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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported): August 4, 1998
UNIVERSAL STANDARD HEALTHCARE, INC.
(Exact name of Registrant as specified in its charter)
Michigan 34-0-20400 38-2986640
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
Attn: Alan S. Ker Chief Financial Officer
26500 Northwestern Highway, Suite 400
Southfield, Michigan 48076
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (248) 358-0810
(Former name or former address, if changed since last report)
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ITEM 2 ACQUISITION OR DISPOSITIONS OF ASSETS.
On August 4, pursuant to that certain Asset Purchase Agreement ("the
Asset Purchase Agreement"), dated as of July 16, 1998, between Laboratory
Corporation of America Holdings, a Delaware corporation (the "Purchaser") and
the Registrant, the Registrant sold its clinical laboratory customer list and
certain tangible assets, including equipment and furniture related to its
clinical laboratory business, to the Purchaser for $9,000,000 in cash (the
"Asset Sale").
In connection with the Asset Sale, the Registrant agreed not to engage
in the business of providing commercial laboratory services for a period of 5
years, except in certain limited circumstances related to the Registrant's
managed care business.
The Purchaser is a national clinical laboratory organization which
operates primary testing facilities nationally and performs diagnostic tests for
physicians, managed care organizations, hospitals, clinics, long-term care
facilities, industrial companies and other laboratories.
The consideration paid in the sale was determined through arms-length
negotiations between the Registrant and the Purchaser. Prior to the execution of
the Asset Purchase Agreement, the Registrant subcontracted on a discounted
fee-for-service basis with the Purchaser to provide clinical laboratory services
to participants in the Registrant's managed care laboratory programs in certain
markets (the "Managed Care Services") and subcontracted on a fee-for-service
basis with the Purchaser to provide certain clinical laboratory services to
clients of the Registrant not offered by the Registrant. Prior to the execution
of the Asset Purchase Agreement, there was no other material relationship
between the Registrant or any of its affiliates and the Purchaser or between any
officers or directors of the Registrant or any of its affiliates and the
officers or directors of the Purchaser. As discussed under Item 5 below, the
Registrant intends to continue to subcontract Managed Care Services to the
Purchaser.
ITEM 5. OTHER EVENTS
On August 4, pursuant to that certain Stock Purchase Agreement ("the
Stock Purchase Agreement"), dated as of July 16, 1998, between the Purchaser and
the Registrant, the Registrant sold 1,416,667 shares of its Common Stock (the
"Purchased Shares") to the Purchaser for $4,250,000 cash (the "Stock Sale"). The
Registrant also granted the Purchaser the right at any time after July 1, 1999
to request the registration of the Purchased Shares under the Securities Act of
1933, as amended (the "Act"), for resale and, under certain circumstances, to
have the Purchased Shares included in certain registration statements filed by
the Registrant on its own behalf or on behalf of its shareholders ("Piggyback
Registration Rights").
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Pursuant to the terms of the Stock Purchase Agreement, the Board of
Directors of the Registrant increased the number of board seats of the
Registrant from 8 members to 9 members and elected Larry L. Leonard, who was
designated by the Purchaser, to fill the vacancy created thereby and to serve as
a member of the Board of Directors of the Registrant for a term expiring at the
Registrant's Annual Meeting of Shareholders to be held in 2001. Pursuant to a
certain Voting Agreement, dated as of August 3, 1998, among the Registrant, the
Purchaser, Anixter International, Inc., Signal Capital Corporation, Portfolio
Investment Company Limited, CLF, Ltd. and CLF, LP (the "Voting Agreement"),
certain shareholders of the Registrant agreed to vote their shares of the
Registrant's Common Stock to elect to the Board of Directors of the Registrant a
nominee designated by the Purchaser, who initially is Mr. Leonard.
Until the payment of the Co-Marketing Termination Fee (as defined
below) and the exercise of and payment of amounts due under the Special Call
Right (as defined below), or the expiration of the Co-Marketing Termination Fee,
the Registrant agreed to certain covenants, including (i) providing to the
Purchaser certain information and financial reports, (ii) restricting dividends
on, and redemptions and repurchases of, its capital stock, (iii) limiting the
Registrant's debt, (iv) not granting Piggyback Registration Rights superior to
those granted to the Purchaser, and (v) not issuing additional shares of capital
stock of the Registrant's subsidiaries.
The Stock Purchase Agreement also provides that the Registrant has
certain call rights, including, but not limited to, the right at any time from
October 1, 2000 to November 30, 2000 to purchase all, and not less than all, the
Purchased Shares then held by the Purchaser at a purchase price of $5.00 per
share (the "Call Right").
The Registrant also granted preemptive rights to the Purchaser as to
certain shares of capital stock issued by the Registrant after the date of the
Stock Purchase Agreement but prior to August 31, 2000.
As required under the Stock Purchase Agreement, the Registrant and the
Purchaser entered into a Co-Marketing Agreement, dated as of August 3, 1998 (the
"Co-Marketing Agreement"), for the purpose of coordinating and complementing
their marketing and sales efforts to new and existing managed care customers and
to utilize each company's expertise and resources in such efforts. The
Co-Marketing Agreement further provides that in the event of the termination of
the Co-Marketing Agreement, as well as, in certain cases, the occurrence of
other events, the Registrant will pay to the Purchaser the Co-Marketing
Termination Fee. The Co-Marketing Termination Fee is calculated as set forth in
the Co-Marketing Agreement, but cannot exceed $4,250,000. The Registrant's
obligation to the Purchaser for the Co-Marketing Termination Fee is secured by a
security interest in all of the Registrant's assets and the assets of its
wholly-owned subsidiary Universal Standard Healthcare of Delaware, Inc.
("Universal Delaware"), other than the capital stock of certain regulated
companies owned by Universal Delaware. The Purchaser has agreed to subordinate
the Registrant's obligation to the Purchaser for the Co-Marketing Termination
Fee and the Purchaser's security
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interest in certain assets of the Registrant to certain debt of the Registrant
and the assets securing such debt.
In the event the Co-Marketing Termination Fee is paid, the Registrant
shall have the right to purchase the Purchased Shares owned by the Purchaser as
provided in the Stock Purchase Agreement (the "Special Call Right").
The Registrant entered into a Laboratory Services Agreement with the
Purchaser effective as of August 3, 1998. Under the terms of the five-year
agreement, the Purchaser shall be the preferred provider of clinical laboratory
services for Registrant's managed care customers. Generally, in those
circumstances where the Purchaser does not wish to provide services or does not
have sufficient facilities or where customers or existing contracts require
other providers, the Registrant may contract with other laboratory providers.
The Registrant pays the Purchaser on a fee-for-service basis.
The Registrant and the Purchaser have also entered into a certain
Shareholders' Agreement, dated as of August 3, 1998, which restricts the
Purchaser's right to resell the Purchased Shares, requires the Purchaser to vote
the shares of Common Stock of the Registrant held by it in favor of the nominees
for election to the Board of Directors of the Registrant designated by the Board
of Directors of the Registrant and requires the Purchaser to vote in favor of
certain business combinations approved by the Board of Directors of the
Registrant.
The Registrant has leased to the Purchaser portions of its clinical
laboratory located in Southfield, Michigan and certain related equipment for a
period of six months, and has sold certain inventory related to its clinical
laboratory business to the Purchaser, for aggregate payments of $1.85 million,
which were paid in advance on August 4, 1998 (the "Lease Arrangement").
The Registrant and the Purchaser have entered into a certain Transition
Services Agreement dated August 3, 1998 pursuant to which the Registrant will
provide certain of its personnel involved in its clinical laboratory operations
to the Purchaser for a period of up to six months, with the Purchaser
reimbursing the Registrant for the costs associated with such personnel.
ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements.
Not applicable.
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(b) Pro Forma Financial Information.
The unaudited pro forma condensed consolidated financial
statements furnished herein reflects the effect of the
Transactions on the consolidated financial statements of
the Registrant.
Page No.
Unaudited Pro Forma Condensed Consolidated F-2
Statement of Operations for the
Fiscal Year Ended December 31, 1997.
Unaudited Pro Forma Condensed Consolidated F-3
Statement of Operations for the
Six Months Ended June 30, 1998.
Unaudited Pro Forma Condensed Consolidated F-4
Balance Sheet as of June 30, 1998.
(c) Exhibits.
2.1 Purchase Agreement between the Company and Laboratory
Corporation of America Holdings dated July 16, 1998,
incorporated by reference from the Company's Current
Report on Form 8-K dated July 21, 1998. The Registrant
agrees to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon
request.
99.1 Stock Purchase Agreement between the Company and
Laboratory Corporation of America Holdings dated July 16,
1998, incorporated by reference from the Company's
Current Report on Form 8-K dated July 21, 1998. The
Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Securities and Exchange
Commission upon request.
99.2 Co-Marketing Agreement, dated as of August 3, 1998,
between the Registrant and Laboratory Corporation of
America Holdings.
99.3 Shareholders' Agreement, dated as of August 3, 1998,
between Universal Standard Healthcare, Inc. and
Laboratory Corporation of America Holdings.
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99.4 Voting Agreement among Universal Standard Healthcare,
Inc., Laboratory Corporation of America Holdings, Anixter
International, Inc., Signal Capital Corporation,
Portfolio Investment Company Limited, CLF, Ltd. and CLF,
LP.
99.5 Laboratory Services Agreement, dated as of August 3,
1998, between Universal Standard Healthcare, Inc. and
Laboratory Corporation of America Holdings. Exhibit A
to this Agreement was filed separately with the
Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934 governing requests for confidential
treatment of information.
99.6 Security Agreement dated as of August 3, 1998, among
Universal Standard Healthcare, Inc., Universal Standard
Healthcare of Delaware, Inc. and Laboratory Corporation
of America Holdings. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
99.7 Sublease dated as of August 3, 1998, between Universal
Standard Healthcare, Inc. and Laboratory Corporation of
America Holdings. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
99.8 Transition Services Agreement dated as of August 3, 1998,
between Universal Standard Healthcare, Inc. and
Laboratory Corporation of America Holdings. Portions of
Schedule 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. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule to
the Securities and Exchange Commission upon request.
99.9 Non-Compete Agreement, dated as of August 3, 1998, by
subsidiaries and affiliated companies for the benefit of
Laboratory Corporation of America Holdings.
99.10 Universal Subordination Agreement, dated as of August 3,
1998, among Universal Standard Healthcare, Inc.,
Universal Standard Healthcare of Delaware, Inc. and
Laboratory Corporation of America Holdings. The
Registrant agrees to furnish supplementally a copy
of any omitted Schedule to the Securities and Exchange
Commission upon request.
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99.11 Sublease Agreement, dated as of August 4, 1998, between
Universal Healthcare, Inc. and Laboratory Corporation of
America Holdings. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
99.12 Consent of Signal Capital Corp., dated July 30, 1998, to
the Amendment to Stockholders Agreement dated as of June
28, 1991 by and among Universal Standard Equity, Ltd.,
WestSphere Capital Associates, L.P., WestSphere Capital,
Inc., WestSphere Funding II, L.P., Fleet National Bank,
Signal Capital Corp. Marvin Eisner, MML, Inc., Robert
Nowikowski, Barbara Pace, John Watkins, Perry McClung,
Janney Montgomery Scott, Inc., Richard J. Berman, Marcus
& Katz and Elan Holdings Corp.
99.13 Consent of Portfolio Investment Company Limited, CLF,
Ltd. and CLF, L.P. , dated July 31, 1998, to the
Amendment to Stockholders Agreement dated as of June 28,
1991 by and among Universal Standard Equity, Ltd.,
WestSphere Capital Associates, L.P., WestSphere Capital,
Inc., WestSphere Funding II, L.P., Fleet National Bank,
Signal Capital Corp., Marvin Eisner, MML, Inc., Robert
Nowikowski, Barbara Pace, John Watkins, Perry McClung,
Janney Montgomery Scott, Inc., Richard J. Berman, Marcus
& Katz and Elan Holdings Corp.
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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 hereunto duly authorized.
Dated: August 19, 1998
-- UNIVERSAL STANDARD HEALTHCARE, INC.
/s/ Alan S. Ker
-----------------------------------
Alan S. Ker
Vice President, Finance
Chief Financial Officer
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UNIVERSAL STANDARD HEALTHCARE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited consolidated pro forma balance sheet at June 30, 1998,
and the unaudited consolidated pro forma statements of operations for the six
months ended June 30, 1998 and the fiscal year ended December 31, 1997 give
effect to (i) the sale by the Registrant of certain assets of its clinical
laboratory division as discussed in Item 2 above (the "Asset Sale"), (ii) the
sublease of portions of the Registrant's Southfield, Michigan clinical
laboratory facility and certain related equipment to the purchaser in the Asset
Sale, including an advanced payment of $1.85 million of rent, and the sale of
certain inventory related to the Registrant's clinical laboratory business, as
discussed in Item 5 above (the "Lease Arrangement") and (iii) the sale to the
purchaser in the Asset Sale of 1,416,667 shares of the Registrant's Common Stock
as discussed in Item 5 above (the "Stock Sale") (collectively, the Asset Sale,
Lease Arrangement and Stock Sale shall be referred to as the "Transactions").
The pro forma balance sheet assumes the Transactions occurred on June 30, 1998,
and the pro forma statements of operations assume the Transactions occurred on
January 1, 1997. The unaudited pro forma condensed consolidated financial
statements are based on the historical financial statements of the Registrant,
giving effect to the Transactions and to the assumptions and adjustments in the
accompanying notes to the unaudited pro forma condensed consolidated financial
statements.
The unaudited pro forma condensed consolidated financial statements are
presented for informational purposes only and do not purport to be indicative of
the financial position which would actually have existed or the results of
operations which would actually have been obtained if the Transactions had
occurred in the periods indicated or which may exist or occur in the future. The
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the notes thereto and the historical consolidated financial
statements and notes thereto included in the Registrant's latest annual report
on Form 10-K and latest quarterly report on Form 10-Q.
F-1
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UNIVERSAL STANDARD HEALTHCARE, INC
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Fiscal Year Ended December,31,1997
---------------------------------------------------------------
Pro Forma Pro
As Reported Adjustments Forma
=================== =================== ================
<S> <C> <C> <C>
Net revenue
Fee for service $36,867 $36,867 (1) $0
Managed care $18,764 $18,764
---------- ---------- ----------
Total net revenue $55,631 $36,867 $18,764
---------- ---------- ----------
Operating expenses
Laboratory $40,338 $27,087 (1) $13,251
Special charge $18,842 $17,442 (2) $1,400
Selling, general, and $0
administrative expenses $11,316 $6,537 (1) $4,779
Depreciation and amortization $3,998 $3,458 (1) $540
---------- ---------- ----------
Total operating expenses $74,494 $54,524 $19,970
---------- ---------- ----------
Operating income (loss) ($18,863) ($17,657) ($1,206)
Interest expense $1,899 $907 (3) $992
Other income, net ($86) ($86)
---------- ---------- ----------
Income (loss) before taxes ($20,676) ($18,564) ($2,112)
Income taxes $0 $0 $0
Net income (loss) ($20,676) ($18,564) ($2,112)
========== ========== ==========
Net income (loss) per common share
(Basic and diluted) ($3.15) ($2.19) ($0.25)
Average shares outstanding and 6,568 8,485 (4) 8,485
equivalent shares
</TABLE>
(1) Reflects the elimination of estimated revenues and
expenses attributable to the laboratory division for the
period presented.
(2) Included in the 1997 historical special charge was
approximately ($14 million) related to an intangible asset
write off for the laboratory division and non recurring
reengineering expenses of($3.4 million) assumed to be
completed on 1/1/97.
(3) Reflects the elimination of interest expense assoicated
with bank debt assumed to be repaid from the proceeds of
the Transactions.
(4) Reflects the issuance of 1,416,667 shares of common stock
in the Stock Sale.
F-2
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UNIVERSAL STANDARD HEALTHCARE, INC
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998
--------------------------------------------------------------------------
Pro Forma Pro
As Reported Adjustments Forma
=================== ================== ==================
<S> <C> <C> <C>
Net revenue
Fee for service $17,227 $17,227 (1) $0
Managed care $13,500 $0 $13,500
---------- ---------- -----------
Total net revenue $30,727 $17,227 $13,500
---------- ---------- -----------
Operating expenses
Laboratory $21,986 $11,871 (1) $10,115
Selling, general, and
administrative expenses $6,234 $3,685 (1) $2,549
Depreciation and amortization $1,910 $1,640 (1) $270
---------- ---------- -----------
Total operating expenses $30,130 $17,196 $12,934
---------- ---------- -----------
Operating income (loss) $597 $31 $566
Interest expense $1,086 $574 (2) $512
Other income, net ($50) $10 (1) ($60)
---------- ---------- -----------
Income (loss) before taxes ($439) ($553) $114
Income taxes $0 $0 $0
Net income (loss) ($439) ($553) $114
Net income (loss) per common share ($0.06) ($0.06) $0.01
Average shares outstanding and
equivalent shares 7,104 8,521 (3) 8,521
</TABLE>
(1) Reflects the elimination of estimated revenues and
expenses attributable to the laboratory division for the
period presented.
(2) Reflects the elimination of interest expense associated
with bank debt assumed to be repaid with the proceeds of the
Transactions.
(3) Reflects the issuance of 1,416,667 shares of common
stock in the Stock Sale.
F-3
<PAGE> 12
UNIVERSAL STANDARD HEALTHCARE, INC
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 1998
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Pro
As Reported Adjustments Forma
==================== ================== ================
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $584 $584
Accounts receivable, net $11,538 $11,538
Inventory $981 ($981) (1) $0
Prepaid expenses and other $1,059 $1,059
----------- ------------ ------------
Total current assets $14,162 ($981) $13,181
Other assets $1,526 $1,526
Property and equipment, net $8,586 ($360) (1) $8,226
Intangible assets, net $18,341 ($11,290) (1) $7,051
----------- ------------ ------------
Total assets $42,615 ($12,631) $29,984
=========== ============ ============
Current liabilities
Accounts payable $5,820 ($1,162) (1) $4,658
Current portion of Long-term debt $4,269 ($4,269) (1) $0
Deferred lease income $1,850 (1) $1,850
Accrued liabilities $5,759 ($1,500) (1) $4,259
----------- ------------ ------------
Total current liabilities $15,848 ($5,081) $10,767
Long-term debt $19,769 ($8,169) (1) $11,600
----------- ------------ ------------
Total liabilities $35,617 ($13,250) $22,367
----------- ------------ ------------
Common stock $34,138 $4,250 (2) $38,388
Retained Earnings (deficit) ($27,140) ($3,631) (3) ($30,771)
----------- ------------ ------------
Total stockholders' equity $6,998 $619 $7,617
----------- ------------ ------------
Total liabilities and stockholders' equity $42,615 ($12,631) $29,984
=========== ============ ============
</TABLE>
Notes: (1) To reflect the use of the net proceeds from the Asset Sale
($9 million) , the Lease Arrangement ($1.850 million), and the
Stock Sale ($4.250 million) to reduce bank debt ($11 million),
other long-term debt ($1.44 million), and other payables and
closing costs ($2.66 million). The Transactions included the sale
of certain assets of the clinical laboratory division (which
included inventory, customer list, and some equipment) and advance
rent payments ($1.850 million ).
(2) To reflect the issuance of 1,416,667 shares of common stock at
$3.00 per share in the Stock Sale.
(3) To reflect the estimated impact of the loss on the sale of the
laboratory division.
F-4
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INDEX TO EXHIBITS
EXHIBIT NO: DESCRIPTION
2.1 Purchase Agreement between the Company and Laboratory Corporation
of America Holdings dated July 16, 1998, incorporated by reference
from the Company's Current Report on Form 8-K dated July 21, 1998.
The Registrant agrees to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon request.
99.1 Stock Purchase Agreement between the Company and Laboratory
Corporation of America Holdings dated July 16, 1998, incorporated by
reference from the Company's Current Report on Form 8-K dated July
21, 1998. The Registrant agrees to furnish supplementally a copy of
any omitted schedule to the Securities and Exchange Commission upon
request.
99.2 Co-Marketing Agreement, dated as of August 3, 1998, between the
Registrant and Laboratory Corporation of America Holdings.
99.3 Shareholders' Agreement, dated as of August 3, 1998, between
Universal Standard Healthcare, Inc. and Laboratory Corporation of
America Holdings.
99.4 Voting Agreement among Universal Standard Healthcare, Inc.,
Laboratory Corporation of America Holdings, Anixter International,
Inc., Signal Capital Corporation, Portfolio Investment Company
Limited, CLF, Ltd. and CLF, LP.
99.5 Laboratory Services Agreement, dated as of August 3, 1998, between
Universal Standard Healthcare, Inc. and Laboratory Corporation of
America Holdings. Exhibit A to this Agreement was filed
separately with the Commission pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934 governing requests for confidential
treatment of information.
99.6 Security Agreement dated as of August 3, 1998, among Universal
Standard Healthcare, Inc., Universal Standard Healthcare of Delaware,
Inc. and Laboratory Corporation of America Holdings. The Registrant
agrees to furnish supplementally a copy of any omitted Schedule to
the Securities and Exchange Commission upon request.
<PAGE> 14
EXHIBIT NO: DESCRIPTION
99.7 Sublease dated as of August 3, 1998, between Universal Standard
Healthcare, Inc. and Laboratory Corporation of America Holdings. The
Registrant agrees to furnish supplementally a copy of any omitted
Schedule to the Securities and Exchange Commission upon request.
99.8 Transition Services Agreement dated as of August 3, 1998, between
Universal Standard Healthcare, Inc. and Laboratory Corporation of
America Holdings. Portions of Schedule 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.
99.9 Non-Compete Agreement, dated as of August 3, 1998, by Universal
Standard Healthcare, Inc. and all of its subsidiaries and affiliated
companies for the benefit of Laboratory Corporation of America
Holdings.
99.10 Universal Subordination Agreement, dated as of August 3, 1998, among
Universal Standard Healthcare, Inc., Universal Standard Healthcare of
Delaware, Inc. and Laboratory Corporation of America Holdings.
The Registrant agrees to furnish supplementally a copy of any
omitted Schedule to the Securities and Exchange Commission upon
request.
99.11 Sublease Agreement, dated as of August 4, 1998, between Universal
Healthcare, Inc. and Laboratory Corporation of America Holdings. The
Registrant agrees to furnish supplementally a copy of any omitted
Schedule to the Securities and Exchange Commission upon request.
99.12 Consent of Signal Capital Corp., dated July 30, 1998, to the
Amendment to Stockholders Agreement dated as of June 28, 1991 by and
among Universal Standard Equity, Ltd., WestSphere Capital Associates,
L.P., WestSphere Capital, Inc., WestSphere Funding II, L.P., Fleet
National Bank, Signal Capital Corp., Marvin Eisner, MML, Inc., Robert
Nowikowski, Barbara Pace, John Watkins, Perry McClung, Janney
Montgomery Scott, Inc., Richard J. Berman, Marcus & Katz and Elan
Holdings Corp.
99.13 Consent of Portfolio Investment Company Limited, CLF, Ltd. and CLF,
L.P. , dated July 31, 1998, to the Amendment to Stockholders
Agreement dated as of June 28, 1991 by and among Universal Standard
Equity, Ltd., WestSphere Capital Associates, L.P., WestSphere
Capital, Inc., WestSphere Funding II, L.P., Fleet National Bank,
Signal Capital Corp., Marvin Eisner, MML, Inc., Robert Nowikowski,
Barbara Pace, John Watkins, Perry McClung, Janney Montgomery Scott,
Inc., Richard J. Berman, Marcus & Katz and Elan Holdings Corp.
<PAGE> 1
EXHIBIT 99.2
RIGHTS OF HOLDER TO RECEIVE PAYMENT OF THE CO-MARKETING
TERMINATION FEE ARE SUBJECT AND SUBORDINATE TO THE PRIOR
PAYMENT OF ALL OBLIGATIONS OF MAKER TO NBD BANK PURSUANT TO
THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF AUGUST 3,
1998.
CO-MARKETING AGREEMENT
This Co-Marketing Agreement (hereinafter the "Agreement") is made and
entered into as of the 3rd day of August, 1998, by and between Laboratory
Corporation of America Holdings, a Delaware corporation ("LabCorp") and
Universal Standard Healthcare, Inc., a Michigan corporation, on behalf of itself
and its subsidiaries ("Universal").
WITNESSETH:
WHEREAS, Universal operates a licensed Alternative Healthcare Financing
Delivery System which offers managed care programs to employers, employer groups
and health plans for the delivery of clinical laboratory, home medical and
diagnostic imaging services ("Universal's Managed Care Business");
WHEREAS, LabCorp owns and operates a clinical laboratory business with
operations and facilities across the United States;
WHEREAS, as part of LabCorp's marketing effort, LabCorp has marketed
laboratory services directly to employers through programs such as its "Lab
Direct" program ("Lab Direct");
WHEREAS, Universal and Lab Corp are entering into a Laboratory Services
Agreement on the date hereof, to provide clinical laboratory services to
individuals covered by Universal's Managed Care Business throughout the United
States; and
WHEREAS, LabCorp and Universal wish to coordinate and complement their
marketing and sales efforts to new and existing customers throughout the United
States to maximize utilization of each company's expertise and resources and
enhance the success of both LabCorp and Universal.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1. Customers. The parties agree that, for purposes of this Agreement,
the customers of Universal and LabCorp shall be divided into four categories as
follows:
a. Existing customers of Universal's Managed Care
Business ("Existing Universal Customers");
<PAGE> 2
b. New customers of Universal's Managed Care Business
("New Universal Customers");
c. Existing customers of LabCorp's Lab Direct program
("Existing LabCorp Customers"); and
d. Potential new customers of LabCorp's employer direct
sales program and other customers as deemed
appropriate by LabCorp ("New LabCorp Customers").
2. Objectives of Co-Marketing Program. With respect to each
category of customer, the parties agree that the objective of this co-marketing
program shall be as set forth below:
a. All current and future business with respect to Existing
Universal Customers shall not be subject to this Agreement; provided, however,
that Universal agrees to use its best efforts to utilize LabCorp as a provider
for these Customers pursuant to the Laboratory Services Agreement.
b. Universal agrees to share information relating to New
Universal Customer prospects as described more fully in Section 3 hereof.
c. Where there is interest on the part of Existing LabCorp
Customers and where consistent with the best interests of both LabCorp and
Universal, LabCorp agrees to work in cooperation with Universal and use
reasonable efforts to (i) generate interest in such Existing LabCorp Customers
to purchase a capitated product from Universal for clinical laboratory services,
and (ii) expand its contract with the Customer to include home medical services,
diagnostic imaging and other services offered by Universal and to purchase such
services from Universal.
d. LabCorp agrees to share information relating to New LabCorp
Customer prospects as described more fully in Section 3 hereof.
3. Sharing Information. Each party agrees that it will
maintain a list of its New Customer prospects and, to the extent permitted by
law and not prohibited by that party's customers, to exchange the list with the
other party on a monthly basis. The purpose of this exchange shall be to avoid
duplication of effort and maximize penetration for the marketing and sale of
each party's products to employers, employer groups, unions, insurance
carriers, self-funded payors and other groups and associations.
4. LabCorp Responsibilities. LabCorp agrees, to the extent
consistent with LabCorp's policies, to perform the following:
a. Commit a sufficient number, in its sole discretion, of
salespersons, who are trained to sell Universal's Managed Care Business, and
provide compensation packages to such
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individuals in a form that provides an incentive tied directly to the sale of
Universal's Managed Care Business and is determined solely in LabCorp's
discretion. LabCorp agrees to cooperate with Universal and use its reasonable
efforts to take into effect Universal's policies when structuring the incentive.
