members or retirees of any of the
following entities, divisions or other groupings:
Chrysler * *
Chrysler * City of Flint (LS)
Chrysler * Lee County (LS)
Chrysler * *
Chrysler Indiana (LS) Allied Signal (LS)
Ford UAW (LS) Budd Plastics (LS)
Ford Retiree (LS) *
Ford Ohio (LS) Emerald HMO (LS)
Ford Ohio Retiree (LS) State of Indiana (LS)
Ford Indiana (LS) Healthnet Kansas (LS)
Ford Kentucky (LS) Ford (HMS)
Mazda (LS) Healthnet (HMS)
Teamsters (LS) Emerald (HMS)
Rouge Steel (LS) Ford National (HMS)
* *
City of Detroit (LS) *
Board of Education (LS) *
Messa (LS) *
Detroit Diesel (LS) *
Rouge Steel (HMS)
____________________________
*
* Denotes information filed separately with the Commission pursuant to Rule 24
b-2 of the Securities Exchange Act of 1934 governing requests for confidential
treatment of information.
12
<PAGE> 13
EXHIBIT A TO
EMPLOYMENT AGREEMENT BETWEEN
USML, INC.
AND
PERRY C. MCCLUNG
[Attach Executive And Key Manager Compensation Plan]
Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended September 30, 1996
13
<PAGE> 1
EXHIBIT 10.3
UNIVERSAL STANDARD HEALTHCARE, INC.
1992 STOCK OPTION PLAN, AS
AMENDED AND RESTATED AUGUST 25, 1997
ARTICLE 1
Identification of the Plan
1.1 Title. The plan described herein (the "Plan") shall be known as the
"Universal Standard Healthcare, Inc. 1992 Stock Option Plan."
1.2 Purpose. The purpose of this Plan is (i) to reward Participants in
the Plan for services to Universal Standard Healthcare, Inc. (the "Company")
and its Subsidiaries rendered by such persons after the date of adoption of
this Plan by the Company's stockholders, (ii) to provide Participants in the
Plan with significant additional incentive to promote the financial success of
the Company, and (iii) to provide an incentive which may be used to induce able
persons to enter into or remain in the employment of, or to provide services
to, the Company or any Subsidiary.
1.3 Defined Terms. Certain capitalized terms used in this Plan shall
have the meanings assigned for such terms in Section 10.1 of this Plan.
ARTICLE 2
Administration of this Plan
2.1 Committee's Powers. This Plan shall be administered by a committee
(the "Committee") composed of persons appointed by the Board of Directors of
the Company in accordance with the provisions of Section 2.2. The Committee
shall have full power and authority to prescribe, amend and rescind rules and
procedures governing administration of this Plan. The Committee shall have
full power and authority to interpret the terms of this Plan and the Options
granted hereunder, and the rules and procedures established by the Committee.
Each action of the Committee which is within the scope of the authority
delegated to the Committee by this Plan or by the Board shall be binding on all
persons.
2.2 Committee Membership. The Committee shall be composed of non-
employee members of the Board. The Board shall have the power to determine the
number of members which the Committee shall have and to change the number of
membership positions on the Committee from time to time but in no event shall
the Committee consist of less than two members of the Board. The Board shall
appoint all members to the Committee. The Board may from time to time appoint
members to the Committee in substitution for, or in addition to, members
previously appointed and may fill vacancies, however caused, on the Committee.
Any member of the Committee may be removed from the Committee by the Board at
any time without cause. If at any time no special
<PAGE> 2
committee has been constituted by the Board especially for the purposes of this
Plan, then the entire Board shall have all powers and rights delegated to the
"Committee" under this Plan.
ARTICLE 3
Persons Eligible to Receive Options
A person shall be eligible to be granted an Option only if, on the
proposed Granting Date for such Option, such person is an officer or director
of the Company or meets the following standards: (i) such person is employed by
the Company or a Subsidiary and such person has managerial, supervisory or
similar responsibilities or (ii) such person is an independent contractor who
provides key services to the Company or a Subsidiary. A person selected to be
granted an Option is herein called a "Participant."
ARTICLE 4
Options Grant
4.1 Power to Grant Options.
(a) The Committee shall have the right and the power to grant
at any time to any Participant an option entitling such person to purchase
Common Stock from the Company in such quantity, at such price, on such terms
and subject to such conditions consistent with the provisions of this Plan as
may be established by the Committee on or prior to the Granting Date for such
option; provided that, effective on and after May 2, 1996, no Participant who
is a salaried employee shall be eligible to receive aggregate option grants
under this Plan, in any two consecutive fiscal years of the Company, to
purchase more than 375,000 shares of the Common Stock.
(b) Notwithstanding the provisions of Section 4.1(a) above,
effective August 4, 1997, the President shall have the right and the power to
grant at any time to any Participant specified in Article 3 above, other than
Section 16 Holders, an option entitling such person to purchase Common Stock
from the Company in such quantity, at such price, on such terms and subject to
such conditions consistent with the provisions of this Plan as may be
established by the President on or prior to the Granting Date for such option;
provided that, effective on and after May 2, 1996, no Participant who is a
salaried employee shall be eligible to receive aggregate option grants under
this Plan, in any two consecutive fiscal years of the Company, to purchase more
than 375,000 shares of the Common Stock. The Committee shall designate the
maximum number of shares of Common Stock available under the Plan which may be
subject to Options granted by the President, which number may be revised from
time to time by the Committee.
4.2 Granting Date. An Option shall be deemed to have been granted under
this Plan on the date (the "Granting Date") on which the Grantor designates as
the Granting Date at the time it or he approves such Option, provided that the
Grantor may not designate a Granting Date with
2
<PAGE> 3
respect to any Option which is earlier than the date on which the granting of
such Option is approved by the Grantor.
4.3 Option Terms Which the Committee May Determine. The Grantor shall
have the power to determine the Participants to whom Options are granted, the
number of Shares subject to each Option, the number of Options awarded to each
Participant and the time at which each Option is granted; except that the
President may not grant Options to Section 16 Holders or Options in excess of
those delegated to the President to grant as described in Section 4.1. Except
as otherwise expressly provided in this Plan, the Grantor shall also have the
power to determine, at the time of the grant of each Option, all terms and
conditions governing the rights and obligations of the holder with respect to
such Option, including but not limited to: (a) the purchase price per Share or
the method by which the purchase price per Share will be determined; (b) the
length of the period during which the Option may be exercised and any
limitations on the number of Shares purchasable with the Option at any given
time during such period; (c) the times at which the Option may be exercised;
(d) any conditions precedent to be satisfied before the Option may be
exercised; (e) any restrictions on resale of any Shares purchased upon exercise
of the Option; and (f) whether the Option will constitute an Incentive Stock
Option.
4.4 Option Agreement. No person shall have any rights under any Option
unless and until the Company and the person to whom such Option is granted have
executed and delivered an agreement expressly granting the Option to such
person and containing provisions setting forth the terms of the Option (an
"Option Agreement").
ARTICLE 5
Option Terms
5.1 Plan Provisions Control Option Terms. The terms of this Plan shall
govern all the Options. In the event any provision of any Option Agreement
conflicts with any term in this Plan as constituted on the Granting Date of
such Option, the term in this Plan as constituted on the Granting Date of the
Option shall control. Except as provided in Article 8, the terms of any Option
may not be changed after the Granting Date of such Option without the express
approval of the Option Holder.
5.2 Price Limitation. Subject to Article 8, the price at which each
Share may be purchased upon the exercise of any Option may not be less than the
Fair Market Value on the Granting Date for such Option, provided that if an
Incentive Stock Option is granted to a person who owns, on the Granting Date of
such Incentive Stock Option, stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company (or of any
parent or Subsidiary of the Company in existence on the Granting Date of such
Option), the price at which each Share may be purchased upon exercise of such
Incentive Stock Option may not be less than 110% of the Fair Market Value on
the Granting Date for such Option.
3
<PAGE> 4
5.3 Term Limitation. No Incentive Stock Option may be granted under
this Plan which is exercisable more than ten years after its Granting Date.
This Section 5.3 shall not be deemed to limit the term which the Grantor may
specify for any Options granted under the Plan which are not intended to be
Incentive Stock Options.
5.4 Transfer Limitations. No Incentive Stock Option or other Option
granted to any Section 16 Holder shall be transferable other than by will or
the laws of descent and distribution or exercisable during the lifetime of the
person to whom the Option is initially granted by anyone other than the initial
grantee. Notwithstanding the terms of the Option Agreement, if any Option
(other than an Incentive Stock Option) is issued to a Holder who is not a
Section 16 Holder on the Granting Date and such Holder becomes a Section 16
Holder before such Holder has fully exercised such Option, then such Option
shall not be transferable other than by will or the laws of descent and
distribution or exercisable during the lifetime of the initial grantee by
anyone other than the initial grantee. Subject to the preceding sentence,
Options (other than Incentive Stock Options) which are granted to anyone other
than a Section 16 Holder may be transferred (i) to any member of the initial
grantee's immediate family or (ii) to any inter vivos trust solely for the
benefit of any members of the initial grantee's immediate family or (iii) as a
result of the death of the initial grantee, testate or intestate. Nothing
contained herein shall be construed as making an Option transferable if the
Option Agreement provides otherwise. It shall be a condition precedent to any
transfer of any Option that the transferee executes and delivers an agreement
acknowledging that such Option has been acquired for investment and not for
distribution and is and shall remain subject to this Plan and the Option
Agreement. The "Holder" of any Option shall mean (i) the initial grantee or
(ii) the person or trust, if any, to whom the Option is transferred.
5.5 No Right to Employment Conferred. Nothing in this Plan or (in the
absence of an express provision to the contrary) in any Option Agreement (i)
confers any right or obligation on any person to continue in the employ of the
Company or any Subsidiary or to continue to provide services to the Company or
any Subsidiary as an independent contractor or (ii) affects or shall affect in
any way any person's right or the right of the Company or any Subsidiary to
terminate such person's employment or services to the Company or any Subsidiary
at any time, for any reason, with or without cause.
ARTICLE 6
Option Exercise
6.1 Normal Option Term. Except as otherwise provided in Section 6.3,
6.5 or in a Participant's Option Agreement, the right to exercise any Option
shall terminate at the earlier of the following dates: (i) the Termination Date
of the initial grantee of the Option and (ii) the Expiration Date of the
Option.
6.2 Exercise Time. Except as provided in Section 6.5, each Option
shall become exercisable at the time provided in the Option Agreement, provided
that the Committee as to all
4
<PAGE> 5
Options, or the President as to Options with respect to which he was the
Grantor, in its or his sole discretion shall have the right (but shall not in
any case be obligated) to permit the exercise of such Option prior to such
time.
6.3 Extension of Exercise Time. The Committee as to all Options, or the
President as to Options with respect to which he was the Grantor, in its or his
sole discretion shall have the right (but shall not in any case be obligated)
to permit any Option to be exercised after the Termination Date of the Holder
of such Option. Subject to Section 6.8, the Committee and the President shall
not have the right to permit the exercise of any Option after its Expiration
Date.
6.4 Exercise Procedures. Each Option shall be exercised by written
notice to the Company. Any Holder of any Option shall be required, as a
condition to such Holder's right to purchase securities with such Option, to
supply the Committee at such person's expense with such evidence,
representations, agreements or assurances (including but not limited to
opinions of counsel satisfactory to the Committee) as the Committee may deem
necessary or desirable in order to establish to the satisfaction of the
Committee the right of such person to exercise such Option, and of the
propriety of the sale of securities by reason of such exercise under the
Securities Act and any other laws or requirements of any governmental authority
specified by the Committee. The Company shall not be obligated to sell any
Shares subject to such Option until all evidence, representations, agreements
and assurances required by the Committee have been supplied. An Option Holder
shall not have any rights as a stockholder with respect to Shares issuable
under any Option until and unless such Shares are sold and delivered to such
Option Holder. The purchase price of Shares purchased upon the exercise of an
Option shall be paid in full in cash or by check by the Option Holder at the
time of the delivery of such Shares, provided that the Grantor may (but need
not) permit payment to be made by (i) delivery to the Company of outstanding
Shares, (ii) retention by the Company of Shares which would otherwise be
transferred to the Option Holder upon exercise of the Option or (iii) any
combination of cash, check, the Holder's delivery of outstanding Shares and
retention by the Company of Shares which would otherwise be transferred to the
Option Holder upon exercise of the Option. In the event any Common Stock is
delivered to or retained by the Company to satisfy all or any part of the
purchase price, the part of the purchase price deemed to have been satisfied by
such Common Stock shall be equal to the product derived by multiplying the Fair
Market Value as of the date of exercise times the number of Shares delivered to
or retained by the Company. The number of Shares delivered to or retained by
the Company in satisfaction of the purchase price shall not be a number which
when multiplied by the Fair Market Value as of the date of exercise would
result in a product greater than the purchase price. No fractional Shares
shall be delivered to or retained by the Company in satisfaction of the
purchase price. Any part of the purchase price paid in cash or by check upon
the exercise of any Option shall be added to the general funds of the Company
and may be used for any proper corporate purpose.