Universal acknowledges that such salespersons need not be dedicated exclusively
to the sale of Universal's Managed Care Business. LabCorp agrees not to move the
sales effort for UHCI products from its managed care (employer direct) sales
force to another sales group without the prior consent of UHCI;
b. Require such salespersons and other relevant personnel to
attend training sessions conducted by Universal on the sale of the Universal
Managed Care Business to the extent reasonable and necessary;
c. Participate in quarterly sales meetings or teleconference
calls between Universal and LabCorp sales management personnel to the extent
reasonable and necessary;
d. In consultation with Universal, establish sales
compensation programs for the sale of Universal's Managed Care Business and
track sales performance on a monthly basis;
e. During the term of this Agreement, not sell managed care
business directly to employers, except for the following: (i) LabCorp's
LabDirect business, (ii) situations where LabCorp is a provider of clinical
laboratory services under a contract with a managed care organization which has
the direct contract with the Employer, or (iii) managed care programs that do
not include those elements of managed care that make Universal's Managed Care
Business unique. These elements are: (a) assumption of risk by Universal for
both in-network and out of network providers, and (b) agreement by Universal to
hold the beneficiary of the Employer plan harmless. For a period of twenty-four
(24) months after termination of the Agreement, each party agrees not to solicit
the "Current Customers" of the other party. For purposes of this
non-solicitation provision, the term "Current Customers" shall mean the
customers of a respective party at the time of termination except for any
customer which became a customer as a result of a joint effort by both parties.
This Section 4(e) shall not apply in the event of a Change in Control (as
defined in Section 9(d)) involving a clinical laboratory competitor of LabCorp
or involving a surviving entity that wants to materially change the position of
LabCorp as the primary provider of Universal.
f. Require salespersons to be reasonably available to make
sales calls to potential customers jointly with Universal.
5. Universal Responsibilities. Universal agrees to perform the
following:
a. Provide personnel to conduct training for LabCorp
salespersons on topics including, without limitation, information about the
Universal Managed Care Business and, effective techniques for selling
Universal's managed care product;
b. Provide technical sales support to LabCorp salespersons;
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c. Make available to LabCorp salespersons copies of existing
relevant marketing information and sales literature and coordinate with LabCorp
to jointly develop additional marketing materials; and
d. Require salespersons to be available to make sales calls to
potential customers jointly with LabCorp.
6. Marketing Fee. In the event that LabCorp brings
additional products (not clinical laboratory) to Universal, Universal agrees to
pay LabCorp a fee which shall be mutually agreed upon by the parties on a
customer by customer basis. The fee shall be calculated based on a percentage
of net revenues based on the total revenues for products sold other than
clinical laboratory products. With respect to additional clinical laboratory
products, the parties agree that they will adjust the fee schedule for
laboratory services (set forth in the Laboratory Services Agreement) in order
to achieve mutual benefit for both parties.
7. TPA Business. Where services, price and other
considerations warrant and with mutual agreement of both LabCorp and Universal,
LabCorp agrees to transfer its third party administrator and administrative
services business to Universal's TPA subsidiary.
8. Term. The term of this Agreement is August 3, 1998
through August 31, 2000.
9. Termination. This Agreement may be terminated:
a. At any time by mutual agreement of the parties;
b. Without cause upon ninety (90) days's prior written notice
and with cause upon thirty (30) days' prior written notice; or
c. Upon thirty (30) days' written notice by Universal in the
event of a Change in Control of Universal (which notice may be given prior to
the effective date of such Change in Control of Universal and which notice may
be withdrawn if such Change of Control of Universal is not consummated). A
"Change in Control of Universal" shall mean (i) the sale of all or
substantially all of the assets of the Company, (ii) the merger of the Company
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 Securities Exchange Act of
1934) acquiring beneficial ownership (calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended) of more than 50% of
Universal's voting securities.
10. Termination Fee.
a. If LabCorp terminates this Agreement as provided in Section
9(b) above, and Universal has not satisfied the Covenant (as defined below) by
July 31, 2000, Universal will pay LabCorp $4,250,000 (the "Co-Marketing
Termination Fee"). However, if LabCorp has sold or
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otherwise transferred any of the Purchased Shares prior to the date of payment
of the Co-Marketing Termination Fee, the Co-Marketing Termination Fee shall be
reduced by the greater of (i) Net Proceeds in excess of $708,350 received by
LabCorp from the sale of the Purchased Shares, or (ii) $3.00 per share of
Purchased Shares sold or transferred by LabCorp ("Transfer Proceeds"). If
LabCorp has not sold or transferred any of the Purchased Shares prior to the
payment of the Co-Marketing Termination Fee, then there shall be no Transfer
Proceeds or reduction in the Co-Marketing Termination Fee. "Net Proceeds" shall
mean the proceeds from the sale of the Purchased Shares, net of selling
commissions and discounts and expenses incurred in connection with the sale or
transfer. "Purchased Shares" shall be as defined in a certain Stock Purchase
Agreement dated July 16, 1998 between Universal and LabCorp (the "Stock Purchase
Agreement"). In the event of a termination by LabCorp pursuant to Section 9(b),
the Co-Marketing Termination Fee, less Transfer Proceeds, shall become due and
payable in full by Universal within one hundred twenty (120) days following
Universal's receipt of LabCorp's written notice of termination, but in no event
earlier than August 1, 2000. Notwithstanding the foregoing, after the
termination of this Agreement as provided in Section 9(b), LabCorp may, by
written notice to Universal, terminate Universal's obligation to pay the
Co-Marketing Termination Fee at any time before August 1, 2000, if, together
with such notice, LabCorp agrees to pay one half of Financing Costs incurred by
Universal in arranging financing to pay the Co-Marketing Termination Fee if
Universal does not complete such financing as a result of LabCorp's notice.
"Financing Costs" are reasonable and customary fees and expenses of a lending
institution or up to $30,000 in reasonable and customary fees and expenses of an
investment banker.
b. In the event that Universal terminates this Agreement as
provided in Section 9(b) or Section 9(c) above prior to August 31, 2000 (a
"Universal Termination"), Universal will pay LabCorp the Co-Marketing
Termination Fee, less Transfer Proceeds, if any. Notwithstanding the foregoing,
LabCorp may, by written notice to Universal within fifteen (15) days after its
receipt of Universal's notice of termination, terminate Universal's obligation
to pay the Co-Marketing Termination Fee. In the event of a Universal
Termination, the Co-Marketing Termination Fee is due and payable in full as of
the effective date of the termination of this Agreement.
c. In the event of a termination of this Agreement by LabCorp
and Universal by mutual consent pursuant to Section 9(a), the Co-Marketing
Termination Fee, less Transfer Proceeds, if any, shall be due and payable in
full by Universal at such time as is mutually agreed upon by Universal and
LabCorp.
d. Universal's obligation to pay the Co-Marketing Termination
Fee shall terminate effective July 31, 2000 if Universal satisfies the Covenant
(as defined below) and thereafter Universal shall not be required to pay the
Co-Marketing Termination Fee upon the termination of this Agreement by Universal
or LabCorp, subject to Section 10(e). The "Covenant" shall mean Universal's
average closing stock price, as reported on the Nasdaq Stock Market, Inc.
("Nasdaq") or any stock exchange on which the Common Stock of Universal is then
traded, for the last five business days of July 2000 is greater than $3.50.
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e. If, after Universal has satisfied the Covenant, LabCorp
sells the Purchased Shares between August 1, 2000 and October 31, 2000,
Universal will pay LabCorp the amount by which $3.50 per share of Purchased
Shares sold exceeds the Net Proceeds received by LabCorp for such shares, with
such payment being due within thirty (30) days after receipt by Universal of
LabCorp's written notice of such sale. If, after Universal has satisfied the
Covenant, LabCorp seeks to, but is unable to, sell all the Purchased Shares
between August 1, 2000, and October 31, 2000, then the Co-Marketing Termination
Fee shall be reinstated effective November 1, 2000. LabCorp shall have the right
to elect to be paid the Co-Marketing Termination Fee, less Transfer Proceeds, if
any, by written notice to Universal at any time from November 1, 2000 to
November 30, 2000 and Universal shall pay the same within thirty (30) days of
its receipt of LabCorp's notice.
f. The Co-Marketing Termination Fee shall bear interest at the
rate of twelve (12%) percent per annum from its due date to the date paid, with
such interest due upon demand by LabCorp, but in no event later than the date
the Co-Marketing Termination Fee is actually paid.
g. Universal's obligation to pay the Co-Marketing Termination
Fee shall survive any termination of this Agreement pursuant to Section 9 and
shall terminate only upon the expiration of this Agreement in accordance with
its terms, as provided in Section 10(a) and as provided in Section 10(d)
(subject to Section 10(f)).
11. Confidentiality.
a. "Confidential Information" shall mean that information
exchanged by the parties in connection with this Agreement which the parties do
not wish to become public. Confidential Information shall include, but not be
limited to, information concerning or relating to a party's business, financial
condition, operations, customers, or managed care products. Confidential
Information shall not include: (1) information rightfully in the receiving
party's possession or rightfully received by such party unless the party is
subject to a written confidentiality agreement which covers such information;
(2) developed independently by the receiving party or a third party; (3)
publicly available when received or thereafter becomes publicly available
through no fault of the receiving party; or (iv) disclosed by the disclosing
party without an intent of confidentiality. Each party further agrees that it
will limit disclosure of Confidential Information within its own company to only
those employees who require such information to perform under this Agreement.
b. For the five (5) years after the date of disclosure or such
greater period required by law, the party receiving Confidential Information
will use the same care and discretion to avoid disclosure of such information as
the receiving party uses with its own similar Confidential Information which it
does not wish to disclose.
c. This section 11 shall survive termination or expiration of
this Agreement.
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12. Damages. No party shall be entitled to any damages with respect
to lost profits or other consequential damages or punitive damages with respect
to the performance by any other Party under this Agreement.
13. Miscellaneous.
13.1 Entire Agreement. This Agreement and any exhibits and
attachments hereto constitute the entire agreement between the parties regarding
the subject matter of this Agreement and supersede any prior agreements between
the parties, whether written or oral.
13.2 Assignment. This Agreement may not be assigned by
either party without prior written consent of the other party.
13.3 Amendment and Waiver. This Agreement may be amended
only upon written consent of both parties. Failure by either party to
enforce any provision of this Agreement shall not be considered a waiver of any
other provision or any subsequent breach.
13.4 Governing Law. This Agreement shall be governed by
the laws of the State of Michigan, without regard to its rules of conflicts of
laws.
13.5 Notice. To be considered notice, written
communication must be made to:
LabCorp: Laboratory Corporation of America Holdings
358 South Main Street
Burlington, North Carolina 27215
Universal: Eugene Jennings
Universal Standard Healthcare of Michigan,
Inc.
26500 Northwestern Highway
P.O. Box 5127
Southfield, MI 48086-5127
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date stated above.
UNIVERSAL STANDARD HEALTHCARE LABORATORY CORPORATION OF
OF MICHIGAN, INC. AMERICA HOLDINGS
By: /s/ Eugene E. Jennings By: /s/ Bradford T. Smith
--------------------------- -----------------------------
Name: Eugene E. Jennings Name: Bradford T. Smith
Title: President Title: Executive Vice President
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EXHIBIT 99.3
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (this "Agreement"), dated as of August 3,
1998, is by and among UNIVERSAL STANDARD HEALTHCARE, INC., a Michigan
corporation (the "Company"), and LABORATORY CORPORATION OF AMERICA HOLDINGS, a
Delaware corporation ("LCA").
WHEREAS, Sections 5(a)(vii) and 5(b)(vii) of the Stock Purchase Agreement
dated July 16, 1998 between the Company and LCA provides that the Company and
LCA execute and deliver this Agreement as a condition precedent to the
effectiveness of the Stock Purchase Agreement;
WHEREAS, the parties hereto desire to effect the Stock Purchase Agreement
and the transactions contemplated by the Stock Purchase Agreement and to enter
into this Agreement in order to set forth certain agreements and understandings
with respect to the obligations, rights and privileges of LCA as a shareholder
of the Company;
NOW THEREFORE, in consideration of promises and mutual covenants and
agreements set forth herein and in the Stock Purchase Agreement, intending to be
legally bound hereby, the parties hereto agree as follows:
SECTION 1. RESTRICTION ON RESALE. LCA hereby covenants that it will not,
directly or indirectly, sell or otherwise transfer, or permit any of its
subsidiaries, directly or indirectly, to sell or to transfer, shares of Common
Stock or other voting securities of the Company owned by LCA, whether acquired
under the Stock Purchase Agreement or otherwise, to any person, other than an
entity that is an Affiliate (as defined under Rule 12b-2 of the Securities
Exchange Act of 1934, as amended, (the "1934 Act")) of LCA (such Affiliate, now
or in the future, a "LCA Affiliate") which agrees to be bound by the terms of
this Agreement or to the Company, unless such sale or transfer (A) is made
pursuant to and in compliance with the requirements of Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if applicable, or (B)
shall have been approved by the written consent of a majority of the members of
the Company's Board of Directors, or (C), in the event that (i) the Company has
defaulted or breached any of its obligations under the Stock Purchase Agreement
or Section 10 of that certain Co-Marketing Agreement, dated as of the date
herewith, between the Company and LCA, or (ii) any of the Company's
representations and warranties under the Stock Purchase Agreement were
inaccurate or untrue in any material respect at the time of the making thereof,
is pursuant to an opinion of counsel reasonably satisfactory to the Company that
registration under the Securities Act is not required.
SECTION 2. STANDSTILL. LCA hereby covenants and agrees that it will not,
and will cause LCA Affiliates to not, without the prior written consent of a
majority of the members of the Company's Board of Directors (the "Board of
Directors"), do any of the following:
<PAGE> 2
(a) vote its shares of Common Stock or other voting securities of
the Company for the election of any person to the Board of Directors other than
the persons nominated by the Board of Directors; or
(b) vote its shares of Common Stock or other voting securities of
the Company to remove any person from the Board of Directors who was nominated
by the Board of Directors, provided, however, that these prohibitions shall not
be operative if the director nominee designated for election to the Board of
Directors by LCA pursuant to Section 1 of a certain Voting Agreement dated
August 3, 1998 (the "Voting Agreement") is not elected to the Board of Directors
of the Company.
SECTION 3. SUSPENSION OF COVENANTS. The provisions of Sections 1, 2, 5 and
6 hereof shall thereafter cease to apply in the event the number of shares of
Common Stock and other voting securities of the Company then owned by LCA and
the LCA Affiliates, in the aggregate, shall be less than five percent (5%) of
the then issued and outstanding shares of Common Stock and other voting
securities of the Company, treating the Common Stock and other voting securities
of the Company as a single class of securities, and LCA and the LCA Affiliates,
together, shall Beneficially Own less than five percent (5%) of the outstanding
shares of Common Stock and each other class of voting securities of the Company,
in each case calculated in accordance with Section 13(d) of the 1934 Act and the
rules and regulations promulgated thereunder.
SECTION 4. RIGHT TO MAKE OFFER. During the term of this Agreement, in the
event a third party makes a bona fide tender or exchange offer (a "Bona Fide
Offer") to purchase a majority of the issued and outstanding shares of Common
Stock or other voting securities of the Company or to effect a merger or share
exchange or the acquisition of all or substantially all of the assets of the
Company or similar transactions involving the Company, then notwithstanding the
provisions of this Agreement, LCA shall not be prohibited by this Agreement from
making a competing offer (the "LCA Offer") to the Board of Directors of the
Company. Upon the receipt of any Bona Fide Offer, the Board of Directors shall
establish a special committee (the "Special Committee"), consisting of members
of the Board of Directors that are not members of the Board of Directors
designated by LCA. The Special Committee shall determine whether it is advisable
and in the best interest of the Company to solicit additional offers from any
other party or parties, shall retain any legal or financial advisory services
deemed necessary or advisable to assist it in its analysis of the Bona Fide
Offer, the LCA Offer and any other offers solicited from third parties by the
Company, and shall establish any procedures deemed necessary or advisable to
regulate the process pursuant to which the Company entertains and analyzes the
competing offers. The Special Committee shall analyze each such offer and shall
make a recommendation to the entire Board of Directors with respect to whether
any such offer is one that the Company should send to its shareholders. If the
Special Committee shall determine that the value of the LCA Offer is equal to or
greater than any other offer received by the Company and that the LCA Offer is
advisable and in the best interest of the Company's shareholders, then,
notwithstanding the provisions of this Agreement hereof to the contrary, LCA
shall be permitted to take any action deemed necessary or
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convenient to acquire that number of shares of Common Stock or other voting
securities of the Company as specified in the LCA Offer for the terms (including
price) set forth in the LCA Offer.
SECTION 5. VOTING BY LCA. (a) During such period as this Agreement shall
be effective, LCA and the LCA Affiliates will vote all shares of Common Stock
and other voting securities of the Company then Beneficially Owned by them for
the election to the Board of Directors of the Company any persons nominated by
the Board of Directors, including any nominee designated by LCA pursuant to
Section 1 of the Voting Agreement.
(b) During such period as this Agreement shall be effective,
in the event that (I) a third party makes a Bona Fide Offer to purchase all of
the issued and outstanding shares of Common Stock or to effect a merger, share
exchange, acquisition of all or substantially all of the assets of the Company
or similar transaction as contemplated in Section 4 hereof and the Special
Committee shall determine that the acceptance of the Bona Fide Offer is in the
best interests of the Company's shareholders and, in connection with such
acquisition, a vote of the holders of the Company's Common Stock is required by
law or by applicable requirements of The Nasdaq Stock Market, Inc. or any other
securities exchange on which shares of the Common Stock are traded, then, in
either event, LCA agrees to refrain from voting and to cause each LCA Affiliate
to refrain from voting all of their shares of Common Stock and other voting
securities of the Company at any meeting of the Company's shareholders held for
the purpose of considering such proposal (or, if an approval of shareholders is
required by reference to all shares outstanding, to vote its shares of Common
Stock and other voting securities of the Company and to cause each LCA
Affiliate to vote its shares of Common Stock and other voting securities of the
Company in favor of such proposal) provided that each of the following
conditions set forth below are satisfied at such time:
(i) the date of the shareholders meeting shall be during the
period that this Agreement is effective;
(ii) the Board of Directors shall have received the written
opinion of a nationally recognized investment banking firm selected by the
Company that the proposed transaction is fair to the Company and its
shareholders from a financial standpoint; and
(iii) the Company's shareholders (other than LCA and the LCA
Affiliates) shall have voted in favor of the proposed transaction by the vote of
a majority of the shares of Common Stock and other voting securities of the
Company voting on such matter, treating the Common Stock and other voting
securities of the Company as a single class of securities.
SECTION 6. CONFIDENTIALITY; NON-SOLICITATION.
(a) Confidentiality. LCA agrees to keep confidential all
confidential information that it or its Representatives receive from or
concerning, or in any way relating to, the Company and its subsidiaries (which
shall, for purposes of this Section 6, be collectively referred to as the
"Company), including, but not limited to information concerning or relating to
their business,
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operations, financial condition, results of operations, customers, assets,
liabilities (the "Confidential Information") and shall not use such Confidential
Information for any purpose, other than the evaluation of the continuation of
its investment in the Common Stock of the Company and with respect to the
discharge of any directorial duties by any director designated by LCA.
"Confidential Information" does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by LCA,
the LCA Affiliates or their Representatives, (ii) was within LCA's possession
prior to its being furnished to LCA, the LCA Affiliates or their Representatives
by or on behalf of the Company pursuant hereto, provided that the source of such
information was not known by LCA, the LCA Affiliates or their Representatives to
be bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company or any other party with
respect to such information or (iii) becomes available to LCA, the LCA
Affiliates or their Representatives on a non-confidential basis from a source
other than the Company or any of its Representatives, provided that such source
is not bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company or any other party with
respect to such information. Confidential Information may be disclosed to LCA or
LCA Affiliates' Representatives who need to know such information for the sole
purpose of evaluating the continuation of LCA's investment in the Common Stock
of the Company and with respect to the discharge of any directorial duties by
any director designated by LCA. In any event, LCA shall be responsible for any
breach of this agreement by any of LCA or LCA Affiliates' Representatives, and
LCA agrees to take all reasonable measures (including but not limited to court
proceedings), at its sole expense, to restrain LCA or LCA Affiliates'
Representatives from prohibited or unauthorized disclosure or use of the
Confidential Information. "Representatives" of a party shall be their directors,
officers, employees, agents or advisors (including, without limitation,
attorneys, accountants, consultants, bankers and financial advisors).
(b) Non-Solicitation of the Company's Employees. For a period of
twenty-four (24) months following the termination of a certain Co-Marketing
Agreement dated August 3, 1998 between the Company and LCA (the "Co-Marketing
Agreement") (the "Non-Solicitation Period"). neither LCA nor the LCA Affiliates
(which shall not include, for purposes of this Section 6(b), any shareholders of
LCA unless acting on behalf or for the benefit of LCA or any LCA Affiliates
other than the shareholder itself) will (i) solicit to employ or engage or (ii)
employ or engage any of the Company's employees, leased employees, agents or
other persons with a contractual relationship with the Company ("Company Covered
Persons") so long as they are providing services to the Company or within one
year following their termination of their relationship with the Company, except
for employees or leased employees providing services solely to the Company's
laboratory operations at the date of closing of the Asset Purchase Agreement
dated July 16, 1998 between the Company and LCA. Notwithstanding the foregoing,
neither LCA nor the LCA Affiliates shall be in violation of Section 6(b) with
respect to the negotiation of employment with Company Covered Persons who earn
less than $75,000 on an annualized basis for their services to the Company and
who contact LCA or LCA Affiliates solely in response to a general solicitation
by LCA or a LCA Affiliate for employees through general newspaper advertising or
a general internet posting. Neither LCA nor the LCA Affiliates shall be in
violation of Section 6(b) with respect to inadvertent violations of this Section
6(b), except that if LCA or the LCA Affiliates inadvertently hire Company
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Covered Persons who earn $75,000 or more on an annualized basis for their
services to the Company on three or more occasions, then LCA shall pay the
Company the costs actually paid (up to a maximum of 25% of the replacement
employee's (as defined below) salary for the first year of employment with the
Company) by the Company for the services of a headhunter to replace each Company
Covered Person thereafter inadvertently hired by LCA or a LCA Affiliate. For
purposes hereof, inadvertent violations shall include situations where an
employee of LCA or a LCA Affiliate hires a Company Covered Person without
realizing that such person is a Company Covered Person. If a replacement
employee is hired by the Company to perform assignments beyond those covered by
the scope of the employment of the Company Covered Person he or she replaces,
then the fee due to the headhunter shall not exceed 25% of the annual salary
paid by the Company to the Company Covered Person hired by LCA or a LCA
Affiliate. Such payments by LCA shall be due and payable within 30 days after
submission to LCA of reasonably detailed documents, including, but not limited
to, the headhunter's contract and invoice, proof of payment and the replacement
employee's employment agreement with the Company or, in the absence thereof, a
reasonably detailed description of his or her compensation and duties. A
"replacement employee" shall be any employee hired to replace an employee
inadvertently hired by the other party to this Agreement or their Affiliates.
(c) Non-Solicitation of LCA's Employees. During the Non-Solicitation
Period, neither the Company nor an Affiliate of the Company (the "Company
Affiliate") (which shall not include, for purposes of this Section 6(c), any
shareholders of the Company, unless acting on behalf of or for the benefit of
the Company or any Company Affiliate other than the shareholder itself) will (i)
solicit to employ or engage or (ii) employ or engage any of the LCA or its
subsidiaries' (which shall for purposes of this Section 6(c), be collectively
referred to as the "LCA Group") employees, leased employees, agents or other
persons with a contractual relationship with the LCA Group ("LCA Covered
Persons") so long as they are providing services to the LCA Group or within one
year following their termination of their relationship with the LCA Group.
Notwithstanding the foregoing, neither the Company nor the Company Affiliates
shall be in violation of Section 6(c) with respect to the negotiation of
employment with LCA Covered Persons who earn less than $75,000 on an annualized
basis for their services to LCA and who contact the Company or Company
Affiliates solely in response to a general solicitation by the Company or a
Company Affiliate for employees through general newspaper advertising or a
general internet posting. Neither the Company nor a Company Affiliates shall be
in violation of Section 6(c) with respect to inadvertent violations of this
Section 6(c), except that if the Company or the Company Affiliates inadvertently
hire LCA Covered Persons who earn $75,000 or more on an annualized basis for
their services to LCA or the LCA Affiliates on three or more occasions, then the
Company shall pay LCA the costs actually paid (up to a maximum of 25% of the
replacement employee's salary for the first year of employment with LCA) by LCA
for the services of a headhunter to replace each LCA Covered Person thereafter
inadvertently hired by the Company or a Company Affiliate. For purposes hereof,
inadvertent violations shall include situations where an employee of the Company
or a Company Affiliate hires a LCA Covered Person without realizing that such
person is a LCA Covered Person. If a replacement employee is hired by LCA to
perform assignments beyond those covered by the scope of the employment of the
LCA Covered Person he or she replaces, then the fee due to the
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headhunter shall not exceed 25% of the annual salary paid by LCA to the LCA
Covered Person hired by the Company or a Company Affiliate. Such payments by the
Company shall be due and payable within 30 days after submission to the Company
of reasonably detailed documents, including, but not limited to, the
headhunter's contract and invoice, proof of payment and the replacement
employee's employment agreement with LCA or, in the absence thereof, a
reasonably detailed description of his or her compensation and duties.
(d) Both LCA and the Company shall use their reasonable best efforts
to notify their employees responsible for hiring of the provisions of this
Section 6.
SECTION 7. STOCK LEGEND. The stock certificates evidencing ownership of
the shares of Common Stock acquired by LCA under the Stock Purchase Agreement
will bear substantially the following legend:
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFER
CONTAINED IN THAT CERTAIN SHAREHOLDERS' AGREEMENT BETWEEN LABORATORY
CORPORATION OF AMERICA HOLDINGS AND THE COMPANY, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
ATTEMPTED TRANSFER OF THE SECURITIES IN VIOLATION OF THE PROVISIONS
OF THE SHAREHOLDERS' AGREEMENT SHALL BE VOID AB INITIO AND SHALL NOT BE
RECOGNIZED BY THE COMPANY.
Whenever any shares cease to be subject to this Agreement and are not
otherwise restricted securities, the holder thereof shall be entitled to receive
from the Company, without expense, upon surrender to the Company of the
certificate representing such shares, a new certificate representing such
shares, of like tenor but without a legend of the character set forth above.
SECTION 8. MISCELLANEOUS.
8.1 Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile and by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed: (x) if to the Company, at
the Company's principal business address at 26500 Northwestern Highway,
Southfield, Michigan 48076 or if to LCA, at the address of LCA listed in the
stock records of the Company, or (z) to such other address as any party shall
specify by written notice so given, and such notice shall be deemed to have been
delivered as of the date so telecommunicated, personally delivered or if mailed,
the date of receipt.
8.2 Assignment, Binding Effect; Benefit. Unless expressly provided in this
Agreement, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
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<PAGE> 7
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
8.3 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
8.4 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
8.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, without regard to its rules
of conflict of laws.
8.6 Headings. Headings of the sections of this Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
8.7 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.8 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.9 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.10 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity. In connection with any litigation
brought to enforce any provision of this
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<PAGE> 8
Agreement, the prevailing party shall be entitled to recover its reasonable
attorney's fees and costs incurred at the trial and appellate levels.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
UNIVERSAL STANDARD HEALTHCARE, INC.