6.5 Death or Disability of Participant. Except as otherwise provided in
the Option Agreement, if the Holder of an Option dies or becomes permanently
disabled while such Option Holder is still employed by, or is providing
services as an independent contractor to, the Company or any Subsidiary, then
the right to exercise all unexpired installments of such Option shall be
5
<PAGE> 6
accelerated and shall accrue as of the date of death. Except as otherwise
provided in the Option Agreement and subject to Section 6.8, if the Holder of
an Option dies and such Option is exercisable at the date of death (for any
reason including acceleration pursuant to the preceding sentence), then the
Holder's estate or the person or persons to whom the Holder's rights under the
Option shall pass by reason of the Holder's death shall have the right to
exercise the Option for one year after the date of death and the Option shall
expire at the end of such one year period.
6.6 [RESERVED]
6.7 Taxes. The Company or any Subsidiary shall be entitled, if the
Grantor of such Option deems it necessary or desirable, to withhold from an
Option Holder's salary or other compensation (or to secure payment from the
Option Holder in lieu of withholding) all or any portion of any withholding or
other tax due from the Company or any Subsidiary with respect to any Shares
deliverable under such Holder's Option or the Grantor of such Option may (but
need not) permit payment of such withholding by the Company's retention of
Shares which would otherwise be transferred to the Option Holder upon exercise
of the Option. In the event any Common Stock is retained by the Company to
satisfy all or any part of the withholding, the part of the withholding deemed
to have been satisfied by such Common Stock shall be equal to the product
derived by multiplying the Fair Market Value as of the date of exercise by the
number of Shares retained by the Company. The number of Shares retained by the
Company in satisfaction of withholding shall not be a number which when
multiplied by the Fair Market Value as of the date of exercise would result in
a product greater than the withholding amount. No fractional Shares shall be
retained by the Company in satisfaction of withholding. The Company may defer
delivery under a Holder's Option until indemnified to its satisfaction.
6.8 Securities Law Compliance. Each Option shall be subject to the
condition that such Option may not be exercised if and to the extent the
Committee determines that the sale of securities upon exercise of the Option
may violate the Securities Act or any other law or requirement of any
governmental authority. The Company shall not be deemed by any reason of the
granting of any Option to have any obligation to register the Shares subject to
such Option under the Securities Act or to maintain in effect any registration
of such Shares which may be made at any time under the Securities Act. An
Option shall not be exercisable if the Committee or the Board determines there
is non-public information material to the decision of the Holder to exercise
such Option which the Company cannot for any reason communicate to such Holder.
Notwithstanding Sections 6.1 and 6.3 and the terms of the Option Agreement, if
(i) any Holder makes a bona fide request to exercise any Option which complies
with Section 6.4, (ii) the Committee or the Board determines such Option cannot
be exercised for a period of time pursuant to this Section 6.8 and (iii) such
Option expires during such period, then the term of such Option shall be
extended until the end of such period.
6
<PAGE> 7
ARTICLE 7
Shares Subject to This Plan
An aggregate of 1,800,000 shares of Common Stock (after giving effect to
the merger of Elan Holdings Corp. with and into Universal Standard Medical
Laboratories, Inc. [the former corporate name of Universal Standard Healthcare,
Inc.] and the 10.33 for 1 split of the outstanding Common Stock, effective
October 2, 1992) shall be subject to this Plan. The Options shall be limited
so that the sum of the following shall not as of any given time exceed
1,800,000 Shares: (i) all Shares subject to Options outstanding under this
Plan at the given time and (ii) all Shares which shall have been sold by the
Company by reason of the exercise at or prior to the given time of any of the
Options; provided, that unless the Board shall otherwise determine, for each
Share delivered to or retained by the Company as payment of all or part of the
purchase price upon the exercise of any Option under Section 6.4 or in
satisfaction of all or any part of the withholding amount under Section 6.7,
the aggregate number of Shares subject to this Plan shall be increased by one
Share. In the event any Option shall expire or be terminated or canceled
before it is fully exercised, then all Shares formerly subject to such Option
as to which such Option was not exercised shall be available for any Option
subsequently granted in accordance with the provisions of this Plan.
ARTICLE 8
Adjustments to Reflect Organic Changes
The Board shall appropriately and proportionately adjust the number and
kind of Shares subject to outstanding Options, the price for which Shares may
be purchased upon the exercise of outstanding Options, and the number and kind
of Shares available for Options subsequently granted under this Plan to reflect
any stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in the capitalization of the Company which the
Board determines to be similar, in its substantive effect upon this Plan or the
Options, to any of the changes expressly indicated in this sentence. The Board
may (but shall not be required to) make any appropriate adjustment to the
number and kind of Shares subject to outstanding Options, the price for which
Shares may be purchased upon the exercise of outstanding Options, and the
number and kind of Shares available for Options subsequently granted under this
Plan to reflect any spin-off, spin-out or other distribution of assets to
stockholders or any acquisition of the Company's stock or assets or other
change which the Board determines to be similar, in its substantive effect upon
this Plan or the Options, to any of the changes expressly indicated in this
sentence. The Committee shall have the power to determine the amount of the
adjustment to be made in each case described in the preceding two sentences,
but no adjustment approved by the Committee shall be effective until and unless
it is approved by the Board. In the event of any reorganization,
reclassification, consolidation, merger or sale of all or substantially all of
the Company's assets which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock,
the Board may (but shall not be required to) substitute the per share amount of
such stock, securities or assets for Shares upon any
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<PAGE> 8
subsequent exercise of any Option. If any fractional Share becomes subject to
any Option as a result of any change made under this Article 8, then (i) such
Option may not be exercised with respect to such fractional Share until and
unless such Option is exercised as to all other Shares subject to such Option
and (ii) if such Option is exercised with respect to such fractional Share, the
Company shall have the right to deliver to the Holder in lieu of such
fractional Share cash in an amount equal to the product derived by multiplying
the fraction representing the portion of a full Share represented by such
fractional Share times the Fair Market Value on the exercise date of the Option
with respect to such fractional Share established as prescribed in this Plan.
ARTICLE 9
Amendment and Termination of This Plan
9.1 Amendment. Except as provided in the following two sentences, the
Board shall have complete power and authority to amend this Plan at any time
and no approval by the Company's stockholders or by any other person, committee
or other entity of any kind shall be required to make any amendment approved by
the Board effective. The Board shall not, without the affirmative approval of
the Company's stockholders, amend the Plan in any manner which would cause any
outstanding Incentive Stock Options to no longer qualify as Incentive Stock
Options. If any Section 16 Holder holds any Option granted prior to October
24, 1996, the Board shall not, without the affirmative approval of the
Company's stockholders, make any amendment to this Plan which materially
increases the benefits to such Holder under this Plan with respect to Options
granted prior to October 24, 1996. No termination or amendment of this Plan
may, without the consent of the Holder of any Option prior to termination or
the adoption of such amendment, adversely affect the rights of such Holder
under such Option.
9.2 Termination. The Board shall have the right and the power to
terminate this Plan at any time, provided that no Incentive Stock Options may
be granted after the tenth anniversary of the adoption of this Plan. No Option
shall be granted under this Plan after the termination of this Plan, but the
termination of this Plan shall not have any other effect. Any Option
outstanding at the time of the termination of this Plan may be exercised after
termination of this Plan at any time prior to the Expiration Date of such
Option to the same extent such Option would have been exercisable had this Plan
not terminated.
ARTICLE 10
Interpretation of This Plan
10.1 Definitions. Each term defined in 10.1 has the meaning indicated
in this 10.1 whenever such term is used in this Plan:
"Board of Directors" or "Board" mean the Board of Directors of the Company
as it may be constituted from time to time.
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<PAGE> 9
"Cause" shall have the meaning set forth in any employment agreement
between the Company and a Participant or, in the absence of such agreement,
shall mean (i) a Participant's willful and repeated failure to comply with the
lawful directives of the Board or of such Participant's supervisory personnel,
(ii) gross negligence or willful misconduct by a Participant in the performance
of his duties to the Company or its Subsidiaries or any act of dishonesty or
fraud with respect to the Company and/or its Subsidiaries, or (iii) the
commission by a Participant of an act (including but not limited to a felony or
a crime involving moral turpitude) causing material harm to the standing and
reputation of the Company and/or its Subsidiaries, in each case as determined
in good faith by the Board.
"Code" means the Internal Revenue Code of 1986, as amended or any
successor statute.
"Committee" has the meaning assigned such term in Section 2.1.
"Common Stock" means the Company's Common Stock, no par value.
"Company" means Universal Standard Healthcare, Inc., except that if at any
time any corporation or other entity has acquired all or a substantial part of
the assets of the "Company" (as herein defined) and has agreed to assume the
obligations of the "Company" under this Plan, or is the survivor in a merger or
consolidation to which the "Company" was a party, such corporation or other
entity shall be deemed to be the "Company" at the given time.
"Disability" shall mean a Participant's inability to substantially perform
normal duties for a continuous period of six months or more.
"Expiration Date" means the date specified in the Option Agreement between
the Company and the Holder as the expiration date of such Option. If no
expiration date is specified in the Option Agreement relating to any Option,
then the Expiration Date of such Option shall be the day prior to the tenth
anniversary of the Granting Date of such Option. Notwithstanding the preceding
sentence, if the person to whom any Incentive Stock Option is granted owns, on
the Granting Date of such Option, stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company (or of any
parent of Subsidiary of the Company in existence on the Granting Date of such
Option), and if no earlier expiration date is specified in the Option Agreement
relating to such Option, than the Expiration Date of such Option shall be the
day prior to the fifth anniversary of the Granting Date of such Option.
"Fair Market Value" means:
(i) for a share of Common Stock, the average of the closing prices
of the sales of the Common Stock on all securities exchanges on which the
Common Stock may at the time be listed or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day or, if on any day the
Common Stock is not so listed, the sales prices of the Common Stock as of 4:00
p.m., New York time, on such day
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<PAGE> 10
as reported on the Nasdaq Stock Market's National Market or SmallCap Market or,
if the Common Stock is not reported on the Nasdaq Stock Market's National
Market or SmallCap Market on such day, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which Fair Market Value is being determined and the 20
consecutive trading days prior to such day or, if the Common Stock is not so
listed or quoted, as determined in good faith by the Committee; and
(ii) for a Vested Option, the excess (if any) of the Fair Market
Value of a share of Common Stock (as determined in accordance with clause (i))
over the Exercise Price.
"Granting Date" has the meaning assigned such term in Section 4.2.
"Grantor" shall mean the Committee or the President, whichever is granting
the Option.
"Holder" has the meaning assigned such term in Section 5.4.
"Incentive Stock Option" means an incentive stock option, as defined in
Section 422 of the Code, which is granted pursuant to this Plan.
"Option" shall mean each option to purchase Common Stock which shall be
granted by a Grantor pursuant to the Provisions of this Plan.
"Option Agreement" has the meaning such term is given in Section 4.4.
"Original Cost" shall mean the original purchase and/or exercise price of
the Shares acquired pursuant to the exercise of Options, adjusted as
appropriate pursuant to Article 8.
"Participant" has the meaning assigned such term in Article 3.
"Plan" has the meaning assigned such term in Section 1.1.
"President" shall mean the person serving as the President of the Company.
"Rule 16b-3" means Rule 16b-3 under the Securities Exchange Act of 1934,
or any successor provision.
"Section 16 Holder" means any person who, with respect to the Company, is
subject to Section 16 of the Securities Exchange Act of 1934 as amended at any
time or any law or statute which succeeds Section 16.