By: Eugene E. Jennings
------------------------------
Its: President
------------------------------
LABORATORY CORPORATION OF
AMERICA HOLDINGS
By: Bradford T. Smith
-------------------------------
Its: E. V. President
------------------------------
8
<PAGE> 1
EXHIBIT 99.4
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement"), dated as of August 3, 1998, is
by and among Universal Standard Healthcare, Inc., a Michigan corporation (the
"Company"), Laboratory Corporation of America Holdings, a Delaware corporation
("LCA"), Anixter International, Inc., a _______ corporation ("Anixter"), Signal
Capital Corporation, a Delaware corporation ("Signal"), Portfolio Investment
Company Limited, a Cayman Islands corporation ("PICL"), CLF, Ltd., a Cayman
Islands corporation ("CLF I"), and CLF, L.P., a Cayman Islands corporation ("CLF
II") (Anixter, Signal, PICL, CLF I and CLF II shall collectively be referred to
herein as the "Shareholders").
WHEREAS, Section 5 of the Stock Purchase Agreement dated July 16, 1998
between the Company and LCA (the "Stock Purchase Agreement") provides that the
Company, LCA and the Shareholders execute and deliver this Agreement as a
condition precedent to the effectiveness of the Stock Purchase Agreement.
WHEREAS, Sections VI and VII of the Purchase Agreement dated July 16,
1998 between the Company and LCA (the "Purchase Agreement") provides that the
Company, LCA and the Shareholders execute and deliver this Agreement as a
condition precedent to the effectiveness of the Purchase Agreement.
WHEREAS, each of the Shareholders own the number of shares of capital
stock of the Company, representing the percentages of ownership of all
outstanding stock of the Company, all as shown on Exhibit 1 attached hereto.
NOW, THEREFORE, in consideration of promises and mutual covenants and
agreements, set forth herein, and to induce LCA to enter into the Stock Purchase
Agreement and the Purchase Agreement, the parties agree as follows:
Section 1. Board Nominations. (a) So long as the Company's Articles of
Incorporation provide for the staggered election of the members of the Company's
Board of Directors, including three year terms of office for directors, (a
"Staggered Board"), in the election of directors of the Company to be held in
2001 and every three years thereafter during the term of this Agreement (each a
"LCA Nominee Election Year"), each of the Shareholders agrees to vote all shares
of Common Stock of the Company (the "Common Stock") and any and all other voting
securities of the Company ("Other Voting Securities") (collectively, the Common
Stock and the Other Voting Securities shall be referred to as the "Voting
Securities") then held by such Shareholder for, and to take all other necessary
action to cause, the election as a director of the Company one nominee to be
designated by LCA for that purpose (the "LCA Director").
(b) In the event that the Company's Articles of Incorporation
shall no longer provide for a Staggered Board, then, in each election of
directors of the Company during the term of this Agreement, each of the
Shareholders agrees to vote all shares of Voting Securities then held by them
for, and take all other necessary action to cause, the election of the LCA
Director as a director of the Company.
<PAGE> 2
(c) The Company shall deliver a written request to LCA (the
"Nomination Request") that LCA designate its LCA Director in writing no earlier
than 90 days prior to and no later than 60 days prior to the scheduled date for
the Company's annual or special meeting of shareholders to elect directors. LCA
shall notify the Company of the identity of the LCA Director no later than 10
days after LCA's receipt of the Nomination Request. The Company shall notify LCA
of the identity of each director nominee designated by any of the other
Shareholders no later than 10 days after the Company's receipt of any
designation. The Company shall notify each of the other Shareholders and LCA of
the identity of the LCA Director no later than 10 days after the Company's
receipt of such designation from LCA.
(d) If LCA fails to designate the LCA Director as provided in
(c) above, it shall be deemed that the LCA Director then serving as a director
of the Company shall be its LCA Director designee for election at the next
meeting of shareholders of the Company at which an LCA Director is so required
to be elected.
(e) Each of the Shareholders agrees to vote all shares of
Voting Securities then held by such Shareholder to remove the LCA Director upon
the request at any time of LCA by written notice to the Company and the
Shareholders; provided that LCA shall simultaneously therewith designate a
successor to fill the vacancy on the Board of Directors so created. Each of the
Shareholders agrees to vote all shares of Voting Securities then held by such
Shareholder for the election of such successor designated by LCA as a director
of the Company.
(f) Promptly following the termination of the provisions of
Section 1 of this Agreement, LCA shall use its reasonable efforts to cause the
LCA Director then in office to resign as a member of the Board of Directors of
the Company.
Section 2. Approval of LCA Transaction. Each of the Shareholders agrees
to vote all shares of Voting Securities then held by them in favor of the sale
by the Company to LCA of certain assets of the Company, as set forth in the
Purchase Agreement, (the "LCA Transaction") if the approval of the shareholders
of the Company is required to consummate such sale, provided that the
Shareholders shall not be required to vote their shares of Voting Securities in
favor of the LCA Transaction if, prior to the Closing on the Purchase Agreement,
the Board of Directors of the Company, after receiving a Superior Proposal (as
defined the Purchase Agreement), withdraws or modifies its approval or
recommendation of the Purchase Agreement, approves or recommends such Superior
Proposal, enters into an agreement with respect to such Superior Proposal and/or
terminates the Purchase Agreement, all as provided in Section XII.C of the
Purchase Agreement.
Section 3. Termination. The provisions of Section 1 of this Agreement
shall terminate (i) in the event that the aggregate number of shares of Voting
Securities beneficially owned ("Beneficially Owned") by LCA shall be less than
five (5%) percent of the outstanding shares of Voting Securities, calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and (ii) after an assignment by LCA of its rights under this
Agreement as permitted by Section 4(b), as to any LCA Shareholder (as defined
below) in the event that the number of shares of Voting Securities Beneficially
Owned by such person shall be less than
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<PAGE> 3
five (5%) percent of the outstanding Voting Securities. The remainder of this
Agreement shall cease as to any Shareholder when it ceases to own any Voting
Securities.
Section 4. Miscellaneous.
(a) Notices. Any notice required to be given hereunder shall
be sufficient if in writing, and sent by facsimile and by courier service (with
proof of service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed: (x) if to the Company, at
the Company's principal business address at 26500 Northwestern Highway,
Southfield, Michigan 48076, Attention: President, (y) or, if to LCA or one of
the Shareholders, at the address of LCA or such shareholder listed in the stock
records of the Company, provided, however, with respect to LCA the address
thereto shall also state "ATTN: PRESIDENT, Special Notice From Universal
Standard Healthcare, Inc. Enclosed) or (z) to such other address as any party
shall specify by written notice so given, and such notice shall be deemed to
have been delivered as of the date so telecommunicated, personally delivered or
if mailed, the date of receipt.
(b) Assignment, Binding Effect; Benefit. Unless expressly
provided in this Agreement, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided that this Agreement shall not
be binding on any person to whom a Shareholder shall transfer any shares of
Voting Securities then held by the Shareholder, unless such person is an
affiliate of the Shareholder (as defined under Rule 12b-2 of the 1934 Act). In
that case, this Agreement shall be binding upon and shall inure to the benefit
of such transferee. No Shareholder may transfer shares of Voting Securities to
an affiliate unless the affiliate agrees in writing to be bound by the terms of
this Agreement. Notwithstanding the foregoing, in the event that (i) the Company
has defaulted on or breached any of its obligations under the Stock Purchase
Agreement or Section 10 of that certain Co-Marketing Agreement dated August 3,
1998 between the Company and LCA or (ii) any of the Company's representations or
warranties under the Stock Purchase Agreement were inaccurate or untrue in any
material respect at the time or times made, LCA shall have the right to assign,
without the consent of the Shareholders, any and all of its rights hereunder to
any Qualified Person to whom LCA shall transfer its shares of Common Stock;
provided that such transferee agrees in writing to be bound by the terms of this
Agreement. A "Qualified Person" is any person who is not in competition with the
Company and who is a bank, financial institution, insurance company, business
and industrial development corporation, registered investment company, entity
regularly engaged in the business of lending or investing money or an entity
constituting an Accredited Investor as defined in Rule 501(a)(1), (2) (3) of the
General Rules and Regulations under the Securities Act of 1933, as amended. In
the event that LCA shall assign any of its rights hereunder to one or more
Qualified Person, then all references to LCA contained herein shall be to LCA
and such Qualified Persons (the "LCA Shareholders") and all actions required or
permitted to be taken by LCA under this Agreement shall be taken upon the
written direction of LCA Shareholders holding at least a majority of all shares
of Common Stock held by the LCA Shareholders.
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<PAGE> 4
(c) Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
(d) Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan, without regard
to its rules of conflict of laws.
(f) Headings. Headings of the sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(g) Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
(h) Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
(i) Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
(j) Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that any party shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity. In connection
with any litigation brought to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
costs incurred at the trial and appellate levels.
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<PAGE> 5
(k) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(l) Voting Securities. Each of the Shareholders agrees that
this Agreement shall apply to all Voting Securities held by it, including any
Voting Securities acquired after the date of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be delivered on their behalf on the day and year first written
above.
UNIVERSAL STANDARD HEALTHCARE, INC.
By: /s/ Alan S. Ker
----------------------------------
Its: CFO
---------------------------------
LABORATORY CORPORATION OF AMERICA
HOLDINGS
By: Bradford T. Smith
----------------------------------
Its: E.V.P.
---------------------------------
ANIXTER INTERNATIONAL, INC.
By: /s/ Rod Dammeyer
----------------------------------
Its:
---------------------------------
SIGNAL CAPITAL CORPORATION
By: /s/ Thomas W. Gorman
----------------------------------
Its: Sr. Investment Manager
---------------------------------
PORTFOLIO INVESTMENT COMPANY LIMITED
By: /s/ Joseph J. Vadapalas
----------------------------------
Its: Authorized Signatory
---------------------------------
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<PAGE> 6
CLF, LTD
By: /s/ Joseph J. Vadapalas
----------------------------------
Its: Authorized Signatory
---------------------------------
CLF, L.P.
By: /s/ Joseph J. Vadapalas
----------------------------------
Its: Authorized Signatory
---------------------------------
6
<PAGE> 7
VOTING AGREEMENT
Exhibit 1
SHARES OF CAPITAL STOCK OWNED BY THE SHAREHOLDERS
Shareholder Shares Owned* Percentage Ownership*
- ----------- ------------- ---------------------
Anixter 190,000 2.2
CLF LTD 45,710 0.5
CLF, L.P. 173,465 2.0
LCA 1,416,667 16.7
PICL 2,178,223 25.7
Signal 584,899 6.9
* Shares owned and percentage ownership are calculated as of the Closing
Date, assuming that 8,490,200 shares are issued and outstanding
including the 1,416,667 shares to be issued to LCA on the Closing Date
of the Stock Purchase Agreement.
<PAGE> 1
EXHIBIT 99.5
LABORATORY SERVICES AGREEMENT
This Agreement is made and entered into as of the 3rd day of August, 1998,
by and between Universal Standard Healthcare of Michigan, Inc., a Michigan
corporation, located at 26500 Northwestern Highway, Southfield, Michigan
("Universal"), and Laboratory Corporation of America Holdings, a Delaware
corporation, located at 358 South Main Street, Burlington, North Carolina
("LabCorp").
RECITALS
A. Universal operates a licensed Alternative Healthcare Financing
Delivery System which offers managed care programs to employers, employer
groups and health plans for the delivery of clinical laboratory, home medical
and diagnostic imaging services;
B. LabCorp owns and operates a clinical laboratory business with
operations and facilities across the United States; and
C. Universal wishes to contract with LabCorp to provide clinical
laboratory services to individuals who are eligible for clinical laboratory
services through their benefit plans;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, Universal and LabCorp agree as follows:
TERMS
1. Definitions.
1.1 "Covered Services" means those clinical laboratory benefits
established by a Group and reviewed by LabCorp prior to execution of the Group
Agreement, including without limitation, any relevant certificates, riders and
other benefit documents.
1.2 "Group" means an employer, group of employers or health plan
which has a contract with Universal to provide clinical laboratory services to
Members, except General Motors Corporation.
1.3 "Group Contract" means the contract between Universal and the
Group.
1.4 "Member" means a person who, on the date the service was
performed, is entitled by the Group Contract to receive Covered Services. Member
shall include subscribers,
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enrollees and covered persons and, where applicable under the Group contract,
spouses and dependents.
1.5 "Non-Covered Services" means all services which are not Covered
Services.
1.6 "STAT" testing means tests performed within four hours from the
time LabCorp or the reference laboratory receives the specimen. STAT tests shall
include, without limitation, Sodium, Potassium, Chloride, CO2, Glucose, BUN,
Creatinine, Calcium, or a combination of these parameters (i.e., Chem 7, Chem
5), CBC, PT, PTT, Urinalysis, Amylase, HCG (Qualitative). and other tests
required for STAT testing by the Group and agreed to by Universal and LabCorp
working in good faith together.
2. Notice of Group Contract. Universal agrees that it will provide
notice to LabCorp of any contract term or condition in a Group Contract that
is materially different than Universal's standard managed care contract terms
prior to submission of a proposal to a Group or execution of a Group Contract
(where no proposal is required). A Group Contract that includes any of the
following shall be considered to be materially different than Universal's
standard contract: a provision for Member co-payments and deductibles, a
provision that prohibits a provider from billing for Non-Covered Services, a
provision permitting the Group to audit for a period longer than two (2) years
following termination of the Group Contract, a contract that does not permit
without cause termination or contains a without cause termination with a notice
period greater than one hundred and eighty (180) days or a provision imposing
service requirements or policies and procedures outside the ordinary course of
clinical laboratory business. Universal also agrees to give LabCorp thirty (30)
days' prior written notice if the Group Contract requires that LabCorp be a
provider for the Group.
In the event that LabCorp does not agree to any materially different
term or condition required by a Group, Universal agrees to work with LabCorp
to negotiate more favorable terms with the Group. If such negotiations do not
result in more favorable terms acceptable to Universal and LabCorp, LabCorp
shall be able to choose not to perform services for that Group or to terminate
its services as set forth in Section 6 of this Agreement with respect to that
Group. LabCorp shall not be able to prevent Universal from executing a Group
Contract with such Group and contracting with another clinical laboratory or
establishing its own laboratory to provide services to that Group. If Universal
is unable to locate another provider that is willing to accept a contract with
the terms rejected by LabCorp, Universal agrees to offer any modified or
amended terms first to LabCorp before offering such modifications or amendments
to another provider.
3. Provision of Services.
LabCorp shall provide Covered Services to Members as reasonably
required by Universal, including without limitation, the following services.
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<PAGE> 3
3.1 LabCorp shall pick-up specimens collected from Members from
physicians' offices, clinics, drawing stations, hospitals, nursing homes and
other locations and transport such specimens to LabCorp facilities for testing.
3.2 LabCorp shall establish and maintain drawing stations with at
least one phlebotomist at a sufficient number of locations to ensure access by
Members to clinical laboratory services within a reasonable time and distance,
which sufficiency shall be determined by Universal and LabCorp working in good
faith to meet Group requirements. The drawing stations shall identify Universal
in a prominent manner as mutually agreed upon from time to time.
3.3 LabCorp shall perform clinical laboratory testing ordered for
Members in a manner consistent with professional standards of care.
3.4 LabCorp will make STAT testing services available as appropriate
based on laboratory industry standards. LabCorp will provide STAT testing
services for Members at LabCorp's facilities, to the extent such service is
currently available, or through reasonably available reference laboratories,
acceptable to Universal. The use of STAT testing will be monitored by LabCorp
and Universal to determine whether STAT tests are being inappropriately ordered
and whether physician education is required.
3.5 LabCorp shall make every reasonable effort to report all test
results to the physician or other health care provider who ordered the test
within a time period consistent with clinical laboratory industry standards
using a report form or methodology acceptable to Universal unless the test
ordered inherently requires a longer time for completion.
3.6 LabCorp agrees to perform Covered Services for Members in the
same manner and with the same quality and level of proficiency as LabCorp
affords its other patients and customers, without regard to Members' or ordering
physicians' age, sex, race, creed, national origin, or income level.
3.7 In providing services pursuant to this Agreement, LabCorp shall
comply with all Universal programs, policies and protocols required by the Group
or applicable law.
4. Qualifications and Performance Standards.
4.1 LabCorp shall at all times during the term of this Agreement
maintain all licenses and certifications required by federal, state or relevant
local law or by any third party payor to conduct a clinical laboratory business
at each laboratory facility, including without limitation, certification under
the Clinical Laboratory Improvement Amendments of 1988, as amended. LabCorp
shall also maintain accreditation by the College of American Pathologists.
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<PAGE> 4
4.2 LabCorp shall comply with all applicable professional and
ethical standards consistent with clinical laboratory industry practice and with
all Universal utilization guidelines and quality assurance standards required by
the Group or applicable law.
4.3 LabCorp shall maintain a level of proficiency on applicable
proficiency tests that is required to maintain licensure applicable to each of
the laboratory specialties for which it is licensed to perform clinical
laboratory tests. LabCorp shall provide Universal with evidence of compliance
with this standard upon Universal's reasonable request.
5. Billing and Payment.
5.1 LabCorp agrees to charge and Universal agrees to pay for all
Covered Services in the manner and at the rates set forth on Exhibit A attached
hereto and incorporated herein.
5.2 LabCorp shall submit claims to Universal in a form acceptable to
Universal which, at a minimum, identifies the ordering physician and LabCorp
location by name and appropriate Universal identifier (as supplied by Universal
in a timely manner) and includes any other information reasonably required by
Universal and other applicable payors.
5.3 Universal shall provide LabCorp with information and data
relating to eligibility of Members upon its receipt of such information and data
from the Group. Universal will use its reasonable efforts to negotiate a
requirement with each Group that the Group provide useable eligibility
information and data at least monthly.
5.4 LabCorp agrees to file claims for Covered Services within one
hundred and eighty (180) days of the date the service was rendered.
5.5 Universal agrees to pay LabCorp within sixty (60) days of
Universal's receipt of a manual claim and within thirty (30) days of Universal's
receipt of an electronic claim.
5.6 Universal shall notify LabCorp in writing of material changes in
Covered Services, in any policies, procedures, programs, protocols, quality
assurance programs, utilization review guidelines or other materials, which
Universal reasonably believes will affect LabCorp, within thirty (30) days of
Universal's knowledge of such change. Universal agrees to work with LabCorp and
with the Group to minimize the effect of such change on both parties. Universal
agrees to review all existing contracts between Universal and LabCorp, notify
LabCorp of any materially different provisions in such contracts (as defined in
Section 2 hereof) and work with LabCorp to make changes in such contracts where
feasible.
5.7 Upon request by Universal, LabCorp shall make reasonable effort
to assist Universal in coordinating benefits by obtaining from Members specific
information regarding third party liability.
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<PAGE> 5
5.8 LabCorp agrees to hold Members harmless from the payment for any
Covered Services provided pursuant to this Agreement, except that LabCorp may
bill Members for co-insurance and deductible amounts if permitted by the Group
and may bill Members for clinical laboratory services which are not Covered
Services.
6. Preferred Provider.
6.1 Universal shall use LabCorp as its sole provider for its
clinical laboratory managed care business except as provided in Section 6.2.
6.2 LabCorp shall have the right to choose not to be a provider
under any Group Contract, prior to submission by Universal of a proposal to a
Group or prior to execution of the Group Contract (where no proposal is
required), as set forth in Section 2 of this Agreement, or following execution
of the Group Contract as set forth in Section 6 of this Agreement. Universal
shall have the right to arrange to have clinical laboratory services provided by
another clinical laboratory or may establish its own clinical laboratory in any
of the following circumstances:
(i) There is a need for clinical laboratory services to be
provided to a Member in a geographic area in which
LabCorp does not have appropriate facilities or the
ability to perform the services required under this
Agreement. In such areas, Universal agrees that, prior
to contracting with another clinical laboratory or
establishing its own laboratory operation, it shall
first give LabCorp the opportunity to establish an
appropriate clinical laboratory operation in the area.
LabCorp shall have thirty (30) days from its receipt of
written notice by Universal to decide whether it will
initiate clinical laboratory services in the area and
shall have a reasonable period of time, as determined on
a case by case basis, to establish such services;
(ii) During the interim period while LabCorp is establishing
or expanding its operations in a particular area or is
making its determination whether to establish an
operation as described in subparagraph (i) above;
(iii) LabCorp chooses not to establish clinical laboratory
operations in the geographic area;
(iv) The Group requires multiple laboratory providers or a
laboratory provider other than LabCorp;
(v) Universal has a written or oral contract in effect as of
the date hereof with another clinical laboratory;
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<PAGE> 6
(vi) LabCorp chooses not to be a provider for a particular
Group pursuant to Section 2 hereof; or
(vii) If LabCorp elects not to provide services for a Group as
provided in Section 6.4 hereof, Universal will have the
right to contract with other clinical laboratories or
establish its own laboratory to provide services to such
Group.
6.3 Universal agrees to work with existing and new Groups to
encourage selection of LabCorp as the provider of choice for clinical
laboratory services. Universal agrees to use its best efforts to enter into
contracts with LabCorp for those employer groups, including General Motors
Corporation, not subject to this Agreement.
6.4 In the event that LabCorp is unable to collect payment from
Members of a particular Group for Non-Covered Services and co-payments and
deductibles following good faith attempts by LabCorp to collect such amounts
following procedures consistent with clinical laboratory industry standards and
LabCorp's collection practices and such non-payment reaches a level which is
material in relation to the revenues generated by LabCorp for services provided
to Members of that Group pursuant to this Agreement, LabCorp shall provide
evidence to Universal of such impact. Universal shall, in cooperation with
LabCorp, meet with the Group involved to attempt to remedy the non-payment
issue. In the event such negotiations with Group do not result in a remedy
within ninety (90) days or such remedy is not reasonably acceptable to LabCorp,
it may terminate the provision of services to such Group by giving Universal at
least one hundred and eighty (180) days' written notice of its intent to
terminate; provided, however, that LabCorp shall not have the option to
terminate the provision of services to such Group if such termination would
violate the terms of the contract between the Group and Universal. Universal
agrees that if it is unable to negotiate more favorable terms with another
laboratory provider, Universal shall give LabCorp the option to continue
providing services under this Agreement on at least as favorable terms as
Universal can obtain from another provider. Universal further agrees that during
the one hundred and eighty (180) day notice period it shall pay LabCorp an
amount equal to 50% of any co-payments and deductibles and amounts owed for
Non-Covered Services that LabCorp is unable to collect from Members after good
faith effort.
In the event that LabCorp experiences a material loss under a
specific Group Contract, LabCorp shall provide evidence of such material loss to
Universal. Universal agrees to work with LabCorp for a period of ninety (90)
days in an attempt to negotiate terms with the Group to remedy the problems
experienced by LabCorp. In the event such negotiations do not result in a remedy
reasonably acceptable to Universal and LabCorp within such ninety (90) day
period, Universal may approach alternative providers to provide services
required under the Group Contract. In addition, LabCorp may, at any time during
the ninety (90) day negotiation period, inform Universal that Universal should
begin seeking alternative providers for the particular Group Contract. Universal
shall have one hundred and eighty (180) days from the date it receives notice to
seek alternative providers to locate such alternative providers. LabCorp may
assist Universal by locating an
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<PAGE> 7
alternative provider acceptable to Universal. If Universal is unable to contract
with alternative providers by the end of such one hundred and eighty (180) day
period, Universal will exercise its right to terminate the Contract under any
without cause termination provision in the Group Contract unless such
termination would (i) result in an early termination penalty or (ii) be or cause
a breach of the Group Contract. For purposes of this Section 6.4, the term
"material loss" shall mean net loss.
7. Records and Access
7.1 LabCorp shall maintain all records in writing and shall comply
with any governmental standards, generally accepted business and professional
standards, and with standards set forth in this Agreement.
7.2 LabCorp shall permit Universal, Group and representatives of
federal and state government agencies with access to LabCorp's premises to
inspect equipment, supplies, and space used to provide Covered Services and to
audit the records of Members as permitted by law. LabCorp will also allow audit
of LabCorp's financial records relating to the services provided by LabCorp
pursuant to this Agreement. Universal agrees to use its best efforts to conduct
such audits with reasonable notice to LabCorp and during LabCorp's business
hours.
7.3 LabCorp agrees to cooperate with audits required under this
Agreement. Any such audit or inspection by Universal and Group will be conducted
only with reasonable written notice to LabCorp. Universal shall use its best
efforts to notify LabCorp immediately following Universal's receipt of a notice
by a government agency or authority of a pending audit or inspection.
7.4 LabCorp agrees that Universal may conduct audits at any time
during this Agreement and following the termination of this Agreement for a
period of two (2) years (the "Audit Period"). The Audit Period may be extended
beyond the two (2) years if required by a Group and provided that Universal
notifies LabCorp of such Group requirement. The Universal agrees to conduct the
audit utilizing standard business practices, including without limitation, a
statistical sampling methodology and to comply with all laws relating to patient
confidentiality. The audit may include LabCorp's claim payment records and any
related financial records for any Universal programs, review of certification,
accreditation, license, ownership records, claims payment records, referral
records, equipment, requisitions and Member results, quality control records,
and qualifications of personnel. LabCorp agrees that Universal may make copies
of any documents and other materials of LabCorp related to the services provided
pursuant to this Agreement as permitted by law.
7.5 Universal agrees that LabCorp may conduct audits of Universal at
any time during this Agreement and following the termination of this Agreement
for a period of two (2) years (the "Audit Period"). The Audit Period may be
extended beyond the two (2) years if required by a Group. LabCorp agrees that
the audit shall be limited only to information and records directly related to
this Agreement. The Universal agrees to use its best efforts to conduct such
audits with reasonable notice to Universal and during Universal's business hours
and to conduct such audits in
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<PAGE> 8
compliance with laws relating to patient confidentiality. Universal agrees that
LabCorp may make copies of any documents and other materials of Universal
related to the services provided pursuant to this Agreement as permitted by law.
8. Term and Termination.
8.1 Term. The term of this Agreement is August 3, 1998 through
August 3, 2003.
8.2 Termination. This Agreement may be terminated:
8.2.1 At any time by mutual agreement of the parties;
8.2.2 By the non-breaching party upon material breach by the
other party that is not cured within thirty (30) days of written notice of the
breach; or
8.3 Universal may recover amounts wrongfully paid for services
which did not comply with this Agreement, or with Group requirements of which
LabCorp has knowledge at the time of billing, for a period of sixty (60) days
following the Audit Period. Notwithstanding any provision of this Agreement,
Universal's right to recover for any wrongfully paid amounts shall not be
limited by termination of this Agreement for any reason.
8.4 In the event of termination for any reason, LabCorp agrees to
complete any services which are in progress for Members and Universal agrees to
pay for all appropriate claims submitted by LabCorp for laboratory services
provided prior to termination or after termination pursuant to this Section 8.4.
9. Utilization Review. LabCorp agrees to participate in and comply
with all utilization guidelines of Universal required by a Group or applicable
law.
10. Insurance. LabCorp shall maintain professional liability and
comprehensive general liability insurance coverage through a commercial
insurance company or a self-insurance program acceptable to Universal in amounts
which are typical of similar businesses. LabCorp shall provide evidence of such
insurance coverage to Universal upon request and shall notify Universal in
writing at least thirty (30) days prior to any material revocation or
modification in such coverage and immediately in the event of cancellation of
such coverage.
11. Notification.
11.1 LabCorp agrees to notify Universal within thirty (30) days of
receipt by LabCorp of any court opinions, settlements, or changes in LabCorp's
business that may affect its performance or delivery of health care pursuant to
this Agreement, and as soon as possible, of any changes in LabCorp's name,
ownership, corporate structure, tax identification number, address,
certification, accreditation, license(s), specialty/sub-specialty areas, drawing
stations, courier service,
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<PAGE> 9
hours of operation, and information relating to any purchase by LabCorp of
another clinical laboratory.