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"Securities Act" means the Securities Act of 1933, as amended and the
rules and regulations promulgated thereunder.
"Share" means a share of Common Stock.
"Subsidiary" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are,
at the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
"Termination Date" means the first date on which the initial grantee of an
Option is not employed by, nor providing services as an independent contractor
to, either the Company or any Subsidiary for any reason (including but not
limited to voluntary or involuntary termination of employment, death or
Disability or voluntary or involuntary termination of the relationship with the
Company or any Subsidiary as an independent contractor).
"Unvested Options" shall mean, as to any Participant as of a particular
date, those Options which are not Vested Options.
"Vested Options" shall mean, as to any Participant as of a particular
date, those Options that are presently exercisable by such Participant as of
such date.
10.2 Captions. The captions (i.e., all underlined words) used in this
Plan are for convenience only, do not constitute a part of this Plan, and shall
not be deemed to limit, characterize or affect in any way any provision of this
Plan. All provisions in this Plan shall be construed as if no captions had
been used in this Plan.
10.3 Severability.
(a) General. Whenever possible, each provision in this Plan and
in every Option at any time granted under this Plan shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Plan or any Option at any time granted under this Plan is
held to be prohibited by or invalid under applicable law, then (i) such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law and (ii) all other
provisions of this Plan and every Option at any time granted under this Plan
shall remain in full force and effect.
(b) Incentive Stock Options. Whenever possible, each provision in
this Plan and in every Option at any time granted under this Plan which is
evidenced by an Option Agreement which expressly states such Option is intended
to constitute an Incentive Stock Option under Section 422 of the Code (an
"intended ISO") shall be interpreted in such manner as to entitle such intended
ISO to the tax treatment afforded by the Code to Incentive Stock Options under
Section 422 of the Code, but if any provision of this Plan or any intended ISO
at any time granted under this Plan is held to be contrary to the requirements
necessary to entitle such intended ISO to the tax treatment
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afforded by the Code to Incentive Stock Options under Section 422 of the Code,
then (i) such provision shall be deemed to have contained from the outset such
language as shall be necessary to entitle such intended ISO to the tax
treatment afforded by the Code to Incentive Stock Options under Section 422 of
the Code, and (ii) all other provisions of this Plan and such intended ISO
shall remain in full force and effect. If any Option Agreement covering an
intended ISO granted under this Plan does not explicitly include any terms
required to entitle such intended ISO to the tax treatment afforded by the Code
to Incentive Stock Options under Section 422 of the Code, then all such terms
shall be deemed implicit in the intention to afford such treatment to such
Option and such Option shall be deemed to have been granted subject to all such
terms.
10.4 No Strict Construction. No rule of strict construction shall be
applied against the Company, the Committee, or any other person in the
interpretation of any of the terms of this Plan, any Option or any rule or
procedure established by the Committee.
10.5 Choice of Law. This Plan and all documents contemplated hereby,
and all remedies in connection therewith and all questions or transactions
relating thereto, shall be construed in accordance with and governed by the
laws of the State of Michigan.
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EXHIBIT 10.4
UNIVERSAL STANDARD HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED AUGUST 25, 1997)
1. PURPOSE. The purpose of the Universal Standard Healthcare, Inc.
Employee Stock Purchase Plan (the "Plan") is to promote the best interests of
Universal Standard Healthcare, Inc. (the "Company") and its shareholders by
encouraging employees of the Company and its subsidiaries to acquire a
proprietary interest in the Company, thus identifying their interests with
those of shareholders and encouraging the employees to make even greater
efforts on behalf of the Company. The Plan is intended to constitute an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code").
2. CERTAIN DEFINITIONS. As used in this Plan, the term
"subsidiary" of the Company means any "subsidiary corporation" as defined in
Section 424(f) of the Code; the term "employee" means an individual with an
"employment relationship" with the Company or any subsidiary as defined in
Regulation 1.421-7(h) of the Income Tax Regulations; the term "employment"
means employment with the Company, or a subsidiary of the Company; the term
"Purchase Period" means an offering period of at least six months beginning and
ending on the dates set by the Stock Option Committee, subject to earlier
termination under Section 12; and the term "compensation" means base salary,
plus incentive bonuses and commissions, but excluding non-compete payments.
3. STOCK. The stock subject to option and purchase under the
Plan shall be the Common Stock of the Company (the "Common Stock"). The total
amount of Common Stock on which options may be granted under the Plan shall not
exceed 750,000 shares, subject to adjustment in accordance with Section 11 of
the Plan. Shares of Common Stock subject to any unexercised portion of a
terminated, canceled or expired option granted under the Plan may again be used
for option grants under the Plan.
4. ADMINISTRATION. The Plan shall be administered by a Committee
(the "Committee") of the Board of Directors ("Board"). The Committee may
prescribe rules and regulations from time to time for the administration of the
Plan and may decide questions which may arise with respect to its
interpretation or application. The decisions of the Committee in interpreting
the Plan shall be final, conclusive and binding on all persons, including the
Company, its subsidiaries, employees and optionees. The Committee, from time
to time, shall grant to eligible employees on a uniform basis, options to
purchase Common Stock pursuant to the terms and conditions of the Plan. In the
event of insufficient shares during a Purchase Period, the Committee shall
allocate the right to purchase shares to each participant in the same
proportion that such participant's total wages (as defined in Section 3401(a)
of the Code) paid by the Company for the Purchase Period bears to the total of
such wages paid by the Company to all participants during the same period.
5. PARTICIPANTS. Except as provided in Section 6 of the Plan, any
employee who is in the employ of the Company or any subsidiary of the Company
on the offering dates (i) whose customary employment with the Company or a
subsidiary is 20 hours or more per week and (ii) who
<PAGE> 2
have been employed by the Company or a subsidiary for at least six months, is
eligible to participate in the Plan in accordance with its terms.
6. OWNERSHIP AND PURCHASE LIMITATIONS. Notwithstanding anything
herein to the contrary, no employee shall be entitled to participate in an
offering under the Plan if such employee, immediately after a grant under this
Plan, would, in the aggregate, own, and/or hold options to purchase, shares of
Common Stock equal to or exceeding five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of its
subsidiary corporations. The rules of Section 424(d) of the Code shall apply
for the purpose of determining such stock ownership. With respect to
individual employees, Section 424(d) of the Code provides that an employee
shall be considered as owning the stock owned directly or indirectly, by or for
his brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants. No employee shall be granted an option
under the Plan which, together with options granted under all employee stock
purchase plans (qualified under Section 423 of the Code) of the Company and its
subsidiaries permits the employee to accrue option rights to purchase shares in
any calendar year in excess of $25,000 of fair market value of such shares
(determined at the time an option is granted). For purposes of this Plan, the
"grant date" shall be the first day of each Purchase Period, as defined in
Section 2 of the Plan.
7. OPTION PRICE. The exercise price of each option granted under
the Plan shall be equal to the "Discount" multiplied by the lesser of (i) the
fair market value per share of the Common Stock on the grant date and (ii) the
fair market per share of the Common Stock on the "Purchase Date" (as defined in
Section 8(d)). The term "Discount" shall mean a percentage not less than 85%.
The Discount shall be 85% unless otherwise determined by the Committee in its
sole discretion on or before the grant date. For purposes of this paragraph,
the fair market value per share shall be determined by the last sale price per
share of the Common Stock on the Nasdaq Stock Market's National Market, as
reported in The Wall Street Journal, for the grant date or the Purchase Date,
as the case may be, or, if there are no sales on such date, on the last date
immediately preceding such date on which there were sales.
8. PAYMENT FOR OPTION SHARES.
(a) SHARES UNDER OPTION. An eligible employee may elect to
participate in an offering by delivering to the Company an election to
participate and a payroll deduction form within a certain period of time, which
period shall be designated by the Committee prior to each offering date (the
"Election Period") and which election shall become irrevocable as to the
applicable Purchase Period at the end of the Election Period. An eligible
employee's election to participate and payroll deduction form from the
preceding Election Period automatically shall carry over to the next Election
Period unless affirmatively revoked in writing by the employee. An employee
who elects to participate may not authorize payroll deductions which, in the
aggregate, are less than one percent (1%) of the employee's cash compensation.
Only whole shares of Common Stock may be purchased under the Plan.
(b) A participating employee may not authorize payroll
deductions for less than an entire Purchase Period. An employee may suspend
payroll deductions during a Purchase
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<PAGE> 3
Period only at the discretion of the Company in the event of an unforeseen
hardship; provided, however, that payroll deductions made prior to approval of
the suspension by the Company shall be used to purchase Common Stock for the
employee at the end of the Purchase Period. A participating employee shall not
be permitted to withdraw payroll deductions from the Plan in cash, except as
provided in Section 8(e).
(c) Payroll deductions shall commence on the first payroll date in
the Purchase Period and shall continue until the last payroll date in the
Purchase Period; provided, however, that unless an election is revoked, such
election shall continue into successive Purchase Periods.
(d) A participating employee's option shall be deemed to have been
exercised at the close of business on the last business day of the Purchase
Period, which shall be the earlier of (i) the day designated by the Committee
as the last day of the Purchase Period or (ii) the date on which the Purchase
Period is terminated pursuant to Section 12.
(e) The Company retains the right to designate an exclusive broker
to handle the Common Stock transactions under the Plan. As soon as practicable
after the end of the Purchase Period, the Company shall deliver to each
employee or a designated brokerage account, through a certificate or electronic
transfer, the shares of Common Stock that such employee has purchased. Any
amount that has been deducted and withheld in excess of the option price
automatically shall be applied toward the purchase of option shares in the next
Purchase Period. An employee who elects not to participate in the following
Purchase Period shall receive a check from the Company for any amount that has
been deducted and withheld in excess of the cost of shares.
(f) No interest shall accrue or be paid on any amounts paid by
payroll deduction by any participating employee.
9. NON-TRANSFERABILITY. No option shall be transferable by an employee
other than by will or the laws of descent and distribution, and an option shall
be exercised during an employee's life time only by an employee.
10. TERMINATION OF EMPLOYMENT, UNPAID LEAVE OF ABSENCE OR LAYOFF. If a
participating employee ceases to be employed by the Company for any reason
(with or without severance pay), including but not limited to, voluntary or
forced resignation, retirement, death, layoff, or if an employee is on an
unpaid leave of absence for more than 60 days, or during any period of
severance, payroll deductions with respect to such employee at the time of such
termination shall cease and the option shall be exercised on the Purchase Date
to the extent payroll deductions were made prior to such termination.
11. ADJUSTMENTS. In the event of changes in the outstanding Common Stock
by reason of stock dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges or other relevant changes in
the capital structure of the Company, an appropriate adjustment shall be made
by the Committee in the number of shares and kind of stock or other securities
for which options may be or may have been granted under the Plan, and the
exercise price
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<PAGE> 4
related thereto, to the end that the proportionate interests shall be
maintained as before the occurrence of such an event. Any of the foregoing
adjustments may provide for the elimination of any fractional share which might
otherwise become subject to any option.
12. CHANGE OF CONTROL.
(a) After any merger of one or more corporations into the
Company in which the Company shall be the surviving corporation or any share
exchange in which the Company is a constituent corporation, each participant
shall, at no additional cost, be entitled upon the exercise of an option, to
receive (subject to any required action by shareholders), in lieu of the number
of shares of Common Stock for which such option shall then be exercisable, the
consideration which such participant would have been entitled to receive
pursuant to the terms of the agreement of merger or share exchange if at the
time of such merger or share exchange such participant had been a holder of
record of a number of shares of Common Stock equal to the number of shares then
underlying the option. In addition, if any person or entity becomes the
beneficial owner of 66-2/3% or more of the number of shares then issued and
outstanding, whether in connection with such merger or share exchange or
otherwise, or upon any sale by the Company of all or substantially all of its
assets, the Committee shall have the right to terminate the Purchase Period as
of such date, and, if so terminated, each participant shall be deemed to have
exercised, immediately prior to such merger, share exchange, acquisition or
sale of assets, his or her option to the extent payroll deductions were made
prior thereto. Comparable rights shall accrue to each participant in the event
of successive mergers or consolidations of the character described above.
(b) Notwithstanding anything contained herein to the
contrary, upon the dissolution or liquidation of the Company or upon any merger
or share exchange in which the Company is not the surviving corporation (other
than a merger with a wholly-owned subsidiary of the Company formed for the
purpose of changing the Company's corporate domicile where the Plan is assumed
by the survivor), the Purchase Period for any option granted under this Plan
shall terminate as of the date of the aforementioned event, and each
participant shall be deemed to have exercised, immediately prior to such
dissolution, liquidation, merger or share exchange, his or her option to the
extent payroll deductions were made prior thereto.
(c) The foregoing adjustments and the manner of application
of the foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an option.
13. TERMINATION AND AMENDMENT. The Board may terminate the Plan,
or the granting of options under the Plan, at any time. No option shall be
granted under the Plan after May 4, 2005.
The Board may amend or modify the Plan at any time and from time to
time, but no amendment or modification shall disqualify the Plan under Section
423 of the Code, or Rule 16b-3 of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), as amended from time to time (or any successor rule),
without shareholder approval.
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No amendment, modification, or termination of the Plan shall in any manner
affect any option granted under the Plan without the consent of the participant
holding the option.
14. RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of
the Plan, the Committee may impose such conditions on the exercise of an option
as may be required to satisfy the requirements of Rule 16b-3 of the Exchange
Act, as amended from time to time (or any successor rule).
15. RIGHTS PRIOR TO DELIVERY OF SHARES. No participant shall have any
rights as a shareholder with respect to shares covered by an option until the
issuance of a stock certificate or electronic transfer to the employee or the
employee's brokerage account of such shares. No adjustment shall be made for
dividends or other rights with respect to such shares for which the record date
is prior to the date the certificate is issued or the shares electronically
delivered to a brokerage account.
16. SECURITIES LAWS. Anything to the contrary herein notwithstanding,
the Company's obligation to sell and deliver stock pursuant to the exercise of
an option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities as
the Company deems necessary or advisable. The Company shall not be required to
sell and deliver stock unless and until it receives satisfactory assurance that
the issuance or transfer of such shares will not violate any of the provisions
of the Securities Act of 1933 or the Exchange Act, or the rules and regulations
of the Securities and Exchange Commission promulgated thereunder or those of
any stock exchange on which the stock may be listed, the provisions of any
state laws governing the sale of securities, or that there has been compliance
with the provisions of such acts, rules, regulations and laws.
The Board may impose such restrictions on any shares of Common Stock
acquired pursuant to the exercise of an option under the Plan as it may deem
advisable, including, without limitation, restrictions (a) under applicable
federal securities laws, (b) under the requirements of any stock exchange or
other recognized trading market upon which such shares of Common Stock are then
listed or traded, and (c) under any blue sky or state securities laws
applicable to such shares. No shares shall be issued until counsel for the
Company has determined that the Company has complied with all requirements
under appropriate securities laws.
17. APPROVAL OF PLAN. The Plan shall be subject to the approval of the
holders of at least a majority of the Common Stock of the Company present and
entitled to vote at a meeting of shareholders of the Company held within 12
months after adoption of the Plan by the Board. If not approved by
shareholders within such 12-month period, the Plan and any options granted
hereunder shall become void and of no effect.
18. EFFECT ON EMPLOYMENT. Neither the adoption of the Plan nor the
granting of an option pursuant to it shall be deemed to create any right in any
employee to be retained or continued in the employment of the Company, parent
or a subsidiary.
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<PAGE> 6
19. USE OF PROCEEDS. The proceeds received from the sale of shares
pursuant to the Plan shall be used for corporate purposes by the Company.
BOARD OF DIRECTORS APPROVAL: May 5, 1995; June 14, 1995; October 24, 1996;
June 17, 1997
SHAREHOLDER APPROVAL: June 14, 1995
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<PAGE> 1
EXHIBIT 10.5
UNIVERSAL STANDARD HEALTHCARE, INC.
DIRECTORS STOCK OPTION PLAN
(AS AMENDED AND RESTATED AUGUST 25, 1997)
I. GENERAL PROVISIONS
1.1 PURPOSE. The purpose of the Universal Standard Healthcare, Inc.
Directors Stock Option Plan is to promote the best interests of the Company and
its shareholders by attracting and motivating highly qualified individuals to
serve as Directors.
1.2 DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:
(a) "AGREEMENT" means the written agreement that sets forth the
terms of a Participant's Option.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CHANGE OF CONTROL" means (i) the sale of all or substantially
all of the assets of the Company to an unaffiliated third-party, (ii) the
merger or consolidation of the Company with an unaffiliated third-party in
which the Company is not the surviving corporation or (iii) any person or group
of persons (as defined in Section 13(d) of the Exchange Act) (other than
WestSphere Capital Associates, L.P. and its affiliates) shall acquire or
control in excess of 66-2/3% of the Common Stock on a fully-diluted basis.
(d) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "COMMITTEE" means a committee of the Board, which shall be
comprised of two or more "non-employee directors", as defined in Rule 16b-3.
(f) "COMMON STOCK" means shares of the Company's authorized Common
Stock.
(g) "COMPANY" means Universal Standard Healthcare, Inc.
(h) "DIRECTOR" means a member of the Company's Board of Directors.
(i) "DISABILITY" means total and permanent disability, as defined
in Code Section 22(e).
(j) "EFFECTIVE DATE" means March 27, 1995.
<PAGE> 2
(k) "ELIGIBLE DIRECTOR" means a Director who is not an Employee and
who is not a beneficial owner (as such term is used in Section 13(d) of the
Exchange Act and the rules promulgated thereunder) of 5% or more of the
outstanding Common Stock or an employee, officer or affiliate of, or partner
in, such a beneficial owner.
(l) "EMPLOYEE" means an employee of the Company or its Subsidiaries,
who has an "employment relationship" with the Company or its Subsidiaries, as
defined in Treasury Regulation 1.421-7(h), and the term "employment" means
employment with the Company or its subsidiaries.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time and any successor thereto.
(n) "EXPIRATION DATE" means the tenth anniversary of an Option's Grant
Date.
(o) "FAIR MARKET VALUE" means, for purposes of determining the value
of Common Stock, the average of the closing prices of the sales of the Common
Stock on all securities exchanges on which the Common Stock may at the time be
listed or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day or, if on any day the Common Stock is not so listed, the sales
prices of the Common Stock as of 4:00 p.m., New York time, on such day as
reported on the National Market or the SmallCap Market or, if the Common Stock
is not reported on the National Market or the SmallCap Market on such day, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which Fair Market Value is
being determined and the 20 consecutive trading days prior to such day or, if
the Common Stock is not so listed or quoted, as determined in good faith by the
Committee.
(p) "GRANT DATE" means the date on which the Option was automatically
awarded pursuant to Section 2.1.
(q) "INVOLUNTARY REMOVAL" means (i) the removal of the Participant
from the Board, (ii) the Participant not being nominated to stand for
reelection to the Board, or (iii) the failure of the Participant to be elected
to the Board, if nominated therefor by the Board or a committee thereof.
(r) "NONQUALIFIED STOCK OPTION" means an Option that is not intended
to meet the requirements of Section 422 of the Code.
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<PAGE> 3
(s) "NATIONAL MARKET" means the Nasdaq Stock Market's National
Market.
(t) "OPTION" means a Nonqualified Stock Option to purchase Common
Stock granted under this Plan.
(u) "PARTICIPANT" means each of the Directors of the Company
participating in the Plan from time to time.
(v) "PLAN" means the Universal Standard Medical Laboratories, Inc.
Directors Stock Option Plan, the terms of which are set forth herein, and any
amendments hereto.
(w) "RULE 16B-3" means Rule 16b-3 under the Exchange Act, as in
effect from time to time.
(x) "SMALLCAP MARKET" means the Nasdaq Stock Market's SmallCap
Market.
1.3 ADMINISTRATION. To the extent permitted by Rule 16b-3 without
disqualifying the Eligible Directors from status as "disinterested directors"
as that term is used in Rule 16b-3, the Plan shall be administered by the
Committee. The Committee shall interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, and make all other
determinations necessary or advisable for its administration. The decision of
the Committee on any question concerning the interpretation of the Plan or its
administration with respect to any Option granted under the Plan shall be final
and binding upon all Participants.
1.4 STOCK. The total number of shares of Common Stock available for
grants under the Plan shall not, in the aggregate, exceed 300,000 shares of
Common Stock, as adjusted from time to time in accordance with Section 4.5.
Shares subject to any unexercised portion of a terminated, forfeited, canceled
or expired Option granted hereunder shall be available for subsequent grants
under the Plan. In the event that an Option granted under the Plan is
exercised and the exercise price is paid by delivering shares of Common Stock
or through the withholding or retention by the Company of shares subject to the
Option, the shares of Common Stock so delivered to or retained by the Company
shall be available for subsequent grants under this Plan.
II. STOCK OPTIONS FOR ELIGIBLE DIRECTORS
2.1 AUTOMATIC GRANTS OF OPTIONS.
(a) INITIAL GRANT. Each Eligible Director who is serving on the
Board on the Effective Date of the Plan shall be granted an Option to purchase
30,000 shares of the Common Stock on the Effective Date. Any Eligible Director
who is first elected or appointed to such position
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<PAGE> 4
after the Effective Date shall receive an Option to purchase 15,000 shares of
Common Stock on the date of his or her election or appointment. A person who
first becomes an Eligible Director following service as an Employee or Director
of the Company (other than Directors who become Eligible Directors as of the
Effective Date) shall not be entitled to receive a grant under this Section
2.1(a) upon becoming an Eligible Director.
(b) SUBSEQUENT GRANTS. During the term of the Plan, an
Eligible Director who has been a Director for at least six months before the
date of an annual meeting of shareholders (not including the annual meeting
held in calendar year 1995), automatically shall be granted, as of the date of
such annual meeting, an additional Option to purchase 10,000 shares of Common
Stock. A Participant may hold more than one Option under the Plan.
2.2 OPTION AGREEMENT. Each Option granted pursuant to this
Article II shall be evidenced by an Agreement that shall specify the exercise
price, the term of the Option, the date or dates on which the Option becomes
exercisable, the number of shares to which the Option relates, and other such
provisions as the Committee shall determine which are consistent with the terms
of the Plan. The terms of the Plan shall govern in the event any provision of
any Agreement conflicts with any term in this Plan as constituted on the Grant
Date.
2.3 OPTION PRICE. The purchase price per share of Common Stock
for an Option granted pursuant to this Article II shall be equal to the Fair
Market Value per share of Common Stock on the Grant Date.
2.4 EXERCISE OF SHARES SUBJECT TO OPTION. Options granted
pursuant to this Article II shall become exercisable (i) according to the
following schedule: one-fourth of the Option shall become exercisable on the
first, second, third and fourth anniversaries of the Grant Date of each Option
and (ii) immediately in full upon a Change of Control or an Involuntary
Removal. Once exercisable, such Options may be exercised at any time and from
time to time until the Expiration Date of such Options, unless earlier
terminated pursuant to Article III.
2.5 DURATION OF OPTIONS. Options granted pursuant to this
Article II shall expire on the Expiration Date, except as otherwise provided in
Article III.
2.6 PAYMENT FOR OPTION SHARES. The purchase price for shares of
Common Stock to be acquired upon exercise of an Option granted hereunder shall
be paid in full at the time of exercise in any of the following ways: (a) in
cash or by check, (b) by delivery to the Company of outstanding shares of the
Common Stock with a Fair Market Value (determined as of the date of exercise of
the Option) equal to the exercise price; (c) through the retention by the
Company of shares with a Fair Market Value (determined as of the date of
exercise of the Option) equal to the exercise price which would otherwise be
transferred to the option holder upon exercise of the Option; or (d) by any
combination of the foregoing.
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<PAGE> 5
2.7 NO DISCRETION. Notwithstanding any provision in the Plan to the
contrary, the Committee shall have no discretion with respect to the terms of
grants made pursuant to this Article II, except to the extent such discretion
would not result in the grant or the Plan failing to satisfy the conditions of
paragraph (c)(2)(ii) of Rule 16b-3.
III. TERMINATION
3.1. PRIOR TO EXERCISABILITY. Except as provided in Section 2.4(ii), if a
Participant's term of office as a Director ceases or is terminated for any
reason, prior to the date that an Option or a portion thereof first becomes
exercisable, such Option or portion thereof which is not then exercisable shall
terminate and all rights thereunder shall cease.