11.2 LabCorp acknowledges and agrees that Universal may use the
above information for any purpose permitted under this Agreement.
11.3 LabCorp will make reasonable effort to notify Universal at
least thirty (30) days prior to closure of any LabCorp facility or operation,
including drawing stations.
12. Indemnification. Each party hereby agrees to defend, indemnify and
hold harmless the other party against any and all damages, liabilities, actions,
obligations, expenses and costs, including court costs and attorney fees,
arising out of or resulting from the actions or services provided by the
indemnifying party pursuant to this Agreement.
13. Confidentiality. Universal and LabCorp agree to treat any
information provided to the other as confidential and/or proprietary and agree
not to use or disclose such information except as permitted under this
Agreement, as required by law, or upon written consent of the other party.
14. Publicity. Universal agrees that LabCorp may use the Universal name
and the Program name to identify LabCorp as a laboratory provider. LabCorp may
not otherwise use Universal's name, likeness, symbols, and/or trade or service
marks without prior written consent of Universal. LabCorp agrees that Universal
may use LabCorp's identifying information in any directory, advertising, and/or
other promotional materials related to this Agreement. Each party agrees that it
will, upon written notice, immediately cease to use any material referring to
the other party and, upon termination of this Agreement, will cease all
identification with the other party in relation to the Program.
15. Miscellaneous.
15.1 Entire Agreement. This Agreement and any exhibits and
attachments hereto constitute the entire agreement between the parties regarding
the subject matter of this Agreement and supersede any prior agreements between
the parties, whether written or oral.
15.2 Assignment. This Agreement may not be assigned by either party
without prior written consent of the other party.
15.3 Amendment and Waiver. This Agreement may be amended only upon
written consent of both parties. Failure by either party to enforce any
provision of this Agreement shall not be considered a waiver of any other
provision or any subsequent breach.
15.4 Governing Law. This Agreement shall be governed by the laws
of the State of Michigan.
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<PAGE> 10
15.5 Notice. To be considered notice, written communication must be
made to:
LabCorp: Laboratory Corporation of America Holdings
P.O. Box 2289
Columbus, Ohio 43216
Attn: James R. Mott
And: Laboratory Corporation of America Holdings
358 South Main Street
Burlington, North Carolina 27215
Attn: Legal Department
And: John R. Erwin, Esq.
Mezzullo & McCandlish
4300 Six Forks Road, Suite 825
Raleigh, North Carolina 27609-5734
Universal: Eugene Jennings
Universal Standard Healthcare of Michigan, Inc.
26500 Northwestern Highway
P.O. Box 5127
Southfield, Michigan 48086-5127
15.6 Damages. No party shall be entitled to any damages with respect
to lost profits or other consequential damages or punitive damages with respect
to the breach by any other party under this Agreement provided that, to the
extent recoverable under applicable law, all costs and expenses incurred by
Universal as a result of LabCorp's breach of this Agreement, including any costs
and expenses payable to any Group as a result of such breach, or incurred by
Universal in connection with the termination of the related Group Contract as a
result of such breach, shall constitute direct, not consequential, damages.
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<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
stated above.
UNIVERSAL STANDARD HEALTHCARE LABORATORY CORPORATION OF
OF MICHIGAN, INC. AMERICA HOLDINGS
By: /s/ Eugene E. Jennings By: /s/ Bradford T. Smith
------------------------- ------------------------
Name: Eugene E. Jennings Name: Bradford T. Smith
Title: President Title: E.V. President
11
<PAGE> 12
EXHIBIT A
FEE SCHEDULE*
* Exhibit A is being filed separately with the Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 governing requests for
confidential information.
<PAGE> 1
EXHIBIT 99.6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), dated as of August 3, 1998,
is by and among Universal Standard Healthcare, Inc., a Michigan corporation
("Universal") and Universal Standard Healthcare of Delaware, Inc. ("Universal of
Delaware") (Universal and Universal of Delaware are referred to collectively
hereinafter as the "Debtor"), and Laboratory Corporation of America Holdings, a
Delaware corporation ("LCA" and the "Holder of the Obligation").
WHEREAS, Universal owns all the issued and outstanding capital stock of
Universal of Delaware.
WHEREAS, Universal and LCA are parties to a certain Co-Marketing
Agreement, dated August 3, 1998 (the "Co-Marketing Agreement"), pursuant to
which LCA will provide marketing services to Universal and Universal of Delaware
and its subsidiaries;
WHEREAS, Universal has agreed to pay LCA a termination fee under
certain circumstances set forth in Section 10 of the Co-Marketing Agreement (the
"Co-Marketing Agreement Termination Fee");
WHEREAS, it is a condition precedent to LCA entering into such
Co-Marketing Agreement and a certain Stock Purchase Agreement dated July 16,
1998 between Universal and LCA (the "Stock Purchase Agreement") that this
Agreement be entered into; and
WHEREAS, LCA has agreed to subordinate its right to payment of the
Co-Marketing Termination Fee to certain indebtedness of the Debtor and to
subordinate its security interest in certain assets of the Debtor granted by
this Agreement to the security interest held by certain of the Debtor's lenders.
NOW, THEREFORE, in consideration of promises and mutual covenants and
agreements, set forth herein, the parties agree as follows:
1. Grant of Security Interest. The Debtor hereby grants to LCA a lien
and security interest in all of Debtor's now owned, and hereafter acquired, real
and personal property, including but not limited to: all goods, equipment,
vehicles, fixtures, inventory, documents, certificated securities, including,
but not limited to the capital stock of Universal of Delaware, investment
property, general intangibles (including all federal and state tax refunds,
royalty payments such as under patent, trademark or other licensing
arrangements, patents, trademarks and copyrights, proceeds of condemnation,
awards, proceeds of judgments and proceeds of fire and other property insurance,
such as business interruption insurance, all causes of action (including,
without limitation, causes of action and recoveries under 11 U.S.C. ss. 542 -
550 and 553), and all earned and unearned insurance premium refunds), accounts,
accounts receivable, contract rights, chattel paper, choses in action and
instruments (negotiable or otherwise), and all additions and accessions to, all
spare and repair parts, special tools, equipment and replacements for, all
returned or repossessed goods, the sale of which gave rise to, and
<PAGE> 2
all proceeds and products of the foregoing wherever located, other than real or
personal property securing Purchase Money Debt (as defined in the Stock Purchase
Agreement), real and personal property subject to Capital Leases (as defined in
the Stock Purchase Agreement) and capital stock of the subsidiaries of Universal
of Delaware required to be licensed to conduct their business, ("Collateral") to
secure Universal's obligations and liabilities to LCA to pay the Co-Marketing
Termination Fee (the "Obligation") and all obligations of the Debtor now or
hereafter existing under this Agreement.
2. Address. The address of Debtor's chief executive office is
as set forth below. The other address(es) of Debtor's businesses, if any, are
set forth in Exhibit 2. Debtor shall provide LCA 30 days prior written notice
of any change in its name or address.
3. Sale of Collateral. So long as no Event of Default (as defined
below) exists under this Agreement, Debtor may sell the Collateral in the
ordinary course of Debtor's business, including the sale of equipment,
furniture, fixtures, vehicles and other personal property in connection with the
winding up of its laboratory operations.
4. Debtor's Covenants. Except as otherwise provided in this
Agreement, Debtor agrees:
(a) Maintenance of Collateral. Debtor shall maintain the
Collateral in good condition and repair and not permit its value to be impaired.
Debtor shall pay and discharge when due all taxes, license fees, levies and
other charges upon the Collateral, except those being contested in good faith.
Debtor shall not sell, lease or otherwise dispose of the Collateral, except for
sales as provided in Section 3 of this Agreement. Debtor shall not permit the
Collateral to be used in violation of any applicable law, regulation or policy
of insurance. Loss of or damage to the Collateral shall not release Debtor from
the Obligation. LCA shall have no duty or liability to preserve the Collateral.
(b) Insurance. Debtor shall keep the Collateral and LCA's
interest in it insured under policies with such provisions and for such amounts
as are customary for companies engaged in similar businesses and shall furnish
duplicate originals of all such policies of insurance to LCA, with lender's loss
payable or endorsements showing LCA's interest. If an insured casualty has
occurred, then Debtor shall apply such proceeds to restoration of the
Collateral, with any excess being retained by the Debtor, except as may
otherwise be required by the terms of any Senior Debt (as defined in Section
5(b)(ix) of the Stock Purchase Agreement). All such insurance policies shall
contain a provision that no cancellation or material alteration therein may be
effected without giving LCA 30 days prior written notice thereof.
(c) Maintenance of Security Interest. Debtor shall pay all
expenses, and, upon request, take any action reasonably deemed advisable by LCA
to establish, determine priority of, perfect, continue perfected, terminate
and/or enforce LCA's interest in the Collateral or rights under this Agreement.
The Debtor will promptly, upon request of LCA, join with LCA in executing such
further assurances in a form satisfactory to LCA with respect to the security
interest granted hereby, including, without limitation, financing statements and
continuation statements.
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<PAGE> 3
(d) Collateral Records and Statements. Debtor shall keep
accurate and complete records respecting the Collateral. At such times as LCA
may require, Debtor shall furnish to LCA a statement certified by the chief
financial officer of Debtor, and in such form and containing such information as
may be reasonably prescribed by LCA, showing the current status and value of the
Collateral.
(e) Inspection of Collateral. At reasonable times, during
business hours, LCA may examine the Collateral and Debtor's records pertaining
to it, wherever located, and make copies of such records.
(f) Indemnification. The Debtor indemnifies and holds LCA
harmless against any and all liability, loss, damage and expense, including
court costs and reasonable attorneys' fees, which LCA may incur or suffer (1)
pursuant to this Agreement or (2) by reason of LCA having a security interest in
the Collateral.
5. Default and Events of Default. If any of the following events
shall occur and be continuing, hereinafter individually referred to as an Event
of Default:
(a) Default in the payment of the Obligation when it becomes
due and payable; or
(b) Default by the Debtor in the performance or observance of
any other agreement, covenant or term of this Agreement and such default shall
not have been remedied within 30 days after written notice thereof from the
Purchaser to the Debtor; or
(c) The Debtor makes an assignment for the benefit of
creditors, or petitions or applies for the appointment of a trustee, liquidator
or receiver of the Debtor or any substantial part of the assets of the Debtor,
or commences any proceeding relating to the Debtor under any bankruptcy,
reorganization, arrangement, insolvency or readjustment of debt, or similar law
of any jurisdiction, now or hereafter in effect, or shall be adjudicated
bankrupt or insolvent; or if any such petition or application is filed, or any
such proceeding is commenced, against the Debtor and the Debtor indicates its
approval thereof, consent thereto or acquiescence therein, or an order is
entered appointing any such trustee, liquidator or receiver, or approving a
petition in any such proceeding, and such order remains in effect for more than
120 days;
then, and in any such event, LCA may at any time thereafter (unless all Events
of Default shall have been previously cured), by written notice to the Debtor,
declare the Obligation to be due and payable, and the same thereupon shall
become and be forthwith due and payable together with interest accrued thereon.
6. Representations and Warranties. The Debtor represents and
warrants the following: (a) Universal legally and beneficially owns 100% of the
outstanding shares of capital stock of Universal of Delaware, all of which are
duly and validly issued and are nonassessable; (b) Exhibit 6(b) hereto sets
forth a description of all of the assets of the Debtor on which NBD Bank has a
lien; (c) Exhibit 6(c) hereto sets forth a description of all Senior Debt and
all collateral of the Debtor which secures that
3
<PAGE> 4
payment of any Senior Debt as of the date hereof; (d) Debtor is the owner of the
Collateral, free and clear of any pledge, mortgage, hypothecation, charge, or
encumbrance, except NBD Bank's security interest and Permitted Liens; and (e)
this Agreement creates a valid security interest and, upon filing a properly
executed financing statement in the appropriate office and execution of a
Subordination and Intercreditor Agreement between the Debtor, NBD Bank and LCA,
creates a perfected security interest in the Collateral.
"Permitted Liens" means:
(a) Liens for taxes, assessments or governmental charges,
liens incident to construction, common carriers, and public warehouse storage,
which are either not delinquent or are being contested in good faith by
appropriate proceedings.
(b) Liens set forth on Exhibit 6(c).
(c) Liens or deposits in connection with workers'
compensation, unemployment, or other insurance, social security laws, or to
secure customs' duties, public or statutory obligations in lieu of surety, stay
or appeal bonds, or to secure performance of contracts or bids (other than
contracts for the payment of money borrowed), or deposits required by law or
governmental regulations or by any court order, decree, judgment or rule as
condition to the transaction of business or the exercise of any right, privilege
or license; or other liens or deposits of a like nature made in the ordinary
course of business.
(d) Attachments, judgments and other similar liens arising in
connection with court proceedings; provided, that the execution or other
enforcement of such liens is effectively stayed and the claims secured thereby
are being contested in good faith and by appropriate proceedings.
7. Remedies. Upon the occurrence of an Event of Default, LCA
shall have all rights and remedies for default provided by the Uniform
Commercial Code ("UCC") as well as any other applicable law and any document or
agreement relating to the Obligation. Debtor shall reimburse LCA for any
expense incurred by LCA in protecting or enforcing its rights under this
Agreement, including, without limitation, reasonable attorneys' fees and court
costs, and all expenses of taking possession, holding, preparing for
disposition and disposing of the Collateral. After deduction of such expenses,
LCA may apply the proceeds of disposition to the Obligation in such order and
amounts as it elects.
8. Persons Bound. This Agreement benefits and binds LCA, its
successors and assigns, and binds the Debtor and its successors and assigns
and benefits the holders of Senior Debt, Purchase Money Debt and Capital
Leases. Neuter terms as used herein shall also refer, where applicable to the
feminine gender and the masculine gender and the singular reference shall also
include the plural of any word if the context so requires.
9. Interpretation. All terms not otherwise defined have the
meanings assigned to them by the Michigan Uniform Commercial Code.
Invalidity of any provision of this Agreement shall not affect the validity of
any other provision.
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<PAGE> 5
10. Controlling Law. This Agreement shall be governed and construed
under the laws of the State of Michigan (without regard to its choice of law or
conflict of law rules).
11. Headings. The section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13. Assignment. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party hereto.
14. Amendment and Certain Waivers. This Agreement may be amended or
modified only by a written agreement executed by the Debtor and LCA. No failure
to exercise and no delay in exercising any right under this Agreement shall
operate as a waiver of such right. No exercise or partial exercise of any right
granted under this Agreement shall preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies provided in
this Agreement are cumulative and are not exclusive of any other rights or
remedies provided by law. Universal of Delaware agrees that LCA may, from time
to time, before or after a default by Universal, under the Co-Marketing
Agreement or the Agreement with or without notice to Universal of Delaware,
renew, extend or modify the terms of the Co-Marketing Agreement, including the
Co-Marketing Termination Fee and the Obligation, and grant and allow such
indulgences or compromises in connection therewith, as LCA may, in its sole
discretion, deem appropriate, and release, renew, extend, surrender or
compromise any obligation, in whole or in part of any person or parties liable
on the Co-Marketing Termination Fee or the Obligation or any other guaranty of
or any security interest of any person or party secondarily liable or otherwise
liable for the Co-Marketing Fee or the Obligation. The Debtor agrees that LCA
may realize on or proceed against any person or party liable in any capacity on
the Co-Marketing Termination Fee or Obligation or any security given available
therefore in such order and upon such terms and conditions as LCA may determine.
15. Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter of this Agreement. There are
no representations, promises, warranties, covenants or undertakings other than
those expressly set forth or provided for in this Agreement. This Agreement
supersedes all prior agreements and understandings among the parties with
respect to the transactions contemplated by this Agreement.
16. Notices. All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Agreement shall
be in writing and delivery shall be deemed sufficient in all respects and to
have been duly given on the date of service if delivered personally or by
facsimile transmission if receipt is confirmed to the party to whom notice is to
be given, or on the date of mailing if mailed by first class - return receipt
requested, postage prepaid and properly addressed as follows:
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<PAGE> 6
If to the Debtor, to:
Universal Standard Healthcare, Inc.
Universal Standard Healthcare of Delaware, Inc.
26500 Northwestern Highway
Southfield, MI 48076
Attention: President
Copies to:
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
Attention: Thomas S. Vaughn, Esq.
If to Purchaser, to:
Laboratory Corporation of America Holdings
358 South Main Street
Burlington, NC 27215-9990
Attention: Legal Department
Copies to:
Mezzullo & McCandlish
Suite 825
4300 Six Forks Road
Raleigh, NC 27609
Attention: John R. Erwin, Esq.
or to such other address as may be specified in writing by any of the above.
17. Validity of Provisions. Should any part of this Agreement for any
reason be declared by any court of competent jurisdiction to be invalid, that
decision shall not affect the validity of the remaining portion, which shall
continue in full force and effect as if this Agreement had been executed with
the invalid portion eliminated, it being the intent of the parties that they
would have executed the remaining portion of the Agreement without including any
part or portion that may for any reason be declared invalid.
18. Attorney's Fees and Costs. In connection with any litigation
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorney's fees and costs incurred at the
trial and appellate levels.
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<PAGE> 7
19. Release. Upon payment in full of the Obligation or in the event the
Debtor shall have no further obligation to pay the Obligation as set forth in
the Co-Marketing Agreement, this Agreement shall immediately terminate and
Purchaser shall take all actions as are necessary to terminate its security
interest in the assets of Debtor and its subsidiaries.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be delivered on their behalf on the day and year first
written above.
UNIVERSAL STANDARD HEALTHCARE, INC.
By: /s/ Eugene E. Jennings
--------------------------------------
, President
------------------
UNIVERSAL STANDARD HEALTHCARE OF
DELAWARE, INC.
By: /s/ Alan S. Ker
--------------------------------------
, CFO
-------------------
LABORATORY CORPORATION OF AMERICA
HOLDINGS
By: /s/ Bradford T. Smith
--------------------------------------
, President
---------------------
7
<PAGE> 1
EXHIBIT 99.7
SUBLEASE
THIS AGREEMENT is made and entered into by and between Universal
Standard Healthcare, Inc., a Michigan corporation ("Sublessor") and Laboratory
Corporation of America Holdings, a Delaware corporation ("Sublessee") as of
August 3, 1998.
W I T N E S S E T H:
WHEREAS, Sublessor presently leases the following described premises
under that certain Lease dated as of November 18, 1994 but executed on November
23, 1994 (the "Master Lease") by and between Jan-Jo Development Corporation, a
Michigan corporation (the "Landlord") and Sublessor (for purposes of the Master
Lease, the "Tenant"), as amended by a First Amendment to Lease dated April 13,
1995, Second Amendment to Lease dated October 19, 1995, Third Amendment to Lease
dated November 14, 1995, Fourth Amendment to Lease dated December 15, 1995, and
any subsequent Amendments:
approximately 93,000 square feet of rentable space of the building
located at 26500 Northwestern Highway, Southfield, Michigan (the
"Building");
and
WHEREAS, Sublessor now desires to (1) sublease the Laboratory on the
third floor of the Building and any other space within the Building used for
laboratory operations as of the date hereof (the "Premises") and (2) lease
and/or sublease all fixtures, equipment, laboratory inventory as consumed,
improvements and installations owned or leased by Sublessor and located in,
attached to, or built into the Premises as of the date hereof (the "Property")
to Sublessee, and Sublessee desires to sublease the Premises and lease and/or
sublease the Property from Sublessor. It is the intent of the parties hereto
that references herein to "sublease" also refer to the lease of the Property.
NOW, THEREFORE, in consideration of the sum of $10.00, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Grant. Sublessor hereby subleases to Sublessee, its
successors and assigns, all of its right, title and interest in and to the
Premises and the Property and; TO HAVE AND TO HOLD THE SAME unto Sublessee,
its successors and assigns, from and after the Closing Date (as defined in
the Asset Purchase Agreement of even date), through January 31, 1999 (the
"Term"), unless terminated as hereinafter provided, subject to the rental,
terms, covenants and conditions contained herein.
2. Rent. Sublessee hereby agrees to pay on the date hereof, the
Base Rent of One Million Eight Hundred Fifty Thousand Dollars
$1,850,000.00. Sublessor represents that such Base
<PAGE> 2
Rent does not exceed that portion of rent due Landlord from Sublessor under
the Master Lease and attributable to the Premises.
3. Insurance.
A. Sublessee shall maintain comprehensive general
liability insurance for the Premises and the Property and Sublessee's
occupancy of the Premises and use and operation of the Property, including,
professional and products liability, in such amounts, against such risks,
in such form and with such deductible amounts or provisions for
self-insurance as Sublessee maintains on similar premises or property owned
or leased by Sublessee and as are in accordance with sound insurance
practice and as are generally maintained by corporations engaged in the
same or similar business as Sublessee and as contemplated by the Master
Lease. Sublessee agrees to apply any insurance proceeds received by
Sublessee by reason of insurance carried pursuant to this Section for the
purpose of restoration or repair of the Premises. Sublessor agrees to apply
any insurance proceeds received by, paid to or held by Sublessor pursuant
to this Section for the purpose of restoration or repair of the Premises in
accordance with the Master Lease and subject to the authority of NBD Bank
to collect and receive such proceeds pursuant to Section 6.2(b) of a
Revolving Credit and Loan Agreement, as amended, among NBD Bank, Universal
Standard Medical Laboratories, Inc. and other entities, dated as of April
30, 1997.
B. If Sublessee is self-insured as to general liability
insurance and insurance covering certain other risks, Sublessee shall
maintain financial resources sufficient to insure against any liability of
Sublessee and its authorized representatives arising out of and in
connection with Sublessee's use or occupancy of the Premises and use of the
Property up to Two Million Dollars ($2,000,000.00) on account of bodily
injuries to or death of one person, and Five Million Dollars
($5,000,000.00) on account of bodily injuries to or death or more than one
person as the result of any one accident or disaster and One Million
Dollars ($1,000,000.00) on account of damage to property.
C. Throughout the Term, in accordance with the Master
Lease, Sublessor shall carry fire insurance for the full replacement cost
of the Premises and the Property, such insurance to be written by insurance
companies, and in amounts, satisfactory to Sublessor. Sublessor shall
charge Sublessee and Sublessee shall pay, independent of the Base Rent, a
pro rata portion of the cost of such fire insurance apportioned according
to the Premises and Property occupied and used by Sublessee and Sublessee's
interest, if any, in improvements to or in the Premises and its interest in
its office furniture, equipment, supplies and other property.
4. Fire or Other Casualty. Sublessee shall give immediate notice
to Sublessor of any damage to the Premises or Property by fire or other
casualty. Sublessor shall cause the damage
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<PAGE> 3
to be repaired with reasonable speed. Rent shall be proportionally reduced
to the extent that the Premises are rendered untenantable. If the Premises
are destroyed or so damaged that in normal course the Premises cannot be
made tenantable within sixty (60) days, or if the damage occurs during the
last thirty (30) days of the Term, either Sublessor or Sublessee may
terminate this Sublease upon thirty (30) days written notice to the other
party and failure of Sublessor to correct such damage within such period.
Rentals shall be adjusted as of the date of the damage, and Sublessee shall
vacate the Premises within thirty (30) days from the date the
aforementioned written notice is provided.
5. Obligation to Landlord. The Parties hereby agree that the
obligations herein assumed by Sublessee are limited to those which arise as
a result of the Sublessee's use and occupation of the Premises and such
obligations shall inure jointly and severally to the Sublessor and Landlord
herein and to the successors and assigns of each.
6. Master Lease. Sublessee's rights pursuant to the Sublease are
subject and subordinate at all times to the Master Lease and to all of the
covenants and agreements of the Master Lease, except as expressly modified
by this Sublease. Sublessee shall not do, permit or tolerate anything to be
done in, or in connection with Sublessee's use or occupancy of the Premises
which would violate any Master Lease covenants or agreements. As to the
Premises and during the Term, Sublessee expressly assumes to be bound by
all obligations, covenants and restrictions which are set forth in the
Master Lease in the same manner as these obligations, covenants and
restrictions are binding upon Sublessor, as Tenant under the Master Lease,
except as expressly modified by this Sublease. Except as modified hereby,
during the Term Sublessee shall perform all of Sublessor's duties and
obligations under the Master Lease which relate to the Premises. Sublessor
shall have the same rights against Sublessee with respect to this Sublease
as the Landlord has against the Sublessor, as Tenant, pursuant to the
Master Lease. The Landlord, under the Master Lease, or the Sublessor may
enforce against Sublessee, each in its own capacity, any of the rights
granted to the Landlord pursuant to the Master Lease, except as expressly
modified by this Sublease. Sublessor may not grant to Sublessee, and
nothing in the Sublease shall be construed or interpreted to grant, any
greater rights than the Sublessor has received as Tenant from the Landlord
pursuant to the Master Lease. Sublessee does not have any greater rights
against Sublessor with respect to this Sublease or the Premises than
Sublessor has as Tenant against the Landlord with respect to the Master
Lease and the Premises. Notwithstanding the foregoing provisions of this
paragraph, Sublessee's duties and obligations relative to the Master Lease
shall at all times be limited by and proportional to the limited duration
and cost of Sublessee's occupation of the Premises, and Sublessee shall
only assume obligations, responsibilities or liabilities arising during the
Term.
7. Services.
A. Except as may be specifically identified herein as an
obligation of Sublessor, Sublessee agrees and acknowledges that Sublessor
shall have no obligation or
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<PAGE> 4
responsibility whatsoever to provide or perform any service, repair,
alteration or other similar obligation which is the obligation of Landlord
to provide or perform pursuant to the provisions and terms of the Master
Lease.
B. Sublessee recognizes that Sublessor does not control
the operation of the Building or the furnishing of utilities and services
therein or to the Premises. Accordingly, all of the agreements and
obligations of Sublessor under this Sublease, express or implied, without
limitation, any agreement or obligation to furnish utilities or services,
are expressly dependent upon the performance and observation by the
Landlord of its agreements and obligations under the Master Lease. If the
Landlord shall default in the performance or observance of any of its
agreements or obligations under the Master Lease, either for the furnishing
of utilities or services or otherwise, Sublessor shall not be liable
therefor to Sublessee. Any condition resulting from such default by the
Landlord that adversely affects the habitability of the Premises at
Sublessee's option, shall constitute an eviction, and Sublessee shall be
entitled to cancel this Sublease or to accept a proportional reduction in
or abatement of the rents provided for herein, if such reduction or
abatement of rents is permitted by the terms of the Master Lease, upon
thirty (30) days notice of such condition to Sublessor and failure of
Sublessor to correct such condition within such period. Notwithstanding the
foregoing provisions of this paragraph, Sublessor agrees to assist
Sublessee in obtaining Landlord's performance of its obligations under the
Master Lease.
C. So long as Sublessee shall not be in default under any
term of this Sublease, Sublessor shall, at its own cost and expense,
furnish the Premises with water, heat, air conditioning, electricity,
sewerage, and five-day per week janitorial services. These utilities and
services shall be provided during ordinary business hours in accordance
with the terms of the Master Lease. Sublessor shall not be liable or
responsible for any interruption in the utilities or other services due to
causes beyond Sublessor's reasonable control or interruptions in connection
with the making of repairs or improvements to the Premises, Property or the
Building. Any such interruption that adversely affects the habitability of
the Premises shall, at Sublessee's option, constitute an eviction, and
Sublessee shall be entitled to cancel this Sublease or to accept a
proportional reduction or abatement of rent upon thirty (30) days notice of
such interruption to Sublessor and failure of Sublessor to correct such
interruption within such period.. Electricity furnished by Sublessor shall
be used only for purposes of illumination and the operation of normal
office and laboratory equipment (excluding main frame computer equipment
but including personal computers). Electricity for any other use shall be
paid for by Sublessee.