3.2 AFTER EXERCISABILITY. To the extent an Option or any portion thereof
is exercisable and unexercised on the date a Participant's term of office as a
Director ceases or is terminated for any reason, the Option shall terminate on
the earlier of (i) the Expiration Date of the Option, and (ii) three months
after such cessation or termination; provided, however, that the exercise
period in clause (ii) shall be extended to one year after cessation or
termination if the cessation or termination is due to the Participant's death
or Disability;
3.3 POST-TERMINATION EXERCISE. During the period from the Participant's
cessation or termination until the termination or expiration of the Option, the
Participant, or the person or persons to whom the Option shall have been
transferred by will or by the laws of descent and distribution, may exercise
the Option only to the extent that such Option was exercisable on the date of
the Participant's cessation or termination.
IV. MISCELLANEOUS
4.1 PARTIAL EXERCISE. The Committee shall permit, and shall establish
procedures for, the partial exercise of Options under the Plan.
4.2 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option as
may be required to satisfy the requirements of Rule 16b-3.
4.3 RIGHTS PRIOR TO ISSUANCE OF SHARES. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option until and
only to the extent that the Option is exercised.
4.4 NON-ASSIGNABILITY. No Option shall be transferable by a Participant
except by will or the laws of descent and distribution. During the lifetime of
a Participant, an Option shall be
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<PAGE> 6
exercised only by the Participant. No transfer of an Option by will or the
laws of descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished with written notice thereof and a copy of
the will or such evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions of the Option.
4.5 ADJUSTMENTS. In the event of changes in the outstanding
Common Stock by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in the capital structure of the Company, an appropriate
adjustment shall be made by the Committee in the number of shares and kind of
stock or other securities for which Options may be or may have been granted
under the Plan, and the exercise price related thereto, to the end that the
proportionate interests shall be maintained as before the occurrence of such an
event. Any of the foregoing adjustments may provide for the elimination of any
fractional share which might otherwise become subject to any Option.
4.6. SECURITIES LAWS.
(a) Anything to the contrary herein notwithstanding, the
Company's obligation to sell and deliver Common Stock pursuant to the exercise
of an Option is subject to such compliance with federal and state laws, rules
and regulations applying to the authorization, issuance or sale of securities
as the Company deems necessary or advisable. The Company shall not be required
to sell and deliver Common Stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares shall not violate any of
the provisions of the Securities Act of 1933 or the Exchange Act, or the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder or those of the Nasdaq Stock Market or any stock exchange on which
the Common Stock may be listed, the provisions of any state laws governing the
sale of securities, or that there has been compliance with the provisions of
such acts, rules, regulations and laws.
(b) The Committee may impose such restrictions on any shares of
Common Stock acquired pursuant to the exercise of an Option as it may deem
advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) required by the Nasdaq Stock Market (including,
without limitation, with respect to securities traded on the National Market or
the SmallCap Market) or any stock exchange or other recognized trading market
upon which such shares of Common Stock are then listed or traded, and (iii)
under any blue sky or state securities laws applicable to such shares. No
shares shall be issued until counsel for the Company has determined that the
Company has complied with all requirements under appropriate securities laws.
4.7 TERMINATION AND AMENDMENT.
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<PAGE> 7
(a) The Board may terminate the Plan, or the granting of Options
under the Plan, at any time. No new grants shall be made under the Plan after
June 30, 2000.
(b) The Board may amend or modify the Plan at any time and from
time to time.
(c) No amendment, modification or termination of the Plan shall
adversely affect any Option granted under the Plan without the consent of the
Participant holding the Option.
4.8 EFFECT ON SERVICES. Neither the adoption of the Plan nor the
granting of any Option pursuant to the Plan shall be deemed to create any right
in any individual to be retained as a Director.
4.9 USE OF PROCEEDS. The proceeds received from the sale of Common
Stock pursuant to the Plan shall be used for general corporate purposes of the
Company.
4.10 APPROVAL OF PLAN. The Plan shall be subject to the approval of
the holders of at least a majority of the shares of Common Stock present and
entitled to vote at a meeting of shareholders of the Company held within 12
months after adoption of the Plan by the Board. Any Option granted under the
Plan prior to such shareholder approval, shall be conditioned upon receipt of
such approval, and may not be exercised in whole or in part unless the Plan has
been approved by the shareholders as provided herein. If not approved by
shareholders within 12 months after approval by the Board, the Plan shall be
rescinded, and any Options granted under the Plan shall be void retroactive to
the Grant Date.
BOARD APPROVAL: March 27, 1995; October 24, 1996; June 17, 1997
SHAREHOLDER APPROVAL: June 14, 1995
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<PAGE> 1
EXHIBIT 10.6
FIFTH AMENDMENT TO THE
USML, INC. TAX DEFERRED SAVINGS PLAN
This Fifth Amendment to the USML, Inc. Tax Deferred Savings Plan and
Trust ("Plan") is adopted pursuant to approval by the Board of Directors of
Universal Standard Medical Laboratories, Inc. at its August 4, 1997 Board of
Directors meeting.
1. Effective as of the effective time of the change of the name
of Universal Standard Medical Laboratories, Inc. to Universal Standard
Healthcare, Inc., the name of the Plan is changed to Universal Standard
Healthcare, Inc. Tax Deferred Savings Plan, and all Plan references to
Universal Standard Medical Laboratories, Inc. or USML are changed to Universal
Standard Healthcare, Inc.
2. Effective August 4, 1997, Section 7.13 of the Plan shall be
amended by the addition of the following new paragraph:
Notwithstanding the foregoing, as soon as the Employer Stock
Fund no longer holds "Qualifying Employer Securities" (as
defined in the Act) the Trustee shall no longer be empowered
to acquire or hold Qualifying Employer Securities.
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC. has caused this Fifth
Amendment to the Plan to be executed on August 4, 1997.
UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
By: Alan S. Ker
--------------------------------------
Its: Chief Financial Officer
---------------------------------
<PAGE> 1
EXHIBIT 10.7
FORM OF
NON-COMPETITION AND RESTRICTIVE COVENANT AGREEMENT
EXECUTIVE
This NON-COMPETITION AND RESTRICTIVE COVENANT AGREEMENT (this
"Agreement") is made as of ____________, 199__ between ______________________
("Employee") and UNIVERSAL STANDARD HEALTHCARE, INC., a Michigan corporation
("USHI").
RECITALS:
WHEREAS, during Employee's employment with USHI and its direct
or indirect subsidiaries, including but not limited to, Universal Standard
Healthcare of Delaware, Inc., Universal Standard Healthcare of Michigan, Inc.,
Universal Standard Healthcare of Ohio, Inc., and TPA, Inc. (collectively, the
"Company"), Employee will have access to, or be acquiring highly confidential
information and trade secrets concerning the Company's business, including but
not limited to, customer lists, price lists, catalogs, methods of pricing,
marketing practices, advertising, methods of operation and the needs and
requirements of Company's customers;
WHEREAS, Employee will receive from Company valuable technical
and/or marketing experience and assistance which will materially aid Employee
in establishing and retaining customers of the Company;
WHEREAS, the support furnished to Employee by Company will
enable Employee to establish goodwill with the Company's customers, such
goodwill being a valuable asset of the Company; and
WHEREAS, the services Employee will be performing for the
Company will be of a special, unique and extraordinary nature.
NOW THEREFORE, as an inducement to Company to employ Employee,
and in consideration of Employee's acceptance of employment with Company and
the Company's compensating Employee for services provided to Company by
Employee and the Company's providing to Employee of other employee benefits of
a compensatory nature, but without any obligation on Company's part to continue
such employment, compensation or benefits for any specified period whatsoever,
Employee hereby agrees as follows:
1. Noncompetition
(a) Employee hereby covenants and agrees that, for a
period beginning on the date hereof and ending on the date occurring two (2)
years following the date on which Employee is no longer employed by Company or
any of its affiliates (the "Noncompetition Period"), Employee will not, and
will not permit any of Employee's affiliates to, directly or indirectly, (i)
engage or Participate in any Clinical Laboratory Business located in or
providing any services to or for any
<PAGE> 2
person or entity whatsoever in or otherwise doing business anywhere in the
State of Michigan or in any state from which the Company was, as of the last
day of Employee's employment, generating Annual Revenues from the Clinical
Laboratory Business in excess of Ten Million ($10,000,000) Dollars; provided
that, in the event that Employee's employment with the Company is terminated by
the Company, the restrictions set forth in this Section 1(a)(i) shall terminate
upon the receipt by the Employee of his final payment of severance compensation
from the Company, if any, and, if the Employee is not entitled to any severance
compensation upon the termination of his employment by the Company, then the
Employee shall not be subject to the restrictions of this Section 1(a)(i) for
the period following the termination by the Company of his employment; or (ii)
induce or attempt to influence any person or entity who or which is or was a
customer or client of Company at any time during the Noncompetition Period to
transact business with any competitor of Company or to cease to do business, in
whole or in part, with Company or any of its affiliates.
(b) Employee hereby covenants and agrees that, for the
Noncompetition Period, Employee will not, and will not permit any of Employee's
affiliates to, directly or indirectly, (i) engage or Participate, within the
United States of America, in a business the same as or similar to the capitated
medical laboratory business or any other capitated or managed care business
engaged in by the Company during the Employment Period or in any business of
medical claims processing which competes with the medical claims processing
business conducted by the Company during the Employment Period (the "Managed
Care Business"), (ii) provide, or Participate in any business which provides,
any products or services of the type offered by the Managed Care Business
during the Employment Period (the "Managed Care Products and Services") to any
person, firm, corporation or other entity that was a customer of the Managed
Care Business during the Employment Period ("Managed Care Customer"), or (iii)
solicit or assist in the solicitation of, or Participate in any business which
solicits or assists in the solicitation of, any agreement for the provision of
Managed Care Products and Services to any Managed Care Customer.
(c) Notwithstanding the provisions contained in
subparagraph (a) and (b) above to the contrary, during the Noncompetition
Period, Employee shall be permitted to perform, solely for Company, the duties
and responsibilities of Employee's position of employment with Company.
(d) Employee hereby acknowledges and agrees that this
covenant is reasonable with respect to its duration, geographic area and scope.
(e) The term "affiliates" shall mean, with respect to any
person, partnership (legal or otherwise), corporation or other entity, any and
all partnerships, corporations or other entities directly or indirectly
controlling (including, without limitation, all directors and officers),
controlled by or under direct or indirect common control with such person,
partnership, corporation, or other entity, including, without limitation, any
joint venture to which such person, partnership, corporation or other entity is
a party.
(f) The term "Clinical Laboratory Business" shall mean
any business, endeavor, enterprise, activity, arrangement or undertaking
engaged in the performance or provision of any
2
<PAGE> 3
clinical laboratory analysis or testing or the sampling, testing or reporting
on medical, biological or diagnostic specimens or products, including, without
limitation, any entity that is required to be licensed under the Clinical
Laboratory Improvement Amendments of 1988, codified at 42 U.S.C. Section 263a.
(g) The term "Participate" shall mean any direct or
indirect interest or position in or any financial or other arrangement or
relationship with any business, arrangement or enterprise whether as an
officer, director, employee, partner, shareholder, sole proprietor, joint
venturer, agent, representative, independent contractor, consultant,
franchisor, franchisee, creditor, owner or otherwise; provided that the term
"Participate" shall not include ownership of less than five percent of the
stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market.
(h) The term "Annual Revenues" shall mean the revenues
derived during the last full fiscal quarter ended prior to the last day of the
Employment Period, multiplied by four.
(i) The term "Employment Period" shall mean the period
during which Employee is employed by one or more of the entities included in
the term Company. The terms "employment" or "employ" as used in this Agreement
shall include direct employment by the Company and/or the rendition of services
for the Company through a contract with a professional employer organization.
2. Nonsolicitation. Employee agrees that, during the
Noncompetition Period, Employee will not, and will not permit any of his
affiliates to, without the prior written consent of Company, directly or
indirectly, call on, solicit, take away or hire any persons who, at any time
during the Noncompetition Period, are employees or agents of Company or any of
Company's affiliates.