D. If Landlord shall default in any of its obligations to
Sublessor with respect to the Premises, Sublessee may, at Sublessee's sole
cost and expense, enforce Sublessor's rights against Landlord with respect
to the Premises in Sublessor's name, provided, however, that Sublessee
shall indemnify and hold Sublessor harmless from and against all liability,
loss, demands,
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<PAGE> 5
penalties or damage which Sublessor may incur or suffer by reason of the
negligent or intentional actions of Sublessee. Sublessor shall also execute
any and all documents reasonably required in furtherance of such action. In
amplification and not in limitation of the foregoing, except as otherwise
provided in this Sublease, Sublessor will not be responsible (i) for
furnishing, painting, window washing or any service to the Building or the
Premises or (ii) for any maintenance, repairs or alterations in or to the
Building or the Premises.
8. Assignment and Subletting. Sublessee shall not voluntarily,
by operation of law, or otherwise, assign or permit to be assigned this
Sublease or any interest herein or sublease the Premises or any part
thereof without the prior written consent of Sublessor and Landlord, which
consent shall not be unreasonably withheld or delayed. Any attempt to do
any of the foregoing shall be void and of no effect and shall be a material
default under this Sublease.
9. Default. Any act or omission by Sublessee which would
constitute a default by Sublessor as Tenant under the Master Lease shall
constitute a default by Sublessee under this Sublease. Sublessor has the
right, but not the obligation, to cure any act or omission by Sublessee
which would constitute a default under the Master Lease or could
reasonably, after notice and the passage of time, constitute a default
under the Master Lease and to recover from the Sublessee the costs incurred
by Sublessor, in curing the act or omission by Sublessee. All remedies
provided by the Master Lease which are hereby expressly incorporated by
reference, shall be available to Sublessor against Sublessee in the event
of default. Failure of Sublessee to perform any covenant, material term or
condition hereof shall constitute a default under the Master Lease and
entitle Sublessor to all rights of the Landlord under the Master Lease. In
the event of default by Sublessor under the Master Lease, Sublessee shall
attorn to Landlord at Landlord's request. Failure of Sublessor to perform
any covenant, material term, or condition hereof shall constitute
Sublessor's default hereunder, and entitle Sublessee, upon thirty (30) days
notice of such default to Sublessor and failure of Sublessor to correct
such default within such period, to terminate this Sublease and Sublessee's
obligation to pay rent hereunder.
10. Restoration of Premises. No alterations or improvements to
the Premises shall be made without the prior written consent of the
Landlord and of the Sublessor, which consent shall not be unreasonably
withheld or delayed. The Property shall, upon termination of this Sublease,
and without any obligation of Sublessor to compensate Sublessee therefor,
be and remain part of the Premises and be deemed the property of Sublessor,
provided that Sublessee shall have the obligation to remove any of its
trade fixtures, furniture and equipment and such alterations and
improvements made during the term hereof if so requested by Sublessor. In
the event of such removal, Sublessee agrees to promptly reimburse Sublessor
for the cost of necessary repairs required as the result of damage done to
the Premises, the Property, or the Building. Any of Sublessee's property
not removed at the expiration or termination of the Sublease shall remain
the property of Sublessor.
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<PAGE> 6
11. Disposition of Property. Sublessor may, as of the date hereof
and at any time during the term of the Sublease, remove, sell or otherwise
dispose of all or any item, component or portion of the Property. If
Sublessor elects to remove, sell or otherwise dispose of the Property,
Sublessor shall either orally or in writing notify Sublessee of such action
and, within sixty (60) days from the date of such notice or such time as
may be reasonably requested by Sublessee and agreed upon by Sublessor,
Sublessee may offer in writing to purchase the Property. Any purchases
under this provision shall be by mutual agreement of the Sublessee and
Sublessor with regard to price and terms of purchase and Sublessor shall be
under no obligation to agree to sell the Property to Sublessee.
12. Maintenance of Property. Sublessee shall maintain the
Property in the condition of the Property as of the date hereof, excluding
normal wear and tear, and as specified by the manufacturers' guidelines or
the equivalent and shall furnish all parts, substitutions, mechanisms,
devices and services required therefor so that the Property will remain in
the same condition as f the date hereof, excluding reasonable and customary
wear and tear. All repairs, parts, accessories and equipment incorporated
in, attached to or installed on any of the Property shall immediately
without further act become the property of the Sublessor and part of the
Property for all purposes of this Sublease, with costs or expense to
Sublessor. Sublessee will use the Property in a careful manner, solely in
the conduct of its lawful business; and Sublessee will comply in all
material respects with and conform to all governmental laws, ordinances,
rules and regulations relating to the possession, use, operation and
maintenance of the Property. Sublessee agrees that the Property will be
operated by competent, qualified personnel in connection with Sublessee's
business for the purpose for which the Property was designed and in
accordance with applicable operating instructions, laws, government
regulations, and that Sublessee shall use all reasonable precautions to
prevent loss or damage to the Property from fire and other hazards.
Notwithstanding any provision of this Sublease to the contrary,
the following are Sublessor's responsibilities:
A. To the extent required by the Master Lease, Sublessor,
at its cost, shall maintain or ensure that the Landlord maintains in good
condition pursuant to the Master Lease (1) the structural portions of the
Building and other improvements that are a part of the Premises, such
structural parts include the foundations, load-bearing and exterior walls,
sub-flooring and roof, (ii) the electrical, plumbing, and sewage systems,
(iii) window frames, gutter, and downspouts on the Building and other
improvements that are a part of the Premises, and (iv) heating, ventilation
and air conditioning systems servicing the Premises.
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B. Sublessor shall repair the Premises if they are
damaged by (i) causes over which Sublessee has no control, (ii) acts or
omissions of Sublessor, or its authorized representatives, or (iii)
Sublessor's failure to perform its obligations under this paragraph.
C. Sublessor shall repair the Premises, including
partitions and glass, damaged due to the neglect of Sublessor, its agents
or employees.
13. Quiet Enjoyment. Sublessor and Landlord agree that Sublessee,
upon paying the rent and performing all the terms and conditions of this
Lease, shall quietly have, hold and enjoy the Premises for the Term as
herein stated.
14. Warranties Regarding Property. Except with respect to any
assignable warranties on any of the Property, which Sublessor agrees to
assign to Sublessee within fifteen (15) days of the Closing Date, Sublessor
makes no representation or warranty, express or implied, as to any matter
whatsoever, including, without limitation, the design or condition of the
Property or its merchantability, suitability, quality, or fitness for a
particular purpose, and hereby disclaims any such warranty. Sublessee
specifically waives all rights to make a claim against Sublessor for breach
of any warranty whatsoever. Sublessee leases the Property "as is". Except
with respect to claims based upon the negligence or intentional act of
Sublessor, Sublessor have no liability, for any liability, claim, loss,
damage, or expense caused directly or indirectly by the Property or any
deficiency or defect thereof, or the operation, maintenance, or repair
thereof, or any consequential damages as that term is used in Section
2-719(3) of the Model Uniform Commercial Code, as amended from time to time
("UCC").
15. Notices. Any notice, consent, approval, agreement,
certification, request, invoice, bill, demand, statement, acceptance or
other communication hereunder ("Notice") shall be in writing and shall have
been duly given or furnished if delivered personally or mailed in a
postpaid envelope (registered or certified mail only) addressed to
Sublessor or Sublessee at the address set forth below, or to such other
address or addressee as either party may designate by a Notice given
pursuant thereto:
Sublessor: Universal Standard Healthcare, Inc.
26500 Northwestern Highway
Southfield, Michigan 48076
Attention: Alan Ker, C.F.O.
(248) 358-0810 (telephone)
(248) 350-3112 (facsimile)
with a copy to: Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
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Attention: Thomas S. Vaughn, Esq.
(313) 568-6524 (telephone)
(313) 568-6915 (facsimile)
Sublessee: Laboratory Corporation of America Holdings
358 South Main Street
Burlington, North Carolina 27215-9990
Attention: Legal Department
(800) 222-7566 (telephone)
(336) 513-4510 (facsimile)
with a copy to: Menzullo & McCandlish
Suite 825
4300 Six Forks Road
Raleigh, North Carolina 27609
Attention: John R. Erwin, Esq.
(919) 510-8333 (telephone)
(919) 510-7558 (facsimile)
16. Indemnification of Sublessor. Sublessee will indemnify and
save harmless Sublessor from and against any and all liabilities,
obligations, damages, penalties, claims, costs, charges and expenses,
including reasonable attorneys' fees, which may be imposed upon or incurred
by or asserted against Sublessor by reason of any negligent or
intentionally wrongful act or omission of the Sublessee occurring during
the term of this Sublease or by reason of noncompliance of Sublessee with
any applicable environmental law, regulation or ordinance with respect to
any action or event occurring with respect to the Premises and the Property
after the date hereof.
17. Indemnification of Sublessee. Sublessor will indemnify and
save harmless Sublessee from and against any and all liabilities,
obligations, damages, penalties, claims, costs, charges and expenses,
including reasonable attorneys' fees, which may be imposed upon or incurred
by or asserted against Sublessee by reason of any negligent or
intentionally wrongful act or omission of Sublessor, or by reason of
noncompliance of Sublessor with any applicable environmental law,
regulation or ordinance with respect to any action or event occurring prior
to the date hereof.
18. Interpretations and Meanings. All words used in this Sublease
shall have the same meaning as the words used in the Master Lease, unless
specifically defined to the contrary in the Sublease.
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19. Condemnation. If the whole or any part of the Premises shall
be taken or condemned by any competent authority for any public or quasi
public use or purpose such as to render the Premises unsuitable for
Sublessee's use, in Sublessee's discretion, then the Term shall terminate
from the date of such taking or condemnation, and rentals shall be
apportioned accordingly. The condemnation award shall be paid to Sublessor
or Landlord with the exception of any portion as may be attributable to
Sublessee's property, such portion shall be paid to Sublessee.
20. Landlord's Acknowledgment. Sublessor will obtain Landlord's
consent to the subleasing of the Premises by Sublessor to Sublessee
pursuant to this Sublease.
21. Change in Law or Regulation. Notwithstanding anything in this
Sublease to the contrary, should legal counsel for Sublessor or Sublessee
reasonably conclude that this Sublease or Sublessee's use of the Premises
is or may be in violation of any law or regulation, this Sublease shall
terminate upon a sixty (60) day notice to the other party unless within
said thirty (30) day period the parties agree to such modifications in this
Sublease or use of the Premises that may be necessary to establish
compliance with the law or regulation.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this
instrument as of the date first above written.
SUBLESSOR:
WITNESSES: UNIVERSAL STANDARD HEALTHCARE,
INC., a Michigan corporation
/s/ Eugene E. Jennings
-------------------------------------
/s/ Anne Cramton By: Eugene E. Jennings
---------------------------- Its: President
/s/ Steven C. Tyshka
----------------------------
SUBLESSEE:
WITNESSES: LABORATORY CORPORATION OF
AMERICA HOLDINGS, a Delaware
corporation
/s/ Bradford Smith
------------------
By: Bradford Smith
----------------------------- ----------------------------------
Its: E.V. President
----------------------------- ----------------------------------
9
<PAGE> 1
EXHIBIT 99.8
TRANSITION SERVICES AGREEMENT
This Services Agreement ("Services Agreement") is made as of the 3rd
day of August, 1998 ("Effective Date"), between (i) Laboratory Corporation of
America Holdings, a Delaware corporation ("Purchaser"), and (ii) Universal
Standard Healthcare, Inc., a Michigan corporation ("Seller"). Pursuant to an
Asset Purchase Agreement ("Asset Purchase Agreement") dated as of July 16, 1998,
Seller sold certain assets and transferred certain liabilities relating to its
laboratory services business (the "Business") to Purchaser.
Purchaser desires to obtain from Seller, and Seller is willing to
furnish, (a) those services performed for the Business by Seller's EDP
Department (data processing) and Seller's Billing Department (cash, billing
edits, aged trial balances, denials) immediately prior to the Closing, all as
set forth in more detail on Schedule A (the "Services"), and (b) the services of
those of Seller's laboratory personnel described on Schedule B (the "Laboratory
Employees"), which Laboratory Employees were, immediately prior to the Closing,
provided to Seller under an agreement ("Employee Agreement") with National Human
Resources Committee, Inc. ("NHRC").
Seller desires to retain the right to use Laboratory Employees to
furnish laboratory services for Seller's customers ("Transition Customers") who
have not agreed to the assignment of their contracts in connection with the
transactions contemplated by the Asset Purchase Agreement, through the
termination notice period under those agreements ("Transition Services").
In consideration of the mutual covenants and agreements contained in
this Agreement, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Definitions Incorporated. All capitalized terms not otherwise
defined in this Services Agreement have the meaning ascribed to them in the
Asset Purchase Agreement.
1.2 Additional Definitions. Unless the context otherwise requires,
the following terms, and their singular or plural, used in this Services
Agreement shall have the meanings set forth below:
"Business" shall have the meaning set forth in the Preamble to
this Services Agreement.
"Confidential Information" shall have the meaning set forth in
Section 8.1 of this Services Agreement.
"Effective Date" shall have the meaning set forth in the
Preamble to this Services Agreement.
<PAGE> 2
"Employee Agreement" shall have the meaning set forth in the
Preamble to this Services Agreement.
"Estimated Monthly Charge" shall have the meaning set forth in
Section 3.1(a) of this Services Agreement.
"Force Majeure" shall have the meaning set forth in Section 6.1
of this Services Agreement.
"Insurance Premiums" shall have the meaning set forth in Section
3.2(b) of this Services Agreement.
"Laboratory Employees" shall have the meaning set forth in the
Preamble to this Services Agreement.
"Midterm Reconciliation" shall have the meaning set forth in
Section 3.2 of this Services Agreement."Party" means either of Seller or
Purchaser.
"Person" means an individual, partnership, corporation, trust,
unincorporated association, or other entity or association.
"Purchaser" shall have the meaning set forth in the preamble to
this Services Agreement."Purchaser's Business" shall have the meaning set forth
in Section 2.1(a) of this Services Agreement.
"Purchaser's Laboratory Operations" shall have the meaning set
forth in Section 2.1(b) of this Services Agreement.
"Seller" shall have the meaning set forth in the preamble to
this Services Agreement.
"Seller's Business" shall have the meaning set forth in Section
2.1(a) of this Services Agreement.
"Services" shall have the meaning set forth in the preamble to
this Services Agreement.
"Term" shall have the meaning set forth in Section 4.1 of this
Services Agreement.
"Transition Customers" shall have the meaning set forth in the
Preamble to this Services Agreement.
"Transition Services" shall have the meaning set forth in the
Preamble to this Services Agreement.
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Other terms are used as defined elsewhere herein.
ARTICLE 2.
SCOPE OF AGREEMENT
2.1 Seller Provided Services.
(a) Services During the Term, Seller will provide the Services as
described in Schedule A. It is the Parties' intention that Seller will operate
the Billing and EDP Departments to service that portion of the Business
conducted before the Closing Date for the account of Seller ("Seller's
Business"), and that portion of the Business conducted on and after the Closing
Date for the account of Purchaser ("Purchaser's Business"), and it is expected
that the volume of work performed by those departments for the account of Seller
will decline and the volume performed for the account of Purchaser will increase
over the course of the Term.
(b) Laboratory Employees. During the Term, Seller will direct the
Laboratory Employees to take instruction from and work for Purchaser in the
Business ("Purchaser's Laboratory Operations"). The Laboratory Employees will
also continue to take instruction from and work for Seller in performing
Transition Services during the Term.
2.2 Purchaser Provided Services. Purchaser shall provide laboratory
services to Seller so as to permit Seller to satisfy its obligations under its
agreements with Transition Customers during the period of termination notice.
2.3 Status of Laboratory Employees. Nothing in this Agreement shall
be deemed to cause a change in the status of the employment of the Laboratory
Employees as such employment existed before the Effective Date. Seller shall be
solely responsible for the continuation of the Employee Agreement after the
Effective Date. All payment of salary (including withholding of income taxes and
social security), worker's compensation, disability benefits, and the like, for
the Laboratory Employees shall continue unchanged from the arrangements in place
before the Effective Date. Nothing contained in this Agreement shall be
construed as creating an employment relationship between Purchaser and the
Laboratory Employees, nor granting to Laboratory Employees any rights under
Purchaser's employee benefit plans. Seller will comply with the WARN Act by
giving notice of plant closing to the employees, entitled to notice under WARN.
ARTICLE 3.
FEES
3.1 Initial Fees to Seller.
(a) Services. Until the completion of the Midterm Reconciliation,
Purchaser shall pay
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<PAGE> 4
to Seller the Estimated Monthly Charge set forth on Schedule A for Services by
5:00 p.m. on the day prior to the day on which Seller is required to pay NHRC
amounts due for leased employees performing services for Seller's Billing and
EDP Departments for the prior pay period (the "Employee Lease Costs"). It is
understood that the Estimated Monthly Charge equals one-half of an estimate of
the fully allocated monthly costs of the Billing and EDP Departments, excluding
the Employee Lease Costs.
(b) Laboratory Employees. Until the completion of the Midterm
Reconciliation, Purchaser shall pay Seller by 5:00 p.m. on the day prior to the
day on which Seller is required to pay NHRC amounts due for the leased
Laboratory Employees for the prior pay period (the "Laboratory Employee Lease
Costs") and monthly in advance the Estimated Monthly Charge set forth on
Schedule B for Seller's premiums ("Insurance Premiums") for general liability
and malpractice insurance maintained by Seller to cover services rendered by the
Laboratory Employees during the Term (provided that Purchaser shall not be
obliged to pay the Insurance Premiums if Purchaser causes Seller to be named as
an additional insured on Purchaser's insurance policies for the purposes of this
Agreement). It is understood that the Estimated Monthly Charge is an estimate of
the total monthly cost to Seller of the Insurance Premiums (subject to the
preceding proviso).
3.2 Midterm Reconciliation. As soon as practicable following
completion of the first three months of the Term, the Parties will perform a
reconciliation ("Midterm Reconciliation"), as follows:
(a) Services. The Parties shall (i) calculate (A) the actual fully
allocated costs of Billing and EDP Departments during the first three month
period; and (B) the total accounts receivable balances for each of Seller and
Purchaser processed through the Accounts Receivable system; (ii) allocate the
costs in subparagraph (A) in accordance with the relative percentages of
Accounts Receivable processed as determined in subparagraph (B); and (iii)
reconcile such calculation against the payments actually made under Section
3.1(a) (with one party reimbursing the other within ten business days after the
completion of the Midterm Reconciliation). As soon as the Midterm Reconciliation
is complete, all further fees charged for Services during the Term shall be
based upon the average actual monthly cost and the relative percentages
calculated monthly under this Section 3.2.
(b) Laboratory Employees. The Parties shall (i) determine the actual
total cost of the Laboratory Employees under the Employee Agreement during the
first three month period; and (ii) reconcile such calculation against the
payments actually made under Section 3.1(b) (with one party reimbursing the
other within ten business days after the completion of the Midterm
Reconciliation). Seller will pay to Purchaser an amount equal to the amount
charged by Seller to its Transition Customers for Transition Services during the
first three month period.
3.3 Final Reconciliation. As soon as practicable following the Term,
the parties will perform a reconcilement for all months not covered by the
Midterm Reconciliation in a similar manner to that described in Section 3.2.
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ARTICLE 4.
TERM
4.1 Term. Except as expressly provided otherwise in this Services
Agreement, or with respect to specific services as indicated on the Schedules
hereto, the term of this Services Agreement shall be for six months commencing
at 12:01 a.m. on the date immediately following the Effective Date (the "Initial
Term"). The term of this Agreement may automatically be extended on a month to
month basis after the expiration of the Initial Term by written notice of
Purchaser to Seller delivered at least thirty (30) days prior to the end of the
Initial Term ("Extended Term") and thereafter during the Extended Term delivered
at least thirty days before the first day of the next month. The obligation of
the Parties to make payments under this Agreement shall not be affected by the
expiration of the Initial Term or Extended Term and shall continue until full
payment is made
ARTICLE 5.
POINTS OF CONTACT
5.1 Points of Contact. Seller and Purchaser have each named a
point of contact for each service as set forth on Schedules A and B. Such points
of contact shall be responsible for the implementation of this Services
Agreement between Seller and Purchaser, including resolution of any issues which
may arise during the performance hereunder on a day-to-day basis.
ARTICLE 6.
FORCE MAJEURE
6.1 Force Majeure. Neither Party shall bear any responsibility or
liability for any losses arising out of any delay, inability to perform or
interruption of its performance of obligations under this Services Agreement due
to any acts or omissions of the other or for events beyond the Party's
reasonable control (hereinafter referred to as "Force Majeure") including,
without limitation, acts of God, act of governmental authority, act of the
public enemy or due to war, riot, flood, civil commotion, insurrection, labor
difficulty, severe or adverse weather conditions, lack of or shortage of
electrical power, malfunctions of equipment or software programs to the extent
beyond the reasonable control of the applicable Party, or any other cause beyond
the reasonable control of the Party whose performance is affected by the Force
Majeure event.
5
<PAGE> 6
ARTICLE 7.
INDEMNITY
7.1 Indemnity.
(a) Except as set forth in the next sentence, Purchaser will
indemnify and hold harmless Seller, its agents, employees and invitees, against
all liabilities, claims, losses, penalties, recoupments of overpayments,
damages, death or personal injury whatever nature or kind, arising out of
Purchaser's Business or Purchaser's Laboratory Operations (other than Transition
Services). Seller retains all liability for actions of the Billing and EDP
Department undertaken before the Closing Date.
(b) Seller will indemnify and hold Purchaser, its agents, employees
and invitees, against all liabilities, claims, losses, damages, death or
personal injury whatever nature or kind, arising out of the Transition Services.
(c) Except with respect to damages based on third party claims
covered under Sections 7.1(a) or 7.1(b) above, no Party shall be entitled to any
damages with respect to lost profits or other consequential damages or punitive
damages with respect to the performance by any other Party under this Services
Agreement.
ARTICLE 8.
CONFIDENTIALITY
8.1 With respect to any information disclosed by one Party to
another Party for the purpose of this Services Agreement or otherwise accessible
to such other Party during the performance hereunder ("Confidential
Information"), the receiving Party agrees that it will use at least that degree
of skill and care that it would exercise in similar circumstances in carrying
out its own business to prevent the disclosure or accessibility to others of the
disclosing Party's Confidential Information and will use such Confidential
Information only for the purpose of this Services Agreement.
8.2 Specifically excluded from the foregoing obligation is any
and all information that:
(a) is already known to the receiving Party at the time of
disclosure or thereafter is independently developed by the receiving Party
without breach of this Agreement;
(b) is already in the public domain at the time of
disclosure, or thereafter becomes publicly known other than as the result of a
breach by the receiving Party of its obligations under this Services Agreement;
6
<PAGE> 7
(c) is rightfully received from a third party without breach
of this Agreement;
(d) is furnished by the disclosing Party to a third party
without a similar restriction on its rights; or
(e) upon advice of counsel, must be produced by the receiving
Party as a matter of law; provided, however, that in such case the receiving
Party shall promptly notify the disclosing Party and, insofar as is permissible
and reasonably practicable without placing the disclosing Party under penalty of
law, give it an opportunity to appear and to object to such production before
producing the requested information.
ARTICLE 9
MISCELLANEOUS
9.1 Internal Dispute Resolution. In the event of any dispute between
Seller and Purchaser arising under or relating to this Services Agreement, they
shall first attempt to resolve such dispute by negotiating in good faith over a
period of at least thirty days.
9.2 Notices. The notice provisions of the Asset Purchase Agreement
are incorporated herein by reference.
9.3 Entire Agreement. Except for those matters provided for in the
Asset Purchase Agreement or the other agreements contemplated therein, this
Services Agreement sets forth the entire agreement of the Parties with respect
to its subject matter. This Services Agreement shall not be modified or amended
except by written instrument executed by each Party.
9.4 Waiver. The failure of a Party to insist upon strict performance
of any provision of this Services Agreement shall not constitute a waiver of, or
estoppel against, asserting the right to require such performance in the future,
nor shall a waiver or estoppel in any one instance constitute a waiver or
estoppel with respect to a later breach of a similar nature or otherwise.
9.5 Severability. If any of the terms and conditions of this
Services Agreement are held by any court of competent jurisdiction to
contravene, or to be invalid under, the laws of any political body having
jurisdiction over the subject matter of this Services Agreement, such
contravention or invalidity shall not invalidate the entire Services Agreement.
Instead, this Services Agreement shall be construed as if it did not contain the
particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provisions added so as to give effect to
the intention of the Parties as expressed in this Services Agreement at the time
of the execution of this Services Agreement and of any amendments to this
Services Agreement.
9.6 Governing Law; Construction. This Services Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Michigan, without reference
7
<PAGE> 8
to its conflicts of law rules or principles. The headings in this Services
Agreement are not to be considered part of this Services Agreement and are
inserted for convenience, identification and reference only and are not intended
to interpret, define, or limit the scope, extent, or intent of this Services
Agreement or any provision of this Services Agreement. Whenever the context
requires, the gender of all words used in this Services Agreement shall include
the masculine, feminine and neuter, and the number of all words shall include
the singular and the plural.
9.7 Counterpart Execution. This Services Agreement may be executed
in counterparts with the same effect as if all of the Parties had signed the
same document. Such counterparts shall be construed together and shall
constitute one and the same instrument, notwithstanding that all of the Parties
are not signatories to the original or the same instrument, or that signature
pages from different counterparts are combined. The signature of any Party to
one counterpart shall be deemed to be a signature to and may be appended to any
other counterpart.
9.8 Successors and Assigns. This Services Agreement shall inure
to the benefit of and shall be binding upon the Parties, their respective legal
representatives, successors, and permitted assignees, and all Persons claiming
by, through, or under right of any of the aforesaid Persons. This Services
Agreement may not be assigned by any Party without the prior written consent of
the other Party.
IN WITNESS WHEREOF, the duly authorized officers or
representatives of the parties hereto have duly executed this Services Agreement
as of the date first written above.
LABORATORY CORPORATION UNIVERSAL STANDARD
OF AMERICA HOLDINGS HEALTHCARE, INC.
By: /s/ Bradford T. Smith By: /s/ Eugene E. Jennings
-------------------------- -------------------------
Name: Bradford T. Smith Name: Eugene E. Jennings
Title: E.V. President Title: President
8
<PAGE> 9
SCHEDULE A
SHARED SERVICES ALLOCATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Dept Dept Detailed Function Proratio Universal % Labcorp %
Name # Description Basis
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Finance 703
Alan Ker, CFO 100% 0%
* Revenue Transition 70% 30%
* Managed Care 100% 0%
* Staff Accountant 10% 90%
* Coding 50% 50%
* Coding 10% 90%
Employees 20% 80%
Other Departmental Expenses 50% 50%
- ------------------------------------------------------------------------------------------------------------------------------------
EDP 704
* A/R Balance TBD on Mthly Basis TBD on Mthly Basis
* A/R Balance TBD on Mthly Basis TBD on Mthly Basis
* Antrim Programmer 10% 90%
* 100% 0%
* Transsend 0% 100%
* Operations 50% 50%
* Transsend 0% 100%
* Operations 50% 50%
* File Definition 0% 100%
* File Definition 0% 100%
* File Definition 0% 100%
* Transsend, File Def, 20% 80%
Cash
* Operations 50% 50%
* File Definition 0% 100%
Other Departmental Expenses 50% 50%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Denotes information filed separately with the Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 governing requests for
confidential treatment of information.