3. Confidentiality; Work Product. Employee agrees to maintain
the strict confidentiality of all information, documents, processes and
materials relating to Company and its business and the Company's affiliates and
their business ("Confidential Information"), to use Confidential Information
only in connection with Employee providing services to the Company and to make
no other commercial, personal or other use of Confidential Information.
Employee shall not divulge to anyone, either during or after the Noncompetition
Period, any Confidential Information acquired by Employee. Employee agrees
that, upon termination of employment with Company, Employee shall forthwith
deliver to Company all documents, materials and other data in Employee's
possession containing Confidential Information or concerning the Company or its
affiliates and their business. Employee agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information, which relates to the Company's
or any of its affiliates' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by Employee during the Employment Period ("Work Product")
belong to the Company or its affiliates. Employee will promptly disclose such
Work Product to the Company and perform all actions reasonably requested by the
Company (whether during or after the Employment Period) to
3
<PAGE> 4
establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).
4. Enforceability. Notwithstanding the intent of the parties
hereto that all of the provisions contained herein be fully enforceable, if at
any time a court holds that the restrictions agreed to by the parties and
stated in this Agreement are unreasonable or otherwise unenforceable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographic area determined to be reasonable under such circumstances
by such court will be substituted for the stated period, scope or area.
5. Specific Performance. The parties hereto agree that money
damages would be inadequate for any breach of any of the provisions of this
Agreement. In the event of Employee's breach of any of the provisions of this
Agreement, Company or any of its affiliates or its or their successors or
assigns may, in addition to other available rights and remedies, apply to any
court of competent jurisdiction for specific performance and/or injunctive
relief in order to enforce, or prevent any violation of, any of the provisions
of this Agreement.
6. Successors and Assigns. This Agreement may not be assigned by
Employee. Company may freely assign this Agreement; provided that, following
the assignment of this Agreement by the Company, the definition of Managed Care
Business shall not be expanded beyond the definition of such term at the date
of such assignment without the prior written consent of Employee. This
Agreement shall be binding upon and inure to the benefit of each of Employee
and Company and their successors and permitted assigns.
7. Waiver. No failure on the part of the Company to exercise,
and no delay in exercising or course of dealing with respect to, any right,
power or privilege under this Agreement (or breach of any obligation under any
other agreement) shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement or any
other agreement (or breach of any obligation under any other agreement)
preclude any other or further exercise thereof or hereunder, or the exercise of
any other right, power or privilege. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
8. Invalidity. In the event that one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but when taken
together shall constitute but one instrument.
10. Descriptive Headings. The descriptive headings contained in
this Agreement are for convenience only and do not constitute a part of this
Agreement.
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<PAGE> 5
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Michigan,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Michigan or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Michigan.
* * * * *
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
Witness Signature
Name
Dated:
UNIVERSAL STANDARD HEALTHCARE, INC.
By:
Name:
Its:
Dated:
5
<PAGE> 1
EXHIBIT 10.8
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
AGREEMENT FOR INCENTIVE STOCK OPTION AWARD PROGRAM
INCENTIVE STOCK OPTION
SEPTEMBER 27, 1996
The Board of Directors (the "Board") of Universal Standard Medical
Laboratories, Inc. (the "Company"), or the Stock Option Committee thereof (the
"Committee") designated by the Board to administer the Universal Standard
Medical Laboratories, Inc. 1992 Stock Option Plan (the "Plan"), hereby grants
to Alan Ker (the "Grantee") a stock option (the "Option"), pursuant to the
Plan and the Incentive Stock Option Award Program (the "ISOAP"). The Option is
subject in all respects to the Plan. Certain capitalized terms used in this
agreement (the "Agreement") which are not defined herein have the meanings
indicated for such terms of the Plan.
1. Stock Option. The Option entitles the Grantee to purchase up
to 40,000 shares (the "Option Shares") of the Company's Common Stock, no par
value (the "Common Stock"), at an option price per share of $3.93 (the "Option
Price"), subject to the terms and conditions of this Agreement. The Option is
intended to be an Incentive Stock Option.
2. (a) Exercisability. Any portion of this Option which
vests and becomes exercisable as provided in Section 2(b) may be exercised and
Option Shares may be purchased pursuant thereto at any time and from time to
time thereafter; provided that the Grantee may not, without the written consent
of the Committee, exercise this Option in a manner which results in a
limitation on the Company's annual tax deduction for compensation payments to
the Grantee pursuant to the $1 million per person limitation on annual
compensation deductions under Section 162(m) of the Code. The Option Price for
Option Shares shall be paid in full in cash or by check by the Grantee at the
time of the delivery of Option Shares, or, at the written election of the
Grantee, payment may be made by (i) delivery to the Company of outstanding
shares of Common Stock, (ii) retention by the Company of one or more of vested
Option Shares or (iii) any combination of cash, check, the Grantee's delivery
of outstanding Shares and retention by the Company of one or more of such
Option Shares.
(b) Vesting/Exercisability. The Grantee may only
exercise his Option to purchase Option Shares to the extent that the Option has
vested and become exercisable with respect to such Option Shares. One half of
the Option Shares shall be designated as the Turnaround Incentive Options and
will vest on June 30, 1997 if the required goals, as set forth below, are
attained by such date. One half of the Option Shares shall be designated as
the High Growth Incentive Options and will vest on December 31, 1997 if the
required goals, as set forth below, are attained by such date.
(i) Turnaround Incentive Options. (A) 6,666
shares of the Turnaround Incentive Options will vest if the Company's
consolidated net loss per share is ($.04) or less for the
<PAGE> 2
three months ended March 31, 1997 (the "First Quarter Corporate Objective").
If the First Quarter Corporate Objective is not met, 13,333 shares of the
Turnaround Incentive Options will vest if the Company's Consolidated net
earnings per share is $0 or more for the three months ended June 30, 1997 (the
"Second Quarter Corporate Objective"). If the First Quarter Corporate
Objective is met, 6,667 shares of the Turnaround Incentive Options will vest
if the Second Quarter Corporate Objective is met.
(B) 6,667 shares of the Turnaround Incentive Options will vest if the
Grantee meets the Grantee's individual goals set forth in Exhibit A (the
"Individual Goals"), by the date set forth in Exhibit A, or June 30, 1997, if
no date is set forth in Exhibit A. However, if the Grantee fails to meet
his/her Individual Goals, he/she will forfeit the right to any Turnaround
Incentive Options that may have vested through the attainment of the Corporate
Objectives unless otherwise approved by the Committee.
(ii) High Growth Incentive Options. A number of
High Growth Incentive Options equal to the number of Turnaround Incentive
Options which vested as described in Section 2(b)(i) above, or if no Turnaround
Incentive Options vested, then, if the Grantee attains all of his/her
Individual Goals by December 31, 1997, one half of the High Growth Incentive
Options, will vest if the Company's consolidated net earnings per share for the
year ended December 31, 1997 is $.10 or more.
(iii) Time Vesting. Subject to the Grantee's
continued employment with the Company as of any such date, Turnaround Incentive
Options which vested on June 30, 1997, and High Growth Incentive Options which
vested on December 31, 1997, will become exercisable in increments of 25% per
annum on each anniversary of the date on which the option first vested,
beginning June 30, 1998. All vested Option Shares which have not yet become
exercisable will expire if the Grantee's employment with the Company terminates
prior to the date on which such Option Shares become exercisable. To the
extent not exercised, exercisable Option Shares shall accumulate and the
Grantee may exercise them thereafter in whole or in part. All unvested
Turnaround Incentive Options expire on June 30, 1997 and all unvested High
Growth Incentive Options expire on December 31, 1998, except as otherwise
determined by the Committee.
(iv) Death or Disability; Change of Control. The
Option shall become exercisable (A), with respect to all of the vested Option
Shares, automatically upon the death or permanent disability (as determined by
the Board or the Committee) of the Grantee and (B), with respect to all
unexpired Option Shares, automatically upon a Change of Control. For purposes
hereof, a "Change of Control" shall mean the sale of all or substantially all
of the assets of the Company to an unaffiliated third-party; the merger or
consolidation of the Company with an unaffiliated third-party in which the
Company is not the surviving corporation; or the acquisition or control in
excess of 51% of the Company's Common Stock on a fully-diluted basis by any
person or group of persons (as defined in Section 13(d) of the Securities
Exchange Act of 1934) (other than WestSphere Capital Associates, L.P. and its
affiliates). Notwithstanding the foregoing, the Option shall not vest and
become automatically exercisable as described in Section 2(b)(iv)(B) without
the
2
<PAGE> 3
written consent of the Committee, to the extent such acceleration of vesting
would result, when taken in the aggregate with all other payments from the
Company, in the payment by such Grantee of any excise tax provided for in
Sections 280G and 4999 of the Code.
(v) Termination of Employment. The Grantee shall
have the right to exercise all unexercised Options which have vested as of the
Grantee's Termination Date (as defined in the Plan) for a period of three (3)
months following such Termination Date or such longer period as may be provided
in the Plan or as the Committee may approve in its sole discretion in
connection with such termination; provided, that the Option shall not be
exercisable after its expiration pursuant to Section 7.
(vi) All calculations of net earnings (loss) per
share required by this Agreement shall be as determined by the Chief Financial
Officer of the Company. If there shall be any disputes as to such
calculations, the determination of the Committee as to the net earnings (loss)
per share amounts shall be final and binding on the Grantee.
3. Transferability of this Option.
(a) Except in the case of death or permanent disability
of the Grantee, this Option shall not be transferable.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. Conformity with Plan. The Grantee's Option is intended to
conform in all respects with, and is subject to all applicable provisions of
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan. By executing and returning the enclosed copy of this Agreement, the
Grantee acknowledges his receipt of the Plan and agrees to be bound by all of
the other terms of the Plan.
5. Employment. Notwithstanding any contrary oral representations
or promises made to Grantee prior to or after the date hereof, Grantee and the
Company acknowledge Grantee's employment with the Company and its subsidiaries
is and will continue to be subject to the willingness of each to continue such
employment and nothing herein confers any right or obligation on Grantee to
continue in the employ of the Company or its subsidiaries or shall affect in
any way Grantee's right or the right of the Company or its subsidiaries to
terminate Grantee's employment at any time, for any reason, with or without
cause.
6. Share Legends. At the sole discretion of the Committee, all
certificates representing any Option Shares subject to the provisions of this
Agreement shall have endorsed thereon the following legend:
3
<PAGE> 4
"THE SHARES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAW."
7. Expiration. The Option shall expire at 5:00 p.m., New York
time, on the tenth anniversary of the date hereof. In the event that the
Grantee shall cease to be employed by the Company or its subsidiaries for any
reason, all Option Shares which shall not have vested and become exercisable
prior thereto pursuant to Section 2 shall automatically terminate.
8. Further Actions. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
9. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns.
10. Governing Law. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
* * * * * *
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your understanding and
acceptance of the agreements contained in this letter.
Very truly yours,
UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
By: /s/ Eugene Jennings
---------------------------------
Its: Chief Executive Officer
---------------------------------
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
4
<PAGE> 5
GRANTEE:
/s/ Alan S. Ker
------------------------------
(Signature)
Alan S. Ker
------------------------------
(Please print name)
5
<PAGE> 6
NOTICE OF EXERCISE OF INCENTIVE
STOCK OPTION GRANTED UNDER THE
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
INCENTIVE STOCK OPTION AWARD PROGRAM
President
Universal Standard Medical
Laboratories, Inc.
26500 Northwestern Highway
Southfield, Michigan 48076
An Option was granted to me on September 27, 1996 to purchase up to
40,000 shares of Universal Standard Medical Laboratories, Inc. (the
"Company") Common Stock at a price of $3.93 per share (the "Option").
I hereby elect to exercise the Option with respect to ______ shares
(the "Exercise Shares"). Payment of the exercise price of $______ ($3.93
multiplied by the number of Exercise Shares, referred to herein as the
"Exercise Price") is being made as follows:
[ ] A. Cash or check delivered with this notice.
[ ] B. Certificates representing shares of Common Stock
having a Fair Market Value on the date of delivery of
this notice equal to the Exercise Price.
[ ] C. The Company is directed to retain shares from the
number of Exercise Shares having a Fair Market Value
on the date of delivery of this notice equal to the
Exercise Price.