<PAGE> 10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Dept Dept Detailed Function Proratio Universal % Labcorp %
Name # Description Basis
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Billing 303
Billing
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
* A/R BALANCE TBD on Mthly Basis TBD on Mthly Basis
Other Departmental Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Denotes information filed separately with the Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 governing requests for
confidential treatment of information.
<PAGE> 11
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Dept Dept Detailed Function Proratio Universal % Labcorp %
Name # Description Basis
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
308
Data
Entry
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
* 0% 100%
Other Departmental Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Denotes information filed separately with the Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 governing requests for
confidential treatment of information.
<PAGE> 12
SCHEDULE B
LABORATORY EMPLOYEES
All employees leased under the Employee Agreement, except those listed
on Schedule A and Eugene E. Jennings, Imtiaz H. Sattaur and *.
* Denotes information filed separately with the Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 governing requests for
confidential treatment of information.
<PAGE> 1
EXHIBIT 99.9
NON-COMPETE AGREEMENT
This NON-COMPETE AGREEMENT("Agreement") is executed and delivered as of
the 3rd day of August, 1998, by UNIVERSAL STANDARD HEALTHCARE, INC., a Michigan
corporation, and all of its subsidiaries and affiliated companies: (present and
future), (collectively "Seller" or "Universal"), for the benefit of LABORATORY
CORPORATION OF AMERICA HOLDINGS, a Delaware corporation ("Purchaser" or
"LabCorp").
This Agreement is delivered to Purchaser pursuant to an asset purchase
agreement dated July 16, 1998, (the "Purchase Agreement") between Seller and
Purchaser. Seller acknowledges that Purchaser would not enter into, or
consummate, the Purchase Agreement and the transactions contemplated thereby
without Seller's execution of this Agreement. Capitalized terms not defined
herein shall have the meanings ascribed to them in the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, for the purpose of inducing Purchaser to enter
into the Purchase Agreement and intending to be legally bound hereby, the
undersigned covenants and agrees as follows:
I. RESTRICTED PERIOD. This Agreement shall remain in effect for a period of
five (5) years from and after the Closing Date (the "Restricted Period").
II. NON-COMPETITION. During the Restricted Period, except in furtherance of
Purchaser's business, or otherwise on behalf of Purchaser, or with the
prior written consent of Purchaser, Seller shall not engage directly or
indirectly on its own behalf or on behalf of, or in conjunction with any
person, firm, partnership, or corporation, in the business of providing
commercial laboratory services through the use of automated or manual
testing procedures, including such services provided under the personal
supervision of any physician in the same group practice in competition
with Purchaser or any subsidiary or affiliate of Purchaser, within any
area in the United States of America (the "Restricted Area").
III. NON-SOLICITATION. During the Restricted Period, except in furtherance of
Purchaser's business, or otherwise on behalf of Purchaser, or with the
prior written consent of Purchaser, Seller shall not influence or attempt
to influence any:
A. customer listed on the Customer Lists, as defined in the Purchase
Agreement, either directly or indirectly, to divert his or its
purchases of commercial laboratory services provided through the use
of automated or manual testing procedures to be conducted in the
Restricted Area (the "Business") to any person, firm, corporation,
institution, or other entity then in competition with the Business
of Purchaser or any subsidiary or affiliate of Purchaser's;
<PAGE> 2
B. employee (i) of Seller to whom Purchaser intends to offer employment
as provided for in the Purchase Agreement or (ii) of the Business
after the transactions contemplated by the Purchase Agreement have
been consummated, either directly or indirectly, to terminate his or
her employment with Purchaser.
IV. The following activities by Seller or any of its subsidiaries or
affiliates shall be excluded from and shall not be deemed to violate this
Non-Compete Agreement, including the restrictions and limitations on
Non-Competition and Non-Solicitation set forth in Sections II and III
hereof:
A. Operation of a managed care business which offers, provides or
arranges for the provision of clinical laboratory services,
including those provided using automated or manual testing
procedures, home medical services or diagnostic imaging services.
Notwithstanding anything above to the contrary, operation of a
managed care business shall not include the performance by Seller or
its subsidiaries of commercial laboratory services as described in
Section II above;
B. Operation of a third-party administrator or administrative services
organization business which processes claims or provides management
services for managed care programs, employer groups, employer health
plans or others notwithstanding that the services for which the
claims are being filed are or include clinical laboratory services,
home medical services or diagnostic imaging services;
C. Establishment of a clinical laboratory program, including drawing
stations, to fulfill the requirements of any managed care contract
to which Seller or any subsidiary or affiliate is a party if (i) no
other clinical laboratory which meets the qualifications established
by Seller for its provider network is available or is willing to
accept Seller's payment rates, and (ii) LabCorp has chosen not to be
a provider of Seller pursuant to Sections 2 and 6 of the Laboratory
Services Agreement (as defined in the Purchase Agreement); or
D. The performance of laboratory services under Seller's existing
agreements with Seller's customers who would not assign such
agreements to Purchaser, or under agreements which Purchaser elects
not to assume, to the extent that services under such agreements
must be performed by Seller under the terms of such agreements,
during the termination notice period, which shall consist of the
period of time commencing with the notice of termination of such
agreements and ending with the termination of the agreements
pursuant to the termination provisions thereunder.
V. SPECIFIC ENFORCEMENT; EXTENSION OF PERIOD. Seller acknowledges that the
restrictions contained in Sections II and III hereof are reasonable and
necessary to protect the legitimate interests of Purchaser and that
Purchaser would not have entered into the
2
<PAGE> 3
Purchase Agreement in the absence of such restrictions. Seller also
acknowledges that any breach by it of Sections II or III hereof will cause
continuing and irreparable injury to Purchaser for which monetary damages
would not be an adequate remedy. Seller agrees that it shall not, in any
action or proceeding to enforce any of the provisions of this Agreement,
assert the claim or defense that an adequate remedy at law exists. In the
event of such breach by Seller, Purchaser shall have the right to enforce
the provisions of Sections II and III of this Agreement by seeking
injunctive or other relief in any court, without a requirement that a bond
be posted, and this Agreement shall not in any way limit remedies of law
or in equity otherwise available to Purchaser.
If any of the provisions of this Agreement are held to be in any respect
an unreasonable restriction upon Seller, then they shall be deemed to
extend only over the maximum period of time, geographic area, or range of
activities as to which they may be enforceable. In the event that Seller
shall be in violation of the restrictive covenants in this Agreement, then
the Restricted Period shall be extended for a period of time equal to the
period of time during which such breach shall occur, and, in the event
that Purchaser should be required to seek relief from such breach in any
court, board of arbitration or other tribunal, then the Restricted Period
shall be extended for the period of time required for the pendency of such
proceedings, including all appeals.
VI. MISCELLANEOUS.
A. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
Purchaser and its successors and assigns.
B. WAIVER. The waiver by Purchaser of the breach of any term or
provision of this Agreement shall not operate as or be construed to
be a waiver of any other or subsequent breach of this Agreement.
C. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
construed and enforced in accordance with the substantive laws of
the State of Michigan, without regard to the principles of conflicts
of laws of any jurisdiction.
D. INVALIDITY. If any provision of this Agreement shall be determined
to be void, invalid, unenforceable or illegal for any reason, the
validity and enforceability of all of the remaining provisions
hereof shall not be affected thereby. If any particular provision of
this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such
amendment to apply only to the operation of such provision in the
particular jurisdiction in which such adjudication is made; provided
that, if any provision contained in this Agreement shall be
adjudicated to be invalid or unenforceable because such provision is
held to be excessively broad as to duration, geographic scope,
activity or subject, such
3
<PAGE> 4
provision shall be deemed amended by limiting and reducing it so as
to be valid and enforceable to the maximum extent compatible with
the applicable laws of such jurisdiction, such amendment only to
apply with respect to the operation of such provision in the
applicable jurisdiction in which the adjudication is made.
E. SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not
affect interpretation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day first above written.
UNIVERSAL STANDARD HEALTHCARE, INC.
By: /s/ Eugene E. Jennings
------------------------------
Eugene E. Jennings
Title: President and Chief Executive Officer
4
<PAGE> 1
EXHIBIT 99.10
UNIVERSAL SUBORDINATION AGREEMENT
THIS UNIVERSAL SUBORDINATION AGREEMENT (the "Agreement"), dated as of
August 3, 1998, is by and among Universal Standard Healthcare, Inc., a Michigan
corporation ("Universal") and Universal Standard Healthcare of Delaware, Inc.
("Universal of Delaware") (Universal and Universal of Delaware are referred to
collectively hereinafter as the "Borrowers"), and Laboratory Corporation of
America Holdings, a Delaware corporation ("LCA").
WHEREAS, Universal and LCA are parties to a certain Co-Marketing
Agreement, dated August 3, 1998 (the "Co-Marketing Agreement"), pursuant to
which LCA will provide marketing services to Universal and Universal of Delaware
and its subsidiaries;
WHEREAS, Universal has agreed to pay LCA a termination fee under
certain circumstances set forth in Section 10 of the Co-Marketing Agreement (the
"Co-Marketing Termination Fee");
WHEREAS, LCA has agreed to subordinate its right to payment of the
Co-Marketing Termination Fee to Senior Debt, Purchase Money Debt and Capital
Leases (as each is defined below) of the Borrowers and to subordinate its
security interest in certain assets of the Borrowers granted by a certain
Security Agreement dated August 3, 1998, between LCA and the Borrowers (the
"Security Agreement") to the security interest held by the holders of Senior
Debt, Purchase Money Debt and Capital Leases; and
WHEREAS, it is a condition precedent to Borrowers entering into a
certain Stock Purchase Agreement dated July 16, 1998 between Universal and LCA
(the "Stock Purchase Agreement") that this Agreement be entered into.
NOW, THEREFORE, in consideration of promises and mutual covenants and
agreements, set forth herein, the parties agree as follows:
1. Subordination. LCA hereby postpones and subordinates (a) all of
the Indebtedness (as defined in the Subordination Agreement dated August 3, 1998
between LCA and NBD Bank attached hereto as Exhibit A (the "NBD Subordination
Agreement")) to the prior payment in full of all of the Obligations (as defined
below) and (b) all liens, security interests, mortgages, and other collateral
security for the Indebtedness (other than liens, security interests and other
collateral security granted in a certain Indemnification Security Agreement
dated August 3, 1998 between LCA and the Borrowers) to all liens, security
interests, mortgages and other collateral security for the Obligations on the
terms and conditions set forth in Sections 5 through 20, inclusive, and 33 of
the NBD Subordination Agreement, as though the holders of the Obligations were
NBD Bank.
2. Obligations. All of each Borrower's present and future
indebtedness, obligations or liabilities (and, in addition, of each Borrower as
a Debtor-in-Possession under any bankruptcy act or code, state or federal law,
common law or equitable doctrine and of any trustee, receiver or other party
appointed for any Borrower under any such laws, doctrine or proceedings) to
holders of the Obligations, including contingent reimbursement obligations of
any Borrower or any Obligor (as
<PAGE> 2
defined below) to holders of the Obligations in connection with standby and
commercial letters of credit now outstanding or issued in the future issued by
holders of the Obligations for any Borrower's or any Obligor's account
(collectively, "Letters of Credit" and individually a "Letter of Credit"),
leases, adequate protection payments and interest accrued or to be accrued
(including but not limited to interest accruing after the commencement of any
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to any Borrower or its property or in an assignment for the benefit of
creditors (collectively, "Proceeding") at the rate then specified in the Credit
Agreements, whether or not such interest is an allowable claim or would
constitute a secured claim in any such Proceeding), prepayment premiums,
absolute or contingent obligations, all obligations and liabilities arising
under any guaranty agreements given by any Borrower in favor of holders of the
Obligations, and obligations acquired by purchase or otherwise as well as all
collection costs and attorneys' fees (whether or not such costs, attorneys'
fees, charges, etc. are an allowable claim or would constitute a secured claim
in any Proceeding) for which any Borrower is now or hereafter becomes liable to
pay to any holder of the Obligations under any agreement (including the Credit
Agreements) or by law are collectively referred to herein as the "Obligations";
provided that, as between the holders of the Obligations and LCA only, for
purposes of this Agreement, the maximum principal amount (including the face
amount of Letters of Credit) that may be included in the Obligations is:
(A) Up to $4,000,000 in Senior Debt (as defined below) from August 3,
1998 to June 29, 1999, $5,000,000 in Senior Debt from June 30, 1999 to June 29,
2000 and $6,000,000 in Senior Debt after June 30, 2000;
(B) Capital Leases (as defined below) in effect at August 3, 1998 and
up to $1,000,000 in additional Capital Leases and Purchase Money Debt (as
defined below) in each calendar year thereafter;
(C) Up to $1,500,000 in Letters of Credit (as defined below); and
(D) Managed Care Letters of Credit (as defined below) in such amounts
as may be outstanding from time to time,
and, in addition to such maximum principal amount, also included in Obligations
are all interest, expenses, fees, and costs (including attorneys' fees) due or
incurred with respect to such maximum principal amount. "Obligations" does not
include interest on principal amounts in excess of the foregoing limits.
The "Credit Agreements" shall mean all agreements between the Borrowers
and the holders of the Obligations.
For purposes of this Agreement, the term "Senior Debt" shall mean the
principal of (and premium, if any) and interest on, and all obligations of the
Borrowers and their subsidiaries for Debt, whether outstanding on the date
hereof or hereafter created, to banks, financial institutions, insurance
companies, business and industrial development corporations, registered
investment companies, entities regularly engaged in the business of lending or
investing money, and entities constituting Accredited Investors as defined in
Rule 501(a)(1), (2) or (3) of the General Rules and Regulations under the
2
<PAGE> 3
Securities Act of 1933, as amended, and (ii) any and all extensions and renewals
of any of the foregoing; provided, however, that Senior Debt shall not include
the 8.25% Convertible Subordinated Debentures due February 1, 2006 and
indebtedness as to which the instrument creating or evidencing the same states
that such indebtedness is not superior in right of payment (or is subordinate or
junior) to the Indebtedness.
"Debt" means all liabilities of any of the Borrowers or their
subsidiaries for or in respect of (i) borrowed money or which has been incurred
in connection with the acquisition of property, (ii) obligations for or in
respect of borrowed money or incurred in connection with the acquisition of
property secured by a lien on the property of any of the Borrowers or their
subsidiaries, other than Capital Leases and Purchase Money Debt, (iii)
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iv) all obligations to pay the deferred purchase price of property or services,
other than Capital Leases, Purchase Money Debt and customary trade payables, (v)
all debt of any other person or entity guaranteed by any of the Borrowers or
their subsidiaries and (vi) all obligations, contingent or otherwise, with
respect to letters of credit and banker's acceptances, other than letters of
credit issued to customers of any of the Borrowers or their subsidiaries to
secure the performance by any of the Borrowers or their subsidiaries of their
obligations to such customers under managed care agreements between the customer
and any of the Borrowers or their subsidiaries ("Managed Care Letters of
Credit"), ("Letters of Credit"). "Capital Leases" means all leases of property,
the obligations for rental of which are required to be capitalized on the
consolidated balance sheet of the Borrowers and their subsidiaries in accordance
with generally accepted accounting principles ("GAAP"). "Purchase Money Debt"
means all liabilities incurred by any of the Borrowers or their subsidiaries to
acquire property which is secured solely by such property or other property
securing Purchase Money Debt.
In the event that any of the aforementioned maximum principal amounts
of Senior Debt, Capital Leases, Purchase Money Debt or Letters of Credit (each a
"Principal Ceiling") are exceeded at any time, the terms and conditions of this
Agreement, including postponement or subordination of the payment of any
Indebtedness and the liens, security interests, mortgage and other collateral
security for the Indebtedness, shall be null and void and of no effect
whatsoever as to the excess above the Principal Ceiling, including any
Obligations (besides principal) arising out of or in connection with any such
excess.
3. Acknowledgements. LCA agrees to enter into such agreements or
other documents as may reasonably be required by the holders of the Obligations
to acknowledge, evidence, confirm or clarify the provisions of this Agreement
and to acknowledge the security interest of any holder of the Obligations and
the subordination, as provided herein, of LCA's security interest to the
security interests of such holders of the Obligations.
4. Miscellaneous.
(a) As between the holders of the Obligations and LCA only, in
the event that there is an express conflict between the terms and provisions of
the Credit Agreements and of this Agreement, the terms and conditions of this
Agreement shall govern and control. As between the
3
<PAGE> 4
holders of the Obligations and LCA only, in the event that there is an express
conflict between the terms and provisions of the agreements between LCA and the
Borrowers relating to the Indebtedness and of this Agreement, the terms and
conditions of this Agreement shall govern and control. This Agreement is solely
for the holders of the Obligations and LCA's benefit and no other party,
including the Borrowers, is intended to be benefited by this Agreement.
(b) Except where the context otherwise requires, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.
(c) This Agreement constitutes the entire understanding of LCA
and Borrowers regarding the subject matter provided for in this Agreement. This
Agreement may only be modified, amended or supplemented by a writing signed by
both LCA and the Borrowers.
(d) This Agreement may be executed in counterparts, all of
which together will be deemed an original of this Agreement. Furthermore,
facsimile/telecopy copies of signatures shall be treated as original signatures
for all purposes.
(e) The rights and remedies specified in this Agreement are
cumulative of each other and not exclusive of any rights or remedies Borrowers
or the holders of the Obligations would otherwise have. Neither the failure nor
any delay on the part of Borrowers or the holders of the Obligations to exercise
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof or give rise to an estoppel, nor be construed as an agreement to modify
the terms of this Agreement, nor shall any single or partial exercise of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver of any breach of any provision of this Agreement will be
deemed a waiver of any preceding or succeeding breach or of any other provision
of this Agreement. No extension of time for performance of any obligations or
acts will be deemed an extension of the time for performance of any other
obligations or acts. No waiver by a party hereunder shall be effective unless it
is in writing and signed by the party making such waiver, and then only to the
extent specifically stated in such writing.
(f) This Agreement shall be governed by and construed
according to the internal laws of the State of Michigan applicable to contracts
made and performed within the State of Michigan, without regard to conflict of
laws principles.
(g) In various places in this Agreement or the NBD
Subordination Agreement, the phrase "payment in full of the Obligations" or
other similar wording is used. Given that a portion of the Obligations may
consist of contingent reimbursement obligations with respect to the Letters of
Credit, the phrase "payment in full of the Obligations" and other similar
phrases mean, in addition to their ordinary meaning, that the beneficiaries of
all Letters of Credit have returned all such Letters of Credit to the holders of
the Obligations undrawn upon and all such Letters of Credit have been cancelled
and terminated.
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<PAGE> 5
(h) This Agreement benefits and binds LCA, its successors and
assigns, and binds the Borrowers and their successors and assigns and benefits
the holders of the Obligations.
(i) The section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
(j) All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Agreement shall
be in writing and delivery shall be deemed sufficient in all respects and to
have been duly given on the date of service if delivered personally or by
facsimile transmission if receipt is confirmed to the party to whom notice is to
be given, or three (3) days after the date of mailing if mailed by first class -
return receipt requested, postage prepaid and properly addressed as follows:
If to the Borrowers, to:
Universal Standard Healthcare, Inc.
Universal Standard Healthcare of Delaware, Inc.
26500 Northwestern Highway
Southfield, MI 48076
Attention: President
Copies to:
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
Attention: Thomas S. Vaughn, Esq.
If to LCA, to:
Laboratory Corporation of America Holdings
358 South Main Street
Burlington, NC 27215-9990
Attention: Legal Department
Copies to:
Mezzullo & McCandlish
Suite 825
4300 Six Forks Road
Raleigh, NC 27609
Attention: John R. Erwin, Esq.
or to such other address as may be specified in writing by any of the above.
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<PAGE> 6
(k) Should any part of this Agreement for any reason be
declared by any court of competent jurisdiction to be invalid, that decision
shall not affect the validity of the remaining portion, which shall continue in
full force and effect as if this Agreement had been executed with the invalid
portion eliminated, it being the intent of the parties that they would have
executed the remaining portion of the Agreement without including any part or
portion that may for any reason be declared invalid.
(l) In connection with any litigation brought to enforce any
provision of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorney's fees and costs incurred at the trial and appellate
levels.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be delivered on their behalf on the day and year first written
above.
UNIVERSAL STANDARD HEALTHCARE, INC.
By: /s/ Eugene E. Jennings
------------------------------------
Eugene E. Jennings, President
UNIVERSAL STANDARD HEALTHCARE OF
DELAWARE, INC.
By: /s/ Alan S. Ker
------------------------------------
Alan S. Ker, Chief Financial Officer
LABORATORY CORPORATION OF AMERICA
HOLDINGS
By: /s/ Bradford T. Smith
------------------------------------
Executive Vice President
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<PAGE> 7
SUBORDINATION AGREEMENT
Under This Agreements Certain Payments To The Subordinating
Creditor Are Allowed Unless The Borrowers Default
Date: August 3, 1998
NBD Bank ("NBD" or "Lender") and the undersigned creditor, Laboratory
Corporation of America Holdings, a Delaware corporation individually and on
behalf of its subsidiaries and affiliates and successors and assigns
(collectively, "Junior Creditor"), of Universal Standard Healthcare, Inc.,
formerly known as Universal Standard Medical Laboratories, Inc., a Michigan
corporation ("USML") and Universal Standard Healthcare of Delaware, Inc.,
formerly known as Universal Standard Manage Care, Inc., a Delaware corporation
("Delaware Managed Care"; for convenience, USML and Delaware Managed Care are
referred to collectively as the "Borrowers" and individually as a "Borrower")
agree to the following:
1. USML is now contingently indebted to Junior Creditor in connection
with a Co-Marketing Agreement dated on or about August 3, 1998 between Junior
Creditor and USML (the "Co-Marketing Agreement"), which provides in paragraph 10
thereof for a termination fee (the "Co-Marketing Termination Fee"). The
indebtedness evidenced by or described in the Co-Marketing Agreement (including
the Co-Marketing Termination Fee) and all of each Borrower's other present and
future indebtedness, obligations or liabilities (and, in addition, of each
Borrower as a Debtor-in-Possession under any bankruptcy act or code, state or
federal law, common law or equitable doctrine and of any trustee, receiver or
other party appointed for any Borrower under any such laws, doctrine or
proceedings) to Junior Creditor that are secured by any lien, encumbrance, or
other interest in any assets or property of any Borrower, including any of the
following that are secured by any lien, encumbrance, or other interest in any
assets or property of any Borrower: adequate protection payments and interest
accrued or to be accrued (including but not limited to interest accruing after
the commencement of any bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to any Borrower or its property or an assignment for
the benefit of creditors), prepayment premiums, absolute or contingent
obligations, all obligations and liabilities arising under all guaranty
agreements given by any Borrower in favor of Junior Creditor, and obligations
acquired by purchase or otherwise as well as all collection costs and attorneys'
fees incurred by Junior Creditor in enforcing its rights against any Borrower
(or any guarantor of any Borrower's obligations) or any collateral for any
Borrower's indebtedness, together with all fees, charges, reimbursement
obligations, indemnity obligations, expenses and attorneys' fees for which any
Borrower is now or hereafter becomes liable to pay to Junior Creditor under any
agreement between any Borrower and Junior Creditor or by law are collectively
referred to herein as the "Indebtedness". Junior Creditor's security for the
Indebtedness is briefly described below next to Junior Creditor's name. Nothing
in this Agreement is intended to permit nor does it permit or allow, without the
prior written consent of Lender, (a) any further loans or advances by Junior
Creditor to any Borrower which constitute Indebtedness or other increases in the
Indebtedness or (b) any further grant of security by any Obligor (as defined
below) to Junior Creditor.
2. Junior Creditor represents and warrants that neither the
Indebtedness nor any collateral security therefor (if any) has been assigned to
or subordinated or subjected to a security interest in favor of any other person
or entity.
<PAGE> 8
3. Junior Creditor is entering into this Agreement:
(a) To induce Lender to enter into a Sixth Amendment to Revolving
Credit Loan Agreement dated on or about the same date as this Agreement
(the "Sixth Amendment"), between Lender, Borrowers, and others, which
amends the Revolving Credit and Loan Agreement dated April 30, 1997, as
previously amended (as amended (including as amended by the Sixth
Amendment), the "Loan Agreement") [for convenience, (1) the Loan
Agreement and all other notes, documents, instruments, and agreements
executed by NBD or any other party to the Loan Agreement, as may be
amended or restated from time to time, are referred to collectively as
the "Credit Agreements" and individually as "Credit Agreement" and (2)
the Borrowers and each other party to the Loan Agreement, except for
NBD, are referred to collectively as the "Obligors" and individually as
an "Obligor"].
(b) In consideration of loans, advances, payments, extensions of
credit (including the extension or renewal, in whole or in part, of any
debt), benefits or financial accommodations previously made to any
Borrower (or any other party to the Loan Agreement) or which may be
made to any Borrower (or any other party to the Loan Agreement).
(c) In consideration of any of each Borrower's obligations to
Lender, now existing or arising in the future.
4. All of each Borrower's present and future indebtedness,
obligations or liabilities (and, in addition, of each Borrower as a
Debtor-in-Possession under any bankruptcy act or code, state or federal law,
common law or equitable doctrine and of any trustee, receiver or other party
appointed for any Borrower under any such laws, doctrine or proceedings) to
Lender, including contingent reimbursement obligations of any Borrower or any
Obligor to NBD in connection with standby and commercial letters of credit now
outstanding or issued in the future issued by NBD for any Borrower's or any
Obligor's account (collectively, "Letters of Credit" and individually a "Letter
of Credit"), leases, adequate protection payments and interest accrued or to be
accrued (including but not limited to interest accruing after the commencement
of any bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to any Borrower or its property or in an assignment for the
benefit of creditors (collectively, "Proceeding") at the rate then specified in
the Credit Agreements, whether or not such interest is an allowable claim or
would constitute a secured claim in any such Proceeding), prepayment premiums,
absolute or contingent obligations, all obligations and liabilities arising
under all guaranty agreements given by any Borrower in favor of Lender, and
obligations acquired by purchase or otherwise as well as all collection costs
and attorneys' fees incurred by Lender in enforcing its rights against any
Borrower (or any guarantor of any Borrower's obligations) or any collateral for
any Borrower's obligations, together with all fees, charges, reimbursement
obligations, indemnity obligations, expenses and attorneys' fees (whether or not
such costs, attorneys' fees, charges, etc. are an allowable claim or would
constitute a secured claim in any Proceeding) for which any Borrower is now or
hereafter becomes liable to pay to Lender under any agreement (including the
Credit Agreements) or by law are collectively referred to herein as the
"Obligations"; provided that as between Lender and Junior Creditor only, for
purposes of this Agreement, the maximum principal amount (including the face
amount of the Litigation Letter of
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<PAGE> 9
Credit, as defined in the Loan Agreement) that may be included in the
Obligations is $7,500,000 plus the Letter of Credit Amount for the period from
the date hereof through June 28, 1999, increasing to $8,500,000 plus the Letter
of Credit Amount for the period from June 29, 1999 through June 28, 2000,
increasing to $9,500,000 plus the Letter of Credit Amount on and after June 29,
2000 and, in addition to such maximum principal amount, also included in
Obligations are all interest, expenses, fees, and costs (including attorneys'
fees) due or incurred with respect to such maximum principal amount. "Letter of
Credit Amount" means all amounts due NBD in connection with letters of credit
issued by NBD to customers of the Obligors and their subsidiaries to secure
performance by the Obligors and their subsidiaries of their obligations to such
customers under managed care agreements between the customer and the Obligors
and their subsidiaries including, without limitation, letters of credit issued
under Section 2.3 of the Loan Agreement. "Obligations" does not include interest
on principal amounts in excess of the foregoing limits.
5. Junior Creditor hereby postpones and subordinates (a) all of the
Indebtedness to the prior payment in full of all of the Obligations and (b) all
liens, security interests, mortgages and other collateral security for the
Indebtedness to all liens, security interests, mortgages and other collateral
security for the Obligations.
6. Junior Creditor agrees that all liens and security interests in
favor of Junior Creditor now existing or hereafter arising in property of any
Borrower and/or securing the Indebtedness (including proceeds of insurance
policies) are and will be junior in right of priority to and subordinate to any
liens or security interests that Lender, its successors or assigns, have or may
have in the same property. The priorities provided for in this Agreement shall
apply:
(a) without regard to the time or order of attachment,
perfection, filing or recording of the mortgages, security interests
and other liens to secure the obligations of any Borrower, or the
failure to give notice of the acquisition or expected acquisition of
any such mortgage, security interest or lien;
(b) notwithstanding anything to the contrary in the provisions
of the United States Bankruptcy Code or the Uniform Commercial Code in
any relevant state of the United States or the laws of the State of
Michigan or any other relevant state, which relate to the priority of
liens, security interests or mortgages;
(c) with respect to all Indebtedness of each Borrower to the
Junior Creditor, and all of the Obligations of each Borrower to Lender,
whenever made, created or acquired; and
(d) notwithstanding the lapse of perfection of Lender's liens or
security interests or Lender's failure to perfect its liens or security
interests.
7. Junior Creditor acknowledges and agrees that all of the
Obligations are secured by a first-priority, properly perfected, nonavoidable,
lien and security interest in, among other things, all of each Borrower's and
each other Obligor's present and future personal property including all of each
Borrower's and each other Obligor's now existing or hereafter created or
acquired accounts, accounts receivable, documents, instruments, chattel paper,
general intangibles (including, but not limited to all patents, trademarks and
copyrights), inventory,
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<PAGE> 10
equipment, fixtures, tax refunds, earned and unearned insurance premium refunds,
causes of action (including recoveries under 11 U.S.C. Section 542 through 550
and 553), and all products and proceeds of all of the foregoing and all
accessions to any of the foregoing. In furtherance of the foregoing, Junior
Creditor agrees not to contest the validity, extent, perfection, priority,
enforceability or any other aspect of any lien, security interest or mortgage
granted by any Borrower or any other Obligor to Lender or to take or permit any
action prejudicial to or inconsistent with Lender's rights under this Agreement
including Lender's priority position over Junior Creditor that is created by
this Agreement.
8. Unless (1) any Obligor has defaulted (irrespective of whether
Lender has agreed to forbear in enforcing its rights in connection with the
occurrence of such defaults) under the Credit Agreements or any agreement or
note referred to or incorporated therein and during the continuance of such
default, or (2) the making of a payment would cause a default under the Credit
Agreements or any related documents or agreements, Junior Creditor may receive
payments from USML on account of the Indebtedness, but only as follows:
(a) Payment of the Co-Marketing Termination Fee may be made at
its scheduled maturity date as provided in the Co-Marketing
Agreement (without amendment), but not by prepayment,
acceleration or otherwise.
(b) No payments of any nature or kind may be made on any other
Indebtedness.
However, upon receipt of such written notice of default from Lender
(irrespective of whether Lender has agreed to forbear in enforcing its rights in
connection with the occurrence of such default), Junior Creditor agrees not to
sue for, take or receive payment on account of the Indebtedness or take or
receive any security for any part of the Indebtedness, until all Obligations to
Lender have been fully paid to Lender. Any payments received by Junior Creditor
on account of the Indebtedness after receiving such notice from Lender or that
are otherwise not allowed to be received by Junior Creditor under the terms of
this Agreement shall be held by Junior Creditor in trust for Lender and shall be
immediately turned over to Lender in the form received except for the addition
of any endorsement or assignment necessary to effect the transfer of all rights
therein to Lender, to be credited against the Obligations. Lender is irrevocably
authorized to supply any required endorsement or assignment which may have been
omitted.
9. Junior Creditor agrees that until the earlier of (1) the date on
which all of the Obligations have been paid in full or (2) the expiration of the
Standstill Period (the earlier to occur of such dates is referred to as the
"Enforcement Date"), it will at no time take possession of any collateral
securing the Indebtedness or the Obligations, or foreclose or begin enforcement
of its rights against such collateral or take any other action of any nature or
kind with respect to such collateral, or institute any litigation to collect the
Co-Marketing Termination Fee without the prior written consent of Lender, which
may be granted or withheld in Lender's sole discretion. "Standstill Period"
means the period commencing on the date of this Agreement and ending on the date
that is 120 days after the date on which the Co-Marketing Termination Fee is due
in accordance with the terms of the Co-Marketing Agreement.
10. Junior Creditor must give simultaneous notice to NBD at the
address provided below under NBD's signature line in this Agreement of any
notices, correspondence, or other
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<PAGE> 11
communication between Junior Creditor and Borrower regarding the Co-Marketing
Agreement (other than usual and customary business communications) or the
Co-Marketing Termination Fee including, without limitation, any of the foregoing
relating to facts and circumstances under which the Co-Marketing Termination Fee
may become payable. If any Borrower defaults on the Indebtedness, the Junior
Creditor shall give Lender written notice of the default. However, regardless of
any Borrower's default on the Indebtedness, until the Enforcement Date Junior
Creditor will not seek to foreclose or otherwise realize upon any security for
the Indebtedness. Until the Enforcement Date Junior Creditor shall have no right
to foreclose or otherwise realize on any security. Furthermore, until the
Enforcement Date regardless of any Borrower's default on the Indebtedness,
Junior Creditor will not institute any litigation of any nature or kind against
any Borrower or any Borrower's assets or property without the prior written
consent of Lender (which may be granted or withheld in Lender's sole
discretion).
11. Upon any distribution of any of any Obligor's assets in which
Lender has a lien, security interest or mortgage, whether by reason of sale,
reorganization, liquidation, dissolution, arrangement, bankruptcy, receivership,
assignment for the benefit of creditors, foreclosure or otherwise, Lender shall
be entitled to receive payment in full of the Obligations before Junior Creditor
receives any payment on account of the Indebtedness. Without limitation, the
preceding sentence applies to any monies or other things of value obtained by
Junior Creditor after the expiration of the Standstill Period.
12. In the event of any bankruptcy or similar proceedings of any
Borrower, Junior Creditor agrees not to oppose directly or indirectly in any
manner any actions taken or supported by Lender including but not limited to
opposition to use of cash collateral, financing, proceedings by Lender to lift
the automatic stay or otherwise realize on Lender's security interests and to
that end, Junior Creditor shall not take any action in any bankruptcy or similar
proceeding with respect to any of the assets or property of any Borrower without
the prior written consent of Lender. In the event of (a) any insolvency,
bankruptcy, receivership, liquidation, foreclosure, reorganization in
bankruptcy, readjustment, composition or other similar proceeding relating to
any Borrower or its properties, (b) any proceeding for the liquidation,
dissolution or other winding-up of any Borrower, voluntary or involuntary, and
whether or not involving insolvency or bankruptcy proceedings, (c) any general
assignment by any Borrower for the benefit of creditors, or (d) any
distribution, division, marshalling or application of any of the properties or
assets of any Borrower or the proceeds thereof to creditors, voluntary or
involuntary, and whether or not involving legal proceedings, then and in any
such event:
(i) all Obligations shall first be paid in full (including all
principal and interest (including but not limited to interest accruing
after the commencement of any Proceeding) at the rate then specified in
the Credit Agreements, whether or not such interest is an allowable
claim or would constitute a secured claim in any such Proceeding) and
costs and attorneys' fees whether or not such costs and attorneys' fees
are an allowable claim or a secured claim in any Proceeding) before any
payment or distribution of any character, whether in cash, securities
or other property, shall be made on account of or in connection with
any Indebtedness;
(ii) all principal and interest on the Indebtedness shall
forthwith become due and payable, and any payment or distribution of
any character, whether in cash, securities or other property, which
would otherwise (but for the terms hereof) be payable or
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<PAGE> 12
deliverable in respect of any Indebtedness, shall be paid or delivered
directly to Lender, for application to the payment of the Obligations,
until all Obligations shall have been paid in full, and Junior Creditor
irrevocably authorizes, empowers and directs all receivers, trustees,
liquidators, conservators, fiscal agents and others having authority in
the premises to effect all such payments and deliveries.
13. (a) During any period in which an Event of Default exists under
the Credit Agreements, Lender or Lender's representative shall have the right to
act as Junior Creditor's attorney-in-fact to enforce and ensure compliance with
all of the terms hereof and Junior Creditor hereby irrevocably appoints Lender
or Lender's representative as its true and lawful attorney, with full power of
substitution, in the name of Junior Creditor or in the name of Lender, for the
use and exclusive benefit of Lender, without notice to Junior Creditor or any of
its representatives, successors or assigns, to perform such acts and functions
as Lender deems desirable to enforce all of the terms and provisions of this
Agreement including the following acts, at Lender's option, at any time
including at any meeting of the creditors of any Borrower or in connection with
any case or proceeding, whether voluntary or involuntary, for the distribution,
division or application of the assets of any Borrower or the proceeds thereof,
regardless of whether such case or proceeding is for liquidation, dissolution,
winding up of affairs, reorganization or arrangement of any Borrower, or for the
composition of the creditors of any Borrower, in bankruptcy or in connection
with a receivership, or under an assignment for the benefit of creditors of any
Borrower, or otherwise:
(i) to enforce claims comprising the Indebtedness, either in its
own name or in the name of Junior Creditor, by proof of debt, proof of
claim, suit or otherwise;
(ii) to collect any assets of any Borrower distributed, divided or
applied by way of dividend or payment, or any securities issued, on
account of the Indebtedness and to apply the same, or the proceeds of
any realization upon the same that Lender in its discretion elects to
effect, to the Obligations until all of the Obligations (including but
not limited to interest accruing after the commencement of any
Proceeding), at the rate then specified in the Credit Agreements,
whether or not such interest is an allowable claim or would constitute
a secured claim in any such Proceeding) has been paid in full,
rendering any surplus to Junior Creditor if and to the extent permitted
by law;
(iii) to vote claims comprising the Indebtedness to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension;
(iv) to have full power to act in the place of Junior Creditor in
connection with the Indebtedness;
(v) to take generally any action in connection with any such
meeting, case or proceeding that Junior Creditor would be authorized or
have power to take but for this Agreement.
(vi) NBD agrees it will not use the foregoing power of attorney to
settle, reduce or otherwise compromise the Indebtedness for an amount
less than the full amount thereof unless one or more of the Borrowers
is in a bankruptcy or other similar insolvency proceeding. NBD further
agrees to give Junior Creditor five days prior
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<PAGE> 13
written notice before its settles, reduces or otherwise compromises the
Indebtedness and if Junior Creditor does not agree with such proposed
action, then Junior Creditor may purchase the Obligations without
representation, warranty, or guaranty of any nature or kind, for cash,
at par, and on such other terms and conditions as are mutually
satisfactory to Junior Creditor and NBD.
(b) The foregoing appointment (and all other appointments
contained herein) is coupled with an interest and is irrevocable so long as any
Obligations remain unpaid or unperformed.
(c) Lender's appointment as agent and/or attorney of Junior
Creditor is intended to benefit Lender solely and Lender shall have no duties or
obligations (including but not limited to those generally associated with
agents, attorneys and/or fiduciaries) to Junior Creditor in connection with such
agency and appointment; provided that if Lender acts in Junior Creditor's place
with respect to the Indebtedness, Lender must act in a commercially reasonably
manner as viewed solely from Lender's perspective and not from the Junior
Creditor's perspective. Without limiting the generality of the foregoing, in no
event shall Lender be liable to Junior Creditor for any failure to prove the
Indebtedness, to exercise any right with respect thereto or to collect any sums
or other property payable thereon or on account thereof.
14. If any payment or distribution of any character (whether in cash,
securities, or other property) or any securities shall be received by Junior
Creditor in contravention of any of the terms of this Agreement, such payment or
distribution or security shall be held in trust for the benefit of, and shall
promptly be paid over or delivered and transferred to Lender for application to
the payment of all Obligations remaining unpaid (or, in Lender's sole
discretion, to be held by Lender as security for the Obligations in an amount
equal to 110% of the Obligations (treating for this purpose the full face amount
of each Letter of Credit as an outstanding principal obligation)), to the extent
necessary to pay all such Obligations in full. In the event of the failure of
Junior Creditor to endorse or assign any such payment, distribution or security,
Lender or such Lender's representative is hereby irrevocably authorized to
endorse or assign the same.
15. Junior Creditor shall not, without Lender's prior written consent,
(a) assign (unless the assignee agrees in writing that it is a party to this
Agreement), pledge or subordinate in favor of any other person or entity, any
part of the Indebtedness or any right, claim or interest in the Indebtedness or
in any collateral security (if any) therefor, or (b) prior to the Enforcement
Date commence or join with any other creditor in commencing any bankruptcy,
reorganization, insolvency proceeding or other similar proceeding against any
Borrower; provided that this subparagraph (b) does not apply if Borrowers owe
Junior Creditor more than $500,000 in indebtedness which is in default and which
does not constitute Indebtedness.
16. Lender may at any time, in its sole discretion, renew, extend,
modify or compromise the time of payment of any part of the Obligations or any
other term thereof, extend additional credit to any Borrower (which will
constitute part of the Obligations), modify the rate of interest payable on the
Obligations, waive or release any collateral that may be held as security for
the Obligations whether or not also security for the Indebtedness, release all
or any guarantors of the Obligations, and enter into any agreement with any
Borrower which Lender may deem desirable, without notice to or further assent
from Junior Creditor and without in any way affecting Lender's rights or Junior
Creditor's obligations under this Agreement, except that
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<PAGE> 14
Junior Creditor is entitled to five days prior written notice from NBD of any
such modification or amendment to the Credit Agreements if an Event of Default
exists under the Credit Agreements and to 15 days prior written notice from NBD
of any such change or modification if no Event of Default exists under the
Credit Agreements; provided that Junior Creditor's sole right is to receive
notice of such change or modification and Junior Creditor's consent is not
required with respect to any such change or modification; provided further that
Lender may, in its sole and absolute discretion, without prior notice to Junior
Creditor, make any changes or modifications to the Credit Agreements that waive
any rights, protections, or benefits for Lender thereunder. Junior Creditor may,
but is not required to, cure any Event of Default under the Credit Agreements
that is capable of being cured as follows: (1) within five days of receipt of a
written notice from NBD of default in the case of a payment default and (2)
within 15 days of receipt of a written notice from NBD of Default in the case of
any other Event of Default. Furthermore, the obligations of Junior Creditor and
the subordination and other provisions of this Agreement shall in no way be
affected by any exercise or nonexercise of any right, power or remedy under or
in respect of any Obligations or any instrument or agreement (including the
Credit Agreements) relating thereto, or any waiver, consent, release,
indulgence, extension, renewal, modification, delay or other action, inaction or
omission in respect of any Obligations or any instrument or agreement (including
the Credit Agreements) relating thereto or any security therefor or any guaranty
thereof. NBD agrees that it will not raise interest rates for time periods that
have passed. NBD also agrees to use good faith efforts to give Junior Creditor
notice of any Events of Default that have occurred under the Loan Documents and
that NBD declares, but NBD has no liability or obligation of any nature or kind
to Junior Creditor if it fails to give such notice and, furthermore, any such
notice will not start the Standstill Period running unless NBD expressly so
provides in such written notice.
17. Junior Creditor must type, write or otherwise conspicuously
imprint on each note, document or other instrument evidencing or related to the
Indebtedness the following legend:
RIGHTS OF THE HOLDER TO RECEIVE PAYMENT OF THE CO-MARKETING
TERMINATION FEE ARE SUBJECT AND SUBORDINATE TO THE PRIOR PAYMENT
OF ALL OBLIGATIONS OF THE MAKER TO NBD BANK PURSUANT TO THE TERMS
OF A SUBORDINATION AGREEMENT DATED AS OF AUGUST 3, 1998.
18. NOTICES. Any notice or other communication required or permitted
to be given under this Agreement or any of the Loan Documents must be in writing
and delivered personally, telegraphed, telecopied or telexed, or mailed (by
certified or registered mail or by recognized overnight courier), postage
prepaid, and is deemed given when so delivered personally, telegraphed or
telexed, or if mailed, three days after the date of mailing, addressed as
follows (or to any another address as to which any party so advises the other
parties in writing):
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<PAGE> 15
(a) If to Borrowers: Universal Standard Healthcare, Inc.
26500 Northwestern Highway
Southfield, MI 48076
Attn: President
With a copy to: Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243-1668
Attn: Thomas S. Vaughn, Esq.
(b) If to NBD: NBD Bank
28660 Northwestern Hwy.
Southfield, MI 48034
Telecopy: (248) 799-5826
Attn: Robert B. Greene
First Vice President
With a copy to: Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, MI 48226
Telecopy: (313) 465-7571
Attn: Theodore B. Sylwestrzak
(c) If to Junior Creditor: Laboratory Corporation of America
Holdings
Suite 825
4300 Six Forks Road
Raleigh, NC 27609
Attn: John R. Erwin, Esq.
With a copy to: Mezzullo & McCandlish
Suite 825
4300 Six Forks Road
Raleigh, NC 27609
Attn: John R. Erwin, Esq.
19. If at any time any Borrower's payment or payment(s) to Lender or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, rescinded and/or required to be repaid by Lender to a
trustee, receiver or any other party under any bankruptcy act or code, state or
federal law, common law or equitable doctrine, then to the extent of any sum not
finally retained by Lender, Junior Creditor's obligations to Lender will be
reinstated and this Agreement will remain in full force and effect (or be
reinstated) until full and final payment shall have been made to Lender. If any
action or proceeding seeking such repayment is pending or, in Lender's sole
judgment, threatened, this Agreement will remain in full force and effect
notwithstanding that any Borrower may not then be obligated to Lender. Junior
Creditor agrees to hold in trust for Lender and promptly remit to Lender any
payment(s) received by Junior Creditor after such invalidated, rescinded or
returned payment(s), above
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described, were originally made.
20. Junior Creditor, on its own behalf and on behalf of its
successors and permitted assigns, hereby expressly waives all rights, if any, to
require a marshalling of assets by Lender or to require that Lender first resort
to some or any portion of any collateral securing any Borrower's obligations to
Lender before foreclosing upon, selling or otherwise realizing on any other
portion thereof.
21. This Agreement shall remain in effect and shall be a continuing
subordination until all Obligations to Lender from each Borrower are paid in
full and Lender has given written notice thereof to Junior Creditor. Junior
Creditor represents and warrants that it has not relied and will not rely on any
representation or information of any nature made by or received from Lender or
any of its officers, agents, attorneys or employees with respect to any Borrower
or any other Obligor in deciding to execute this Agreement, except that Junior
Creditor has relied on Section 29 of this Agreement and on the Sixth Amendment.
22. As between Lender and Junior Creditor only, in the event that
there is an express conflict between the terms and provisions of the Credit
Agreements and of this Agreement, the terms and conditions of this Agreement
shall govern and control. As between Lender and Junior Creditor only, in the
event that there is an express conflict between the terms and provisions of the
agreements between Junior Creditor and Borrowers relating to the Indebtedness
and of this Agreement, the terms and conditions of this Agreement shall govern
and control. This Agreement is solely for Lender's and Junior Creditor's benefit
and no other party, including Borrowers or the other Obligors, is intended to be
benefited by this Agreement.
23. Except where the context otherwise requires, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter.
24. This Agreement constitutes the entire understanding of Junior
Creditor and Lender regarding the subject matter provided for in this Agreement.
This Agreement may only be modified, amended or supplemented by a writing signed
by both Junior Creditor and Lender.
25. Junior Creditor represents and warrants that it has authority to
enter into this agreement and that the person executing this Agreement on behalf
of Junior Creditor has been authorized and directed to do so. Lender represents
and warrants that it has authority to enter into this Agreement and that person
executing this agreement on behalf of Lender has been authorized and directed to
do so.
26. This Agreement is being entered into among competent persons, who
are experienced in business and represented by counsel, and has been reviewed by
the parties and their counsel. Therefore, any ambiguous language in this
Agreement will not necessarily be construed against any particular party as the
drafter of such language.
27. This Agreement may be executed in counterparts, all of which
together will be deemed an original of this Agreement. Furthermore,
facsimile/telecopy copies of signatures shall be treated as original signatures
for all purposes.
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<PAGE> 17
28. The rights and remedies specified in this Agreement are cumulative
of each other and not exclusive of any rights or remedies Lender would otherwise
have. Neither the failure nor any delay on the part of Lender to exercise any
right, remedy, power or privilege hereunder shall operate as a waiver thereof or
give rise to an estoppel, nor be construed as an agreement to modify the terms
of this Agreement, nor shall any single or partial exercise of any right,
remedy, power or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No notice to or demand on the Junior Creditor not required hereunder
or under any other agreement shall in any event entitle the Junior Creditor to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of Lender or any holder of the Obligations to
any other or further action in any circumstances without notice or demand. No
waiver of any breach of any provision of this Agreement will be deemed a waiver
of any preceding or succeeding breach or of any other provision of this
Agreement. No extension of time for performance of any obligations or acts will
be deemed an extension of the time for performance of any other obligations or
acts. No waiver by a party hereunder shall be effective unless it is in writing
and signed by the party making such waiver, and then only to the extent
specifically stated in such writing.
29. This Agreement shall be governed by and construed according to the
internal laws of the State of Michigan applicable to contracts made and
performed within the State of Michigan, without regard to conflict of laws
principles.
30. NBD states, without investigation or due diligence, that after
giving effect to the Sixth Amendment and assuming that Obligors comply with all
of the terms and conditions of the Sixth Amendment, it is unaware of any Events
of Defaults or defaults under the Credit Agreements and that the Credit
Agreements are in full force and effect.
31. In various places in this Agreement the phrase "payment in full
of the Obligations" or other similar wording is used. Given that a portion of
the Obligations consist of contingent reimbursement obligations with respect to
the Letters of Credit, the phrase "payment in full of the Obligations" and other
similar phrases mean, in addition to their ordinary meaning, that the
beneficiaries of all Letters of Credit have returned all such Letters of Credit
to NBD undrawn upon and all such Letters of Credit have been cancelled and
terminated.
32. Given that a portion of the collateral for the Indebtedness (as
well as for the Obligations) consists of the stock certificates, copies of which
are attached to this Agreement as Exhibit A (the "Stock Certificates"), that are
in NBD's possession and in which a security interest may only be perfected
through possession, NBD agrees to act as Junior Creditor's agent for the sole
purpose of perfecting Junior Creditor's security interest in the Stock
Certificates, which is subordinated under the terms of this Agreements. NBD
continues to hold the Stock Certificates to perfect its lien. NBD makes no
representation, warranty, or guaranty of any nature or kind that NBD's
possession of the Stock Certificates is sufficient to perfect Junior Creditor's
security interest therein and has no liability of any nature or kind if for any
reason Junior Creditor's lien and security interest in the Stock Certificates is
unperfected. Furthermore, NBD's sole duty to Junior Creditor with respect to the
agency created with respect to the Stock Certificates, and with respect to the
Stock Certificates, is to deliver physical possession of the originals thereof
to an agent of Junior Creditor when all of the Obligations have been paid in
full and the Credit Agreements have been terminated in writing by Lender. If
Junior Creditor does not default under the terms of this Agreement, then NBD
agrees that it will not terminate the
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<PAGE> 18
agency created under this Paragraph 32 until the Stock Certificates have been
delivered to Junior Creditor.
33. Junior Creditor and USML are parties to an Indemnification
Agreement dated the same date as this Agreement and an Indemnification Security
Agreement, also dated the same date as this agreement (collectively, the
"Indemnification Agreements"). Junior Creditor represents and warrants that none
of the collateral in which NBD holds a security interest secures any obligations
under the Indemnification Agreements. Based on this representation and warranty
the terms and conditions of this Agreement do not apply to the Indemnification
Agreements. If in the future any collateral in which NBD holds a lien or
security interest on is collateral for any of the obligations under the
Indemnification Agreements, then this Agreement applies to the Indemnification
Agreements.
34. WAIVER OF BOND AND SUBMISSION TO JURISDICTION. ANY JUDICIAL
PROCEEDING AGAINST THE JUNIOR CREDITOR BROUGHT BY LENDER WITH RESPECT TO ANY
TERM OR CONDITION OF THIS AGREEMENT, OR ANY OTHER PRESENT OR FUTURE AGREEMENT
BETWEEN JUNIOR CREDITOR AND LENDER MAY BE BROUGHT BY LENDER IN A COURT OF
COMPETENT JURISDICTION IN THE STATE OF MICHIGAN, UNITED STATES OF AMERICA, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, JUNIOR CREDITOR AND LENDER ACCEPT
FOR THEMSELVES AND IN CONNECTION WITH THEIR RESPECTIVE PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT, OR ANY OTHER PRESENT AND FUTURE AGREEMENT
BETWEEN JUNIOR CREDITOR AND LENDER. JUNIOR CREDITOR WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT ITS ADDRESS SET FORTH IN THIS
AGREEMENT. JUNIOR CREDITOR WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND
OR SURETY WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF LENDER. NOTHING
CONTAINED IN THIS SECTION AFFECTS THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT LENDER'S RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST JUNIOR CREDITOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY JUNIOR CREDITOR AGAINST LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY ARISING OUT
OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY PRESENT OR FUTURE
AGREEMENT BETWEEN JUNIOR CREDITOR AND LENDER, MAY BE BROUGHT ONLY IN A COURT
LOCATED IN THE STATE OF MICHIGAN. JUNIOR CREDITOR WAIVES ANY OBJECTION TO
JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER OR IN CONNECTION
HEREWITH AND MAY NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE
OR BASED UPON FORUM NON CONVENIENS. JUNIOR CREDITOR OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE WAIVERS AND CONSENTS CONTAINED HEREIN.
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<PAGE> 19
35. WAIVER OF JURY TRIAL. LENDER AND JUNIOR CREDITOR, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL
BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. NEITHER LENDER NOR JUNIOR CREDITOR SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE
OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER LENDER OR JUNIOR CREDITOR
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
LABORATORY CORPORATION OF
AMERICA HOLDINGS
Security: Subordinated Security Interest in
substantially all of each Borrower's assets,
except for stock in subsidiaries that are
By: /s/ Bradford T. Smith subject to governmental licensing.
------------------------------
Name: Bradford T. Smith
--------------------
Title:E.V. President
--------------
- ----------------------------------
- ----------------------------------
(Address)
BORROWERS' ACKNOWLEDGMENT
Borrowers, on ____________, 1998, acknowledge receiving notice of the
attached Subordination Agreement between Lender and the listed creditor of
Borrowers (the "Junior Creditor") and agree to be bound by all the terms,
provisions and conditions of the Subordination Agreement. The amount of present
indebtedness owing to Junior Creditor is acknowledged to be due and owing as of
the date of the Acknowledgment. The Borrowers further agree that unless Lender's
written consent is received, it will not repay any part of the present or any
future indebtedness (the "Indebtedness"), issue any note or other instrument
evidencing the Indebtedness or grant any collateral security for the
Indebtedness, except as permitted by the terms of the Subordination Agreement.