[ ] D. A combination of A, B and/or C above, having a value
equal to the Exercise Price, as follows:______________
______________________________________________________
______________________________________________________
______________________________________________________
The stock certificate for the shares acquired upon exercise should be
issued to:
(name)____________________________
(address)_________________________
__________________________________
Social Security No.)______________
Dated: ____________________, ____ _______________________________
(print name)___________________
<PAGE> 1
EXHIBIT 10.9
EXECUTIVE FORM OF
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
AGREEMENT FOR INCENTIVE STOCK OPTION AWARD PROGRAM
INCENTIVE / NON-QUALIFIED STOCK OPTION
SEPTEMBER 27, 1996
The Board of Directors (the "Board") of Universal Standard Medical
Laboratories, Inc. (the "Company"), or the Stock Option Committee thereof (the
"Committee") designated by the Board to administer the Universal Standard
Medical Laboratories, Inc. 1992 Stock Option Plan (the "Plan"), hereby grants
to _________ (the "Grantee") a stock option (the "Option"), pursuant to the
Plan and the Incentive Stock Option Award Program (the "ISOAP"). The Option is
subject in all respects to the Plan. Certain capitalized terms used in this
agreement (the "Agreement") which are not defined herein have the meanings
indicated for such terms of the Plan.
1. Stock Option. The Option entitles the Grantee to purchase up
to ______ shares (the "Option Shares") of the Company's Common Stock, no par
value (the "Common Stock"), at an option price per share of $____ (the "Option
Price"), subject to the terms and conditions of this Agreement. The Option is
intended to be an Incentive Stock Option, to the extent permitted under
applicable law.
2. (a) Exercisability. Any portion of this Option which
vests and becomes exercisable as provided in Section 2(b) may be exercised and
Option Shares may be purchased pursuant thereto at any time and from time to
time thereafter; provided that the Grantee may not, without the written consent
of the Committee, exercise this Option in a manner which results in a
limitation on the Company's annual tax deduction for compensation payments to
the Grantee pursuant to the $1 million per person limitation on annual
compensation deductions under Section 162(m) of the Code. The Option Price for
Option Shares shall be paid in full in cash or by check by the Grantee at the
time of the delivery of Option Shares, or, at the written election of the
Grantee, payment may be made by (i) delivery to the Company of outstanding
shares of Common Stock, (ii) retention by the Company of one or more of vested
Option Shares or (iii) any combination of cash, check, the Grantee's delivery
of outstanding Shares and retention by the Company of one or more of such
Option Shares.
(b) Vesting/Exercisability. The Grantee may only
exercise his Option to purchase Option Shares to the extent that the Option has
vested and become exercisable with respect to such Option Shares. One half of
the Option Shares shall be designated as the Turnaround Incentive Options and
will vest on June 30, 1997 if the required goals, as set forth below, are
attained by such date. One half of the Option Shares shall be designated as
the High Growth Incentive Options and will vest on December 31, 1997 if the
required goals, as set forth below, are attained by such date.
<PAGE> 2
(i) Turnaround Incentive Options. (A) _______
shares of the Turnaround Incentive Options will vest if the Company's
consolidated net loss per share is ($.04) or less for the three months ended
March 31, 1997 (the "First Quarter Corporate Objective"). If the First Quarter
Corporate Objective is not met, _____ shares of the Turnaround Incentive
Options will vest if the Company's Consolidated net earnings per share is $0 or
more for the three months ended June 30, 1997 (the "Second Quarter Corporate
Objective"). If the First Quarter Corporate Objective is met, ______ shares of
the Turnaround Incentive Options will vest if the Second Quarter Corporate
Objective is met.
(B) _______ shares of the Turnaround Incentive Options will vest if
the Company's consolidated net loss per share for its laboratory division is
($.11) or less for the three months ended March 31, 1997 (the "First Quarter
Lab Division Objective"). If the First Quarter Lab Division Objective is not
met, _______ shares of the Turnaround Incentive Options will vest if the
Company's consolidated net loss per share for its laboratory division is ($.09)
or less for the three months ended June 30, 1997 (the "Second Quarter Lab
Division Objective"). If the First Quarter Lab Division Objective is met,
______ shares of the Turnaround Incentive Options will vest if the Second
Quarter Lab Division Objective is met.
(C) _______ shares of the Turnaround Incentive Options will vest if
the Grantee meets the Grantee's individual goals set forth in Exhibit A (the
"Individual Goals"), by the date set forth in Exhibit A, or June 30, 1997, if
no date is set forth in Exhibit A. However, if the Grantee fails to meet
his/her Individual Goals, he/she will forfeit the right to any Turnaround
Incentive Options that may have vested through the attainment of the Corporate
Objectives or Lab Division Objectives unless otherwise approved by the
Committee.
(ii) High Growth Incentive Options. A number of
High Growth Incentive Options equal to the number of Turnaround Incentive
Options which vested as described in Section 2(b)(i) above, or if no Turnaround
Incentive Options vested, then, if the Grantee attains all of his/her
Individual Goals by December 31, 1997, one half of the High Growth Incentive
Options, will vest if the Company's consolidated net earnings per share for the
year ended December 31, 1997 is $.10 or more.
(iii) Time Vesting. Subject to the Grantee's
continued employment with the Company as of any such date, Turnaround Incentive
Options which vested on June 30, 1997, and High Growth Incentive Options which
vested on December 31, 1997, will become exercisable in increments of 25% per
annum, on each anniversary of the date on which the option first vested,
beginning June 30, 1998. All vested Option Shares which have not yet become
exercisable will expire if the Grantee's employment with the Company terminates
prior to the date on which such Option Shares become exercisable. To the
extent not exercised, exercisable Option Shares shall accumulate and the
Grantee may exercise them thereafter in whole or in part. All unvested
Turnaround Incentive Options expire on June 30, 1997 and all unvested High
Growth Incentive Options expire on December 31, 1997, except as otherwise
determined by the Committee. Option
2
<PAGE> 3
shares shall be Incentive Stock Options to the extent permitted under
applicable law and the remainder of the Option Shares shall be Non- qualified
Stock Options.
(iv) Death or Disability; Change of Control. The
Option shall become exercisable (A), with respect to all of the vested Option
Shares, automatically upon the death or permanent disability (as determined by
the Board or the Committee) of the Grantee and (B), with respect to all
unexpired Option Shares, automatically upon a Change of Control. For purposes
hereof, a "Change of Control" shall mean the sale of all or substantially all
of the assets of the Company to an unaffiliated third-party; the merger or
consolidation of the Company with an unaffiliated third-party in which the
Company is not the surviving corporation; or the acquisition or control in
excess of 51% of the Company's Common Stock on a fully-diluted basis by any
person or group of persons (as defined in Section 13(d) of the Securities
Exchange Act of 1934) (other than WestSphere Capital Associates, L.P. and its
affiliates). Notwithstanding the foregoing, the Option shall not vest and
become automatically exercisable as described in Section 2(b)(iv)(B) without
the written consent of the Committee, to the extent such acceleration of
vesting would result, when taken in the aggregate with all other payments from
the Company, in the payment by such Grantee of any excise tax provided for in
Sections 280G and 4999 of the Code.
(v) Termination of Employment. The Grantee shall
have the right to exercise all unexercised Options which have vested as of the
Grantee's Termination Date (as defined in the Plan) for a period of three (3)
months following such Termination Date or such longer period as may be provided
in the Plan or as the Committee may approve in its sole discretion in
connection with such termination; provided, that the Option shall not be
exercisable after its expiration pursuant to Section 7.
(vi) All calculations of net earnings (loss) per
share required by this Agreement shall be as determined by the Chief Financial
Officer of the Company. If there shall be any disputes as to such
calculations, the determination of the Committee as to the net earnings (loss)
per share amounts shall be final and binding on the Grantee.
3. Transferability of this Option.
(a) Except in the case of death or permanent disability
of the Grantee, this Option shall not be transferable.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. Conformity with Plan. The Grantee's Option is intended to
conform in all respects with, and is subject to all applicable provisions of
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan. By executing and returning the enclosed copy of this Agreement, the
Grantee acknowledges his receipt of the Plan and agrees to be bound by all of
the other terms of the Plan.
3
<PAGE> 4
5. Employment. Notwithstanding any contrary oral representations
or promises made to Grantee prior to or after the date hereof, Grantee and the
Company acknowledge Grantee's employment with the Company and its subsidiaries
is and will continue to be subject to the willingness of each to continue such
employment and nothing herein confers any right or obligation on Grantee to
continue in the employ of the Company or its subsidiaries or shall affect in
any way Grantee's right or the right of the Company or its subsidiaries to
terminate Grantee's employment at any time, for any reason, with or without
cause.
6. Share Legends. At the sole discretion of the Committee, all
certificates representing any Option Shares subject to the provisions of this
Agreement shall have endorsed thereon the following legend:
"THE SHARES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAW."
7. Expiration. The Option shall expire at 5:00 p.m., New York
time, on the tenth anniversary of the date hereof. In the event that the
Grantee shall cease to be employed by the Company or its subsidiaries for any
reason, all Option Shares which shall not have vested and become exercisable
prior thereto pursuant to Section 2 shall automatically terminate.
8. Further Actions. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
9. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns.
10. Governing Law. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
11. Withholding. The Grantee hereby authorizes the Company to
withhold from his compensation or agrees to tender the applicable amount to the
Company to satisfy any requirements for withholding of income and employment
taxes in connection with the exercise of the options granted hereby.
* * * * * *
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your understanding and
acceptance of the agreements contained in this letter.
4
<PAGE> 5
Very truly yours,
UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
By: ____________________________
Its: ___________________________
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE:
______________________________
(Signature)
______________________________
(Please print name)
5
<PAGE> 6
NOTICE OF EXERCISE OF
STOCK OPTION GRANTED UNDER THE
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
INCENTIVE STOCK OPTION AWARD PROGRAM
President
Universal Standard Medical
Laboratories, Inc.
26500 Northwestern Highway
Southfield, Michigan 48076
An Option was granted to me on September 27, 1996 to purchase up to
______ shares of Universal Standard Medical Laboratories, Inc. (the "Company")
Common Stock at a price of $____ per share (the "Option").
I hereby elect to exercise the Option with respect to ______ shares
(the "Exercise Shares"). Payment of the exercise price of $______ ($_____
multiplied by the number of Exercise Shares, referred to herein as the
"Exercise Price") is being made as follows:
[ ] A. Cash or check delivered with this notice.
[ ] B. Certificates representing shares of Common Stock
having a Fair Market Value on the date of delivery of
this notice equal to the Exercise Price.
[ ] C. The Company is directed to retain shares from the
number of Exercise Shares having a Fair Market Value
on the date of delivery of this notice equal to the
Exercise Price.
[ ] D. A combination of A, B and/or C above, having a value
equal to the Exercise Price, as follows:______________
______________________________________________________
______________________________________________________
______________________________________________________
The stock certificate for the shares acquired upon exercise should be
issued to:
(name)_____________________________
(address)__________________________
___________________________________
Social Security No.)_______________
Dated: ____________________, ____ _______________________________
(print name)_____________________
<PAGE> 1
EXHIBIT 10.10
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
AGREEMENT FOR INCENTIVE STOCK OPTION AWARD PROGRAM
INCENTIVE STOCK OPTION
MAY 14, 1997
The Board of Directors (the "Board") of Universal Standard Medical
Laboratories, Inc. (the "Company"), or the Stock Option Committee thereof (the
"Committee") designated by the Board to administer the Universal Standard
Medical Laboratories, Inc. 1992 Stock Option Plan (the "Plan"), hereby grants
to PERRY McCLUNG (the "Grantee") a stock option (the "Option"), pursuant to the
Plan and the Incentive Stock Option Award Program (the "ISOAP"). The Option is
subject in all respects to the Plan. Certain capitalized terms used in this
agreement (the "Agreement") which are not defined herein have the meanings
indicated for such terms of the Plan.
1. Stock Option. The Option entitles the Grantee to purchase up to 40,000
shares (the "Option Shares") of the Company's Common Stock, no par value (the
"Common Stock"), at an option price per share of $3.14 (the "Option Price"),
subject to the terms and conditions of this Agreement. The Option is intended
to be an Incentive Stock Option.
2. (a) Exercisability. Any portion of this Option which vests and becomes
exercisable as provided in Section 2(b) may be exercised and Option Shares may
be purchased pursuant thereto at any time and from time to time thereafter;
provided that the Grantee may not, without the written consent of the
Committee, exercise this Option in a manner which results in a limitation on
the Company's annual tax deduction for compensation payments to the Grantee
pursuant to the $1 million per person limitation on annual compensation
deductions under Section 162(m) of the Code. The Option Price for Option
Shares shall be paid in full in cash or by check by the Grantee at the time of
the delivery of Option Shares, or, at the written election of the Grantee,
payment may be made by (i) delivery to the Company of outstanding shares of
Common Stock, (ii) retention by the Company of one or more of vested Option
Shares or (iii) any combination of cash, check, the Grantee's delivery of
outstanding Shares and retention by the Company of one or more of such Option
Shares.
(b) Vesting/Exercisability. The Grantee may only exercise his Option to
purchase Option Shares to the extent that the Option has vested and become
exercisable with respect to such Option Shares. One half of the Option Shares
shall be designated as the Turnaround Incentive Options and will vest on June
30, 1997 if the required goals, as set forth below, are attained by such date.
One half of the Option Shares shall be designated as the High Growth Incentive
Options and will vest on December 31, 1997 if the required goals, as set forth
below, are attained by such date.
(i) Turnaround Incentive Options. (A) 3,500 shares of the
Turnaround Incentive Options will vest if the Company's consolidated net loss
per share is ($.04) or less for the
<PAGE> 2
three months ended March 31, 1997 (the "First Quarter Corporate Objective").
If the First Quarter Corporate Objective is not met, 7,000 shares of the
Turnaround Incentive Options will vest if the Company's Consolidated net
earnings per share is $0 or more for the three months ended June 30, 1997 (the
"Second Quarter Corporate Objective"). If the First Quarter Corporate
Objective is met, 3,500 shares of the Turnaround Incentive Options will vest
if the Second Quarter Corporate Objective is met.
(B) 3,500 shares of the Turnaround Incentive Options will vest if the
Company's consolidated net earnings per share for its managed care division is
($.07) or more for the three months ended March 31, 1997 (the "First Quarter
Managed Care Division Objective"). If the First Quarter Managed Care
Division Objective is not met, 7,000 shares of the Turnaround Incentive Options
will vest if the Company's consolidated net loss per share for its managed care
division is ($.09) or more for the three months ended June 30, 1997 (the
"Second Quarter Managed Care Division Objective"). If the First Quarter
Corporate Objective is met, 3,500 shares of the Turnaround Incentive Options
will vest if the Second Quarter Managed Care Division Objective is met.
(C) 6,000 shares of the Turnaround Incentive Options will vest if the
Grantee meets the Grantee's individual goals set forth in Exhibit A (the
"Individual Goals"), by the date set forth in Exhibit A, or June 30, 1997, if
no date is set forth in Exhibit A. However, if the Grantee fails to meet
his/her Individual Goals, he/she will forfeit the right to any Turnaround
Incentive Options that may have vested through the attainment of the Corporate
Objectives or Managed Care Division Objectives unless otherwise approved by the
Committee.
(ii) High Growth Incentive Options. A number of High Growth
Incentive Options equal to the number of Turnaround Incentive Options which
vested as described in Section 2(b)(i) above, or if no Turnaround Incentive
Options vested, then, if the Grantee attains all of his/her Individual Goals by
December 31, 1997, one half of the High Growth Incentive Options, will vest if
the Company's consolidated net earnings per share for the year ended December
31, 1997 is $.10 or more.
(iii) Time Vesting. Subject to the Grantee's continued employment
with the Company as of any such date, Turnaround Incentive Options which vested
on June 30, 1997, and High Growth Incentive Options which vested on December
31, 1997, will become exercisable in increments of 25% per annum on each
anniversary of the date on which the option first vested, beginning June 30,
1998. All vested Option Shares which have not yet become exercisable will
expire if the Grantee's employment with the Company terminates prior to the
date on which such Option Shares become exercisable. To the extent not
exercised, exercisable Option Shares shall accumulate and the Grantee may
exercise them thereafter in whole or in part. All unvested Turnaround
Incentive Options expire on June 30, 1997 and all unvested High Growth
Incentive Options expire on December 31, 1998, except as otherwise determined
by the Committee.
2
<PAGE> 3
(iv) Death or Disability; Change of Control. The Option shall
become exercisable (A), with respect to all of the vested Option Shares,
automatically upon the death or permanent disability (as determined by the
Board or the Committee) of the Grantee and (B), with respect to all unexpired
Option Shares, automatically upon a Change of Control. For purposes hereof, a
"Change of Control" shall mean the sale of all or substantially all of the
assets of the Company to an unaffiliated third-party; the merger or
consolidation of the Company with an unaffiliated third-party in which the
Company is not the surviving corporation; or the acquisition or control in
excess of 51% of the Company's Common Stock on a fully-diluted basis by any
person or group of persons (as defined in Section 13(d) of the Securities
Exchange Act of 1934) (other than WestSphere Capital Associates, L.P. and its
affiliates). Notwithstanding the foregoing, the Option shall not vest and
become automatically exercisable as described in Section 2(b)(iv)(B) without
the written consent of the Committee, to the extent such acceleration of
vesting would result, when taken in the aggregate with all other payments from
the Company, in the payment by such Grantee of any excise tax provided for in
Sections 280G and 4999 of the Code.
(v) Termination of Employment. The Grantee shall have the right to
exercise all unexercised Options which have vested as of the Grantee's
Termination Date (as defined in the Plan) for a period of three (3) months
following such Termination Date or such longer period as may be provided in the
Plan or as the Committee may approve in its sole discretion in connection with
such termination; provided, that the Option shall not be exercisable after its
expiration pursuant to Section 7.
(vi) All calculations of net earnings (loss) per share required by
this Agreement shall be as determined by the Chief Financial Officer of the
Company. If there shall be any disputes as to such calculations, the
determination of the Committee as to the net earnings (loss) per share amounts
shall be final and binding on the Grantee.
3. Transferability of this Option.
(a) Except in the case of death or permanent disability of the Grantee,
this Option shall not be transferable.
(b) The Company may assign its rights and delegate its duties under this
Agreement.
4. Conformity with Plan. The Grantee's Option is intended to conform in
all respects with, and is subject to all applicable provisions of the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing and returning the enclosed copy of this Agreement, the
Grantee acknowledges his receipt of the Plan and agrees to be bound by all of
the other terms of the Plan.
5. Employment. Notwithstanding any contrary oral representations or
promises made to Grantee prior to or after the date hereof, Grantee and the
Company acknowledge Grantee's
3
<PAGE> 4
employment with the Company and its subsidiaries is and will continue to be
subject to the willingness of each to continue such employment and nothing
herein confers any right or obligation on Grantee to continue in the employ of
the Company or its subsidiaries or shall affect in any way Grantee's right or
the right of the Company or its subsidiaries to terminate Grantee's employment
at any time, for any reason, with or without cause.
6. Share Legends. At the sole discretion of the Committee, all
certificates representing any Option Shares subject to the provisions of this
Agreement shall have endorsed thereon the following legend:
"THE SHARES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAW."
7. Expiration. The Option shall expire at 5:00 p.m., New York time, on
the tenth anniversary of the date hereof. In the event that the Grantee shall
cease to be employed by the Company or its subsidiaries for any reason, all
Option Shares which shall not have vested and become exercisable prior thereto
pursuant to Section 2 shall automatically terminate.
8. Further Actions. The parties agree to execute such further instruments
and to take such further actions as may reasonably be required to carry out the
intent of this Agreement.
9. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Grantee's heirs,
executors, administrators, successors and assigns.
10. Governing Law. This Agreement and all documents contemplated hereby,
and all remedies in connection therewith and all questions or transactions
relating thereto, shall be construed in accordance with and governed by the
laws of the State of Michigan.
* * * * * *
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your understanding and
acceptance of the agreements contained in this letter.
Very truly yours,
UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
By: /s/ Eugene Jennings
---------------------------------
Its: Chief Executive Officer
-------------------------------
4
<PAGE> 5
The undersigned hereby acknowledges having read this Agreement, the Plan,
and the other enclosures to this Agreement, and hereby agrees to be bound by
all provisions set forth herein and in the Plan.
GRANTEE:
/s/ Perry C. McClung
--------------------------------
(Signature)
Perry C. McClung
--------------------------------
(Please print name)
5
<PAGE> 6
NOTICE OF EXERCISE OF INCENTIVE
STOCK OPTION GRANTED UNDER THE
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
INCENTIVE STOCK OPTION AWARD PROGRAM
President
Universal Standard Medical
Laboratories, Inc.
26500 Northwestern Highway
Southfield, Michigan 48076
An Option was granted to me on May 14, 1997 to purchase up to 40,000
shares of Universal Standard Medical Laboratories, Inc. (the "Company") Common
Stock at a price of $3.14 per share (the "Option").
I hereby elect to exercise the Option with respect to ______ shares (the
"Exercise Shares"). Payment of the exercise price of $______ ($3.14 multiplied
by the number of Exercise Shares, referred to herein as the "Exercise Price")
is being made as follows:
[ ] A. Cash or check delivered with this notice.
[ ] B. Certificates representing shares of Common Stock
having a Fair Market Value on the date of delivery of this
notice equal to the Exercise Price.
[ ] C. The Company is directed to retain shares from the
number of Exercise Shares having a Fair Market Value on the
date of delivery of this notice equal to the Exercise Price.
[ ] D. A combination of A, B and/or C above, having a value
equal to the Exercise Price, as follows: ________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
The stock certificate for the shares acquired upon exercise should be
issued to:
(name)_______________________________
(address)____________________________
_____________________________________
Social Security No.)_________________
Dated: ____________________, ____ _________________________________
(print name)_____________________
<PAGE> 1
Exhibit 11
UNIVERSAL STANDARD HEALTHCARE, INC.
COMPUTATION OF CONSOLIDATED NET INCOME PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) (a) $ (95) $ (688) $ (817) $ (3,686)
======= ======= ======= =========
PRIMARY
- -------
Weighted average common shares outstanding 6,561 6,542 6,561 6,542
Effect of assumed exercise of stock options at prices
which are lower than the average market price of
common shares during the period using the
treasury stock method 17 100 33 99
Warrants outstanding 5 19 5 19
------- ------ ------- ---------
Average shares outstanding and common equivalent
shares for primary earnings per share 6,583 6,661 6,599 6,660
======= ====== ======= =========
Primary earnings per share (a):
Net Income (loss) $ (0.01) $(0.10) $ (0.12) $ (0.55)
FULLY DILUTED
- -------------
Weighted average common shares outstanding 6,561 6,503 6,561 6,503
Effect of assumed exercise of stock options at
prices which are lower than the market price of
common shares at the end of the period, when the
ending price is higher than the average market price 17 181 33 99
Warrants outstanding 5 19 5 19
------- ------ ------- ---------
Average shares outstanding and common equivalent
shares, assuming full dilution 6,583 6,703 6,599 6,621
======= ======= ======= =========
Fully diluted earning per share:
Net Income (loss) $ (0.01) $(0.10) $ (0.12) $ (0.56)
======= ====== ======= =========
</TABLE>
(a) These amounts agree with the related amounts in the condensed consolidated
statements of income.
* Not applicable
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMAITON EXTRACED FROM THE BALANCE
SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000889187
<NAME> UNIVERSAL STANDARD HEALTHCARE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,026
<SECURITIES> 0
<RECEIVABLES> 19,841
<ALLOWANCES> 9,054
<INVENTORY> 1,335
<CURRENT-ASSETS> 14,384
<PP&E> 18,492
<DEPRECIATION> 9,646
<TOTAL-ASSETS> 57,524
<CURRENT-LIABILITIES> 11,441
<BONDS> 20,060
0
0
<COMMON> 32,865
<OTHER-SE> (6,842)
<TOTAL-LIABILITY-AND-EQUITY> 57,524
<SALES> 42,061
<TOTAL-REVENUES> 42,061
<CGS> 28,216
<TOTAL-COSTS> 28,216
<OTHER-EXPENSES> 13,346<F1>
<LOSS-PROVISION> 1,906
<INTEREST-EXPENSE> 1,386
<INCOME-PRETAX> (817)
<INCOME-TAX> 0
<INCOME-CONTINUING> (817)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (817)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
<FN>
<F1>Includes Provision for Doubtful Accounts.
</FN>
</TABLE>