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<PAGE> 20
UNIVERSAL STANDARD HEALTHCARE, INC.,
formerly known as Universal Standard Medical
Laboratories, Inc., a Michigan corporation
By: /s/ Eugene E. Jennings
--------------------------------------
Name: Eugene E. Jennings
----------------------------
Title: President
--------------------
UNIVERSAL STANDARD HEALTHCARE OF DELAWARE, INC.,
formerly known as Universal Standard Manage Care,
Inc., a Delaware corporation
By: /s/ Alan S. Ker
--------------------------------------
Name: Alan S. Ker
----------------------------
Title: CFO
--------------------
Accepted:
NBD BANK
By: /s/ Patrick P. Skiles
------------------------------------
Patrick P. Skiles
First Vice President
28660 Northwestern Hwy.
Southfield, MI 48034
Exhibit A - Stock Certificates of Delaware Managed Care
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<PAGE> 1
EXHIBIT 99.11
SUBLEASE AGREEMENT
This Sublease Agreement (the "Sublease") is made this 4th day of August,
1998, by and between UNIVERSAL STANDARD HEALTHCARE, INC., a Michigan corporation
(the "Sublessor") and LABORATORY CORPORATION OF AMERICA HOLDINGS, a Delaware
corporation (the "Sublessee").
W I T N E S S E T H:
WHEREAS, Sublessor entered into a certain lease (the "Lease") dated June
18, 1992, with JWJ Company, a Michigan Co-Partnership (the "Lessor"), whereby
Sublessor leases approximately 31,243 quare feet of office space (the "Demised
Premises") in the building located at 5656 S. Cedar Street, Lansing, Michigan
48911, together with the non-exclusive right and easement to use the parking and
common facilities appurtenant thereto (a copy of said Lease is attached hereto
as Exhibit "A" and incorporated herein).
WHEREAS, the Sublessee desires to sublease a portion of the Demised
Premises from the Sublessor;
WHEREAS, the Sublessor desires to sublease a portion of the Demised
Premises from the Sublessor; and
WHEREAS, the Lessor has agree to allow the Sublessor to sublease a portion
of the Demised Premises to Sublessee.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises set forth herein, the adequacy, sufficiency and receipt of which are
hereby acknowledged by the parties hereto, the parties agree as follows:
1. Grant of Premises - Sublessor hereby demises and leases to Sublessee
and Sublessee hereby leases from Sublessor 11,019 net rentable square feet in
the Demised Premises or space currently occupied by Sublessor of which 10,395
are usable square feet and 624 square feet are common area (the "Subleased
Premises"), upon the terms and conditions set forth herein and as shown on
Exhibit "B" hereto.
2. Term and Commencement Date - The term of this Sublease shall be 6
months commencing as of August 4, 1998 and expiring on February 9, 1999.
3. Rent.
a. Rent for the entire term shall be Twelve Dollars ($12.00) per
square foot. Sublessee shall pay to Sublessor on the first day of each month, in
advance monthly prorated rent. All rental payments shall be due and payable on
the first day of each and every month during the term of this Sublease and any
extensions thereafter. The rent for the first month and for the last month of
this Sublease, if less than a full calendar month, shall be prorated.
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<PAGE> 2
4. Utilities - Sublessor shall, throughout the term of the Sublease,
pay all Utility Costs Sublessor shall not be liable to Sublessee for any
failure, shortages, or interruption in the supply of any utility service unless
caused by the willful act of Sublessor.
5. Property Taxes -Sublessor shall, throughout the term of the
Sublease, pay all taxes (as defined in the Lease).
6. Maintenance -
A. Sublessor shall provide lawncare, snow removal and landscape
maintenance to the Subleased Premises. Sublessee shall
contract with Sublessor's current provider or Sublessor's own
janitorial service, to provide for Sublessee's janitorial
services required in connection with Sublessee's use of the
Subleased Premises.
B. Sublessee shall be responsible for payment of all costs
associated with janitorial services provided to the Subleased
Premises. Sublessor, at its cost, shall maintain, in
accordance with its responsibilities under the Lease, or
ensure that Lessor maintains in good condition (i) the
structural portions of the Subleased Premises and other
improvements that are a part of the Subleased Premises, such
structural parts include the foundations, load- bearing and
exterior walls, sub-flooring and roof, (ii) the electrical,
plumbing, and sewage systems, (iii) window frames, gutter, and
downspouts on the building and other improvements that are a
part of the Subleased Premises, and (iv) heating, ventilation
and air-conditioning systems servicing the Subleased Premises.
C. Sublessor shall repair the Subleased Premises if they are
damaged by (i) causes which Sublessee has no control, (ii)
acts or omissions of Sublessor, or its authorized
representatives, or (iii) Sublessor's failure to perform its
obligations under this paragraph.
7. Condition of Premises - Sublessor shall deliver the Subleased
Premises to Sublessee in its existing condition, provided however, that
Sublessor shall demise the subject space including closing all common openings
and providing a finished wall and removing all personal property and equipment.
Sublessor shall be responsible for removing any electrical and plumbing not
required in the Subleased Premises. Any improvements or renovations to the
Premises required by Sublessee prior to or during the Term of this Sublease
shall be completed (1) at Sublessee's sole expense, and (2) only upon Sublessee
obtaining Sublessor's and Landlord's written consent to such improvements or
renovations, which consent will not be unreasonably withheld. Sublessor shall
be responsible for any expenses associated with removing Sublessor's equipment
or furnishings from the Subleased Premises.
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<PAGE> 3
8. Insurance -
(a) Sublessor shall, at all times during the terms of this Sublease,
arrange to provide fire and extended coverage insurance on the Subleased
Premises in an amount it deems reasonable.
(b) Additionally, during the term of this lease, Sublessee, all its
sole costs and expense, for the mutual benefit of Sublessor and Sublessee, shall
carry and maintain an insurance policy on the Premises in an amount of not less
than Two Million Dollars ($2,000,000.00) on account of bodily injuries to or
death of more than one person, Five Million Dollars ($5,000,000.00) on account
of bodily injuries to or death of more than one person as the result of one
accident or disaster, and One Million Dollars ($1,000,000.00) on account of
damage to property, with an insurance company rated "A" or better by A.M. Best &
Co.
9. Indemnification - Sublessee shall indemnify and hold Sublessor
harmless from and against any and all loss, cost, damage and expense resulting
from all liens (including Worker's Compensation claims) for damage or injury to
any person or property arising out of any or in any way connected with
Sublessee's use and occupancy of the Subleased Premises resulting from any act
or omission of Sublessee, its employees, agents, guests or invites with respect
to the Subleased Premises. Likewise, Sublessor hereby indemnifies and holds
Sublessee harmless from and against any and all loss, cost, damage and expense
resulting from acts or omissions by Sublessor with respect to the Subleased
Premises.
10. Compliance With Environmental Regulations. Sublessor hereby warrants
that, to the best of its knowledge, it, its beneficiaries and all prior
occupants of the Demised Premises have complied with all environmental
regulations, including regulations regulating hazardous waste disposal, issued
by federal, state or local environmental agencies. Sublessor shall further
indemnify and save harmless Sublessee from any claim of a violation of
environmental standards or hazardous waste disposal requirements resulting from
periods prior to the commencement date of this Sublease, whether brought by an
agency, a private citizen, or in a court procedure, and Sublessor shall, at its
cost, respond to all such claims for its benefit and for the benefit of
Sublessee. Likewise, sublessee warrants that it will comply with all such
environmental regulations and indemnify and save harmless Sublessor from damage
resulting solely from acts of Sublessee which violate such environmental
standards and to the extent such damage arises out of its occupancy of the
Subleased Premises. Provided, unless it is shown that Sublessee caused any such
environmental violations, it shall be presumed that the same existed prior to
the commencement dat of the Sublease.
11. Incorporation of Lease Terms - To the extent not inconsistent with
the terms of this Sublease, the terms, provisions, covenants and conditions of
the Lease are hereby incorporated herein by reference, subject to the following:
a. The term "Lessor" as used therein shall refer to Sublessor
hereunder, its successors and assigns and the term "Lessee" as
used therein shall refer to
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<PAGE> 4
Sublessee hereunder, its successors and assigns but only with
respect to the Subleased Premises:
b. Each party hereto agrees to perform and comply with the terms,
provisions, covenants and conditions of the Lease and not to
do or suffer or permit anything to be done that would result
in a default under or cause the Lease to be terminated or
forfeited.
c. In connection with any assignment or subletting desired to be
made by Sublessee, in addition to the applicable provisions of
the Lease, Sublessee shall also obtain Sublessor's prior
written consent, which consent shall not be reasonably
withheld, and if such consent shall not be unreasonably
withheld, and if such consent is obtained, Sublessee shall
contact Lessor directly for the Lessor's consent, and if the
Lessor refuses to consent to such assignment or subletting,
Sublessor shall, on request in writing from Sublessee, use its
best effort to secure such consent from the Landlord.
d. Sublessor shall have a right to access the Subleased Premises
only during ordinary business hours with two business days
advance notice to Sublessee and only when accompanied by an
authorized agent/employee of Sublessee.
e. Sublessee, at its own cost, shall have the right to signage on
the street sign, building directories and on/near suite doorway entrance,
subject to both Sublessor's and Landlord's approval, which approval shall not be
unreasonably withheld.
12. Warranty and Indemnification - Sublessor hereby warrants that there
are no unpaid amounts due to Lessor under the Lease (other than further accruals
of Rent), nor are there any unpaid amounts due or liens against the fixtures,
trade fixtures, personalty, equipment or leasehold interests pertaining to the
Demised Premises, the Sublessee expressly disclaiming any liability or
responsibility therefore. Sublessor shall indemnify and hold harmless Sublessee
for any loss, liability and reasonable costs (including but not limited to
attorney fees) incurred by Sublessee due to a breach of this warranty.
13. Default -
A. The following Events of Default are separate from the Events
of Default as defined in the Lease and do not diminish in any
respect the Sublessor's obligations under the Lease. The
occurrence of one or more of the following events (an "Event
of Default") shall constitute default by the Sublessee:
(a) the rental payments are not paid at the time and place
due as provided herein. Sublessor shall give Sublessee
five (5) days written notice of Sublessor's intent to
declare Sublessee in default hereunder, and
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<PAGE> 5
Sublessee shall have the right to cure such default
within ten (10) days from receipt of the notice;
(b) Sublessee fails to comply in any material respect with
any term, provision, condition or covenant of this
Sublease (other than the payment of rent), and does not
cure such failure within thirty (30) days after written
notice by Sublessor specifying such default;
(c) Sublessee files (or has filed against it) any petition
or action for relief under any creditor's law (including
bankruptcy, reorganization, or similar actions), either
in a state or federal court;
(d) Sublessee becomes insolvent or makes an assignment for
benefit of creditors;
(e) a receiver is appointed for Sublessee;
(f) the leasehold interest of Sublessee is attached or
levied upon;
(g) if any license, permit, approval or registration
required for the operation of the Sublessee's business
as a licensed and certified clinical reference
laboratory, whether presently issued or subsequently
required, shall expire without renewal or be canceled,
suspended, or materially limited in any respect; or
(h) any representation or warranty of Sublessee given or
made in connection herewith is not true, accurate, and
complete in all material respects.
B. If Sublessee shall commit an Event of Default, Sublessor shall
have the following remedies:
These remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law.
(a) Sublessor shall have the right to terminate this
Sublease and Sublessee's rights to possession of the
Subleased Premises at any time without notice to vacate,
re-enter the Subleased Premises, pursue its remedies at
law or in equity to recover from Sublessee all amounts
of rent then due or thereafter accruing, and pursue such
other damages as are caused by Sublessee's default;
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<PAGE> 6
(b) No course of dealing between Sublessor and Sublessee or
any delay in exercising any rights that either party may
have under this Sublease shall operate as a waiver of
any of the rights hereunder, nor shall any waiver of a
prior default operate as a waiver of any subsequent
default or defaults and no express waiver shall affect
any condition, covenant, rule or regulation other than
the one specified in such waiver and that one only for
the time in the manner specifically stated.
C. In the event Sublessor defaults in keeping, observing or
performing any of the terms, provisions, covenants and
conditions, contained in the Lease, and such default is not
cured (or proper measures to cure such default commenced) by
Sublessor within the periods specified in the Lease for the
curing of such defaults, Sublessee shall have the right to
remedy such default after it gives Sublessor written notice
thereof in accordance with the terms of this Sublease. Is
Sublessee shall incur any expense in remending such default,
Sublessee shall be entitled to deduct such expenditures (to
the extent they are reasonable in amounts) paid by it from the
next monthly installment of rent falling due hereunder.
Sublessor agrees to send promptly to Sublessee a copy of any
notice of default received from Lessor.
14. Use - Sublessee may use the Subleased Premises for the operation
of a Clinical Reference Laboratory.
15. Subrogation - Sublessor's right under the Lease (except such
rights as are personal to Sublessor may be enforced against the Lessor by the
Sublessee on behalf of the Sublessor, and each party shall advise the other,
in writing, before taking any action to enforce such rights.
16. Lease Amendments - Sublessor agrees that it will not modify the
Lease without first obtaining the written consent of Sublessee to such
modification, which consent shall not be unreasonably withheld. This Sublease
may not be modified except in a writing signed by authorized representatives of
each party.
17. Notices - Notices which are required to be given pursuant to this
Sublessee shall be in writing and shall be addressed and served personally or
sent by prepaid registered or certified mail or nationally recognized overnight
courier service as follows:
If to Sublessor: Universal Standard Healthcare, Inc.,
a Michigan Corporation
26500 Northwestern Highway
Southfield, Michigan 48076
Attention: Alan S. Ker, CFO
6
<PAGE> 7
With a copy to: Krieg, DeVault, Alexander & Capehart
One Indiana Square, Suite 2800
Indianapolis, Indiana 46204--2117
If to Sublessee: Laboratory Corporation of America Holdings,
a Delaware Corporation
358 S. Main Street
Burlington, North Carolina 27215
Attention: Randal Stone
with a copy to:
John Erwin, Esq.
Mezzullo & McCandlish
4300 Six Forks Road
Suite 825
Raleigh, North Carolina 27609
and
Laboratory Corporation of America Holdings
6370 Wilcox Road
Dublin, Ohio 43016
Attention: Lease Administrator
18. Use of Shared Areas - The Sublessee has the non-exclusive right to
reasonable use of the conference/board room and the lunch room in the building,
which shall be in common with the Sublessor and any other Sublessee.
19. Americans with Disability Act (ADA) - Sublessee agrees not to use the
Premises in any manner which would result in the use of the Subleased Premises
or the Subleased Premises itself becoming a "public accommodation" as that term
is defined in the Americans with Disabilities Act ("ADA") of 1990, as amended,
47 USC Section 17.101 et seq and hereby agrees to and does indemnify and hold
Sublessor harmless from any and all claims, liabilities, losses, damages, costs
and expenses, including reasonable attorney's fees incurred solely as a result
of any breach by Sublessee of this provision. Sublessee agrees to undertake and
complete, at its sole expense, any obligations, improvements or renovations
necessary for the Subleased Premises and its entryways to comply with the ADA,
provided, however, that such obligation arises solely as a result of Sublessee's
use of the Subleased Premises pursuant to this Sublease. Sublessor is
responsible for all other parking areas, building access and common areas with
respect to ADA compliance.
It is understood that the Universal Standard Healthcare, Inc. patient
service center restrooms are available for use by handicapped patients,
employees, agents, guests or invitees of the Laboratory
7
<PAGE> 8
Corporation of America Holdings in order to assist in complying with ADA
provisions. No additional rental charge will be assessed for the availability of
this space.
20. Subject to the prior rights of the Sublessor, Sublessee shall have a
right of first refusal to lease additional space in the Building. Sublessor
accordingly agrees that as space becomes available it shall notify Sublessee in
writing of the availability of the same and Sublessee shall have the right of
first refusal, subject to Sublessor's prior rights, except by written notice to
Sublessor within thirty (30) days of receipt of said notice, to lease sold space
on a reasonable portion thereto (referred to as a "Additional Premises"). Any
Additional Premises leased shall be under the same terms and conditions
contained herein.
21. So long as Sublessee has not been in default of any terms or
conditions of this Lease. Sublessee shall have the right to extend the terms of
this Lease for a period of time which will be determined after the initial 6
month period and with approval of the Lessor and commencing upon the expiration
of the original terms of this Lease. All terms and conditions of this Lease
shall remain the same including rental, which shall continue to be calculated by
$.50 per square foot per year. Sublessee's right to extend the term provided in
this Section 21 must be exercised, if at all, no later than thirty (30) days
prior to the expiration of the original term of this Sublease.
22. Entire Agreement - This Sublease constitutes the entire agreement
between the parties hereto and contains all of the covenants and provisions
between the parties with respect to the subject matter hereof. There is no
statement, promise, agreement or obligation in existence which may conflict with
the terms of this Sublease, or may modify, enlarge or invalidate this Sublease
or any provisions thereto.
23. Change in Law or Regulations- Notwithstanding anything in this
Sublease to the contrary, should legal counsel for Sublessor or Sublessee
reasonably conclude that this Sublease or Sublessee's use of the Subleased
Premises is or may be in violation of any law or regulation, or subsequent
changes in any applicable law or regulation, this Sublease shall terminate upon
a sixty (60) day notice to the other party unless within said sixty (60) day
period the parties agree to such modifications in this Sublease or use of the
Subleased Premises that may be necessary to establish compliance with the law or
regulation.
24. Condemnation- If the whole or any part of the Subleased Premises shall
be taken or condemned by any competent authority for any public or quasi public
use or purpose such as to render the Subleased Premises unsuitable for
Sublessee's use, in Sublessee's discretion, then the Term shall terminate from
the date of possession, and rentals shall be apportioned accordingly. The
condemnation award shall be paid to Sublessor or Lessor with the exception of
any portion as may be attributable to Sublessee's fixtures and personal
property, such portion shall be paid to Sublessee.
25. Fire or Other Casualty- Sublessor shall give immediate notice to
Sublessor of partial damage to the Premises by fire or other casualty. Sublessor
shall cause the damage to be repaired with reasonable speed. Rent shall be
proportionately reduced to the extent that the Subleased
8
<PAGE> 9
Premises are rendered untenantable. If the Subleased Premises are destroyed or
so damaged that in normal course the Subleased Premises cannot be made
tenantable within sixty (60) days, or if the damage occurs during the last
thirty (30) days of the term and Sublessee does not exercise any option to
renew, either Sublessor or Sublessee may terminate this Sublease by written
notice to the other. Rentals shall be adjusted as of the date of the damage, and
Sublessee shall vacate the Subleased Premises within twenty (20) days from the
notice of termination.
26. Quiet Enjoyment - Sublessor and Lessor agree that Sublessee upon
paying the rent and performing all the terms and conditions of this Sublease,
shall quietly have, hold and enjoy the Subleased Premises for the Term as herein
stated.
27. Successors and Assigns - The provisions of this Sublease shall bind
and inure to the benefit of the Sublessor and Sublessee and their respective
heirs, legal representatives and permitted assigns.
28. Lessor's Acknowledgment - Lessor joins in the execution of this
Sublease as the Lessor under the Lease, to acknowledge its approval and consent
to the subleasing of the Subleased Premises by Sublessor to Sublessee pursuant
to this Sublease; and Lessor does hereby grant its approval and consent to this
Sublease. In accordance with the terms of such consent, it is understood and
agreed by the parties that such approval and consent shall not be deemed a
release by Lessor of Sublessor's obligations and liabilities under the Lease.
[signatures appear on following page]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
Agreement the day and year first above written.
In the presence of: UNIVERSAL STANDARD HEALTHCARE,
INC., a Michigan corporation
/s/ David C. Koelsch By: /s/ Alan S. Ker
- ---------------------------- ---------------------------
/s/ Steven C. Tyshka Its: C.F.O.
- ---------------------------- ---------------------------
LABORATORY CORPORATION OF
AMERICA HOLDINGS, a Delaware
corporation
By: /s/ Bradford T. Smith
- ---------------------------- ---------------------------
Its: E.V. President
- ---------------------------- ---------------------------
10
<PAGE> 11
STATE OF MICHIGAN )
) SS.
COUNTY OF WAYNE )
On this 4th day of August, 1998, before me, a Notary Public, personally
appeared Alan Ker to me known to be the Chief Financial Officer of Universal
Standard Healthcare, Inc., and who executed the foregoing instrument on behalf
of said corporation by authority of its board of directors and acknowledged the
same as the free act and deed of the corporation.
/s/ Patricia A. Menozzi
----------------------------------------------
Notary Public, County of Wayne
---------------------
My Commission Expires: July 2, 1999
---------------------
STATE OF NORTH CAROLINA)
) SS.
COUNTY OF ALMANCE )
On this 4th day of August, 1998, before me, a Notary Public, personally
appeared Bradford T. Smith to me known to be the Exec. Vice President of
Laboratory Corporation of America Holdings, and who executed the foregoing
instrument on behalf of said corporation by authority of its board of
directors and acknowledged the same as the free act and deed of the
corporation.
/s/ Jennifer F Pulliam
-------------------------------------------
Notary Public, County of Alamance
------------------
My Commission Expires: 10/17/99
------------------
11
<PAGE> 12
CONSENT TO SUBLEASE
On behalf of JWJ COMPANY, a Michigan Co-Partnership, the undersigned hereby
acknowledges and consents to this Sublease.
In the event Universal Standard Healthcare, Inc. defaults on payment to JWJ
Company, Laboratory Corporation of America Holdings may make rental and any
other applicable payments, directly to JWJ Company. All aspects of original
Lease supersede this Sublease Agreement and continue to be enforceable against
Universal Standard Healthcare in accordance with the terms therein.
JWJ Company agrees to the terms and conditions of this Sublease Agreement in the
event of default.
JWJ COMPANY, a Michigan
Co-Partnership
By: /s/ John R. Kately, Ph.d.
----------------------------
Its:
----------------------------
Acknowledged by Universal Standard Healthcare, Inc.: /s/ Alan S. Ker
--------------------------
Signature and Date
Acknowledged by Laboratory Corporation of America Holdings: /s/ Bradford T.Smith
---------------------
Signature and Date 8/4/98
---------------------
Sublessee will begin Sublease on August 4, 1998. Document effective on that
date.
12
<PAGE> 1
EXHIBIT 99.12
July 30, 1998
Mr. Thomas Gorman
Signal Capital Corp.
55 Ferncroft Road
Danvers, Massachusetts 01923
Re: Amendment to Stockholders Agreement dated as of June 28, 1991
by and among Universal Standard Equity, Ltd., Westsphere
Capital Associates, L.P., Westsphere Capital, Inc., Westsphere
Funding II, L.P., Fleet National Bank, Signal Capital Corp.
("Signal"), Marvin Eisner, MML, Inc., Robert Nowikowski,
Barbara Pace, John Watkins, Perry McClung, Janney Montgomery
Scott, Inc., Richard J. Berman, Marcus & Katz and Elan
Holdings Corp. (the "Original Stockholders Agreement")
Dear Mr. Gorman:
Pursuant to the Stock Purchase Agreement between Universal Standard
Healthcare, Inc. ("Universal") and Laboratory Corporation of America Holdings
("LCA"), dated July 16, 1998, (the "Stock Purchase Agreement'), Universal hereby
requests Signal's consent to amend the Original Stockholders Agreement to allow
LCA to piggyback on a registration statement initiated by Signal, in accordance
with Section 10(b) of the Stock Purchase Agreement, and to amend Section 3.6 of
the Original Stockholders Agreement to provide for the basis on which Signal and
LCA participate in a piggyback registration. Article III of the Original
Stockholders Agreement and Section 10 of the Stock Purchase Agreement are
attached for your information.
Signal, by executing this letter where indicated below, consents to LCA
having the right to piggyback on a registration statement initiated by Signal
pursuant to Section 3.1 of the Original Stockholders Agreement in accordance
with Section 10(b) of the Stock Purchase Agreement.
Signal, by executing this letter where indicated below, hereby agrees
to the amendment and restatement of Section 3.6 of the Original Stockholders
Agreement as follows:
3.6 Underwriting Requirements. In connection with any offering pursuant
to Section 3.2 involving an underwriting of Securities, the Company
shall not be required under Section 3.2 to include any of the Holders'
or Special Warrantholders' Registrable Securities in such underwriting
unless the Holders and Special Warrantholders accept the terms of the
underwriting as agreed upon between the Company and the underwriters
selected by it. If the managing underwriter advises the Company in
writing that in its opinion the total number or dollar amount of
securities requested to be included in such registration exceeds the
number or dollar amount of securities which can be offered and
<PAGE> 2
sold on reasonable terms and price under prevailing market conditions,
the Company will include in such registration first the securities
which the Company proposes to sell, if the registration was initiated
by the Company, or the securities which the Initiating Shareholders
propose to sell, if the registration was initiated by or for
shareholders of the Company with contractual registration rights (the
"Initiating Shareholders"), and then the remaining number and dollar
amount of securities of the Company which, in the opinion of the
underwriter, can be sold shall be allocated among (i) the Selling
Holders, (ii) the Special Warrantholders, (iii) other persons or
entities with contractual registration rights seeking to include their
securities of the Company in the registration statement (the "Other
Holders") (collectively, the Selling Holders, the Special
Warrantholders, and the Other Holders shall be referred to as the
"Registration Participants") and, (iv) in the case where the
registration was initiated by or for Initiating Shareholders, the
Company, in proportion to the number of shares of Common Stock or other
securities each such person has elected to include in the registration
statement.
Notwithstanding the foregoing, if the Company proposes to sell
any of its securities under the 1933 Act pursuant to the terms of
warrants, rights or convertible securities which are being registered
in connection with the registration of such warrants, rights or
convertible securities or in connection with dividend reinvestment
plans, the Company shall have no obligation to register Registrable
Securities for sale as part of the offering of such warrants, rights or
convertible securities unless the Registrable Securities cannot be
registered and sold in an offering conducted subsequent to such
offering, and provided that if the managing underwriter or their
representative, or the selling dealers or their representatives, if
any, determine, reasonably and in good faith that the number of
securities in any registration exceeds the number of shares which can
be offered and sold on reasonable terms and price under prevailing
market conditions, the Company will include in its registration the
warrants, rights or convertible securities which the Company proposes
to sell and then, in a subsequent offering, the number and dollar
amount of Common Stock or other securities of the Company which the
Registration Participants seek to include in the registration statement
and which can be sold under prevailing market conditions, reduced, if
necessary, on a proportionate basis among the Registration Participants
as described above.
Please execute this letter below to indicate your acceptance of this
amendment.
Sincerely,
UNIVERSAL STANDARD HEALTHCARE, INC.
/s/ Alan S. Ker
Alan S. Ker, Chief Financial Officer
<PAGE> 3
The undersigned hereby consents to the amendment to the Original Stockholders
Agreement set forth above.
SIGNAL CAPITAL CORP.
By: /s/ Thomas W. Gorman
--------------------------
Its: Sr. Investment Manager
-------------------------
The amendment set forth above is hereby acknowledged by Laboratory Corporation
of America Holdings.
LABORATORY CORPORATION OF
AMERICA HOLDINGS
By: /s/ Bradford T. Smith
--------------------------
Its: Executive Vice President
-------------------------
<PAGE> 1
EXHIBIT 99.13
July 31, 1998
Mr. Thomas R. Donahue and
Mr. Yi Tsai
Westphere Capital Associates, L.P.
13th Floor, 55 East 59th Street
New York, New York 10022
Re: Amendment to Stockholders Agreement dated as of June 28, 1991
by and among Universal Standard Equity, Ltd., Westsphere
Capital Associates, L.P., Westsphere Capital, Inc., Westsphere
Funding II, L.P., Fleet National Bank, Signal Capital Corp.
("Signal"), Marvin Eisner, MML, Inc., Robert Nowikowski,
Barbara Pace, John Watkins, Perry McClung, Janney Montgomery
Scott, Inc., Richard J. Berman, Marcus & Katz and Elan
Holdings Corp. (the "Original Stockholders Agreement")
Gentlemen:
Pursuant to the Stock Purchase Agreement between Universal Standard
Healthcare, Inc. ("Universal") and Laboratory Corporation of America Holdings
("LCA"), dated July 16, 1998, (the "Stock Purchase Agreement'), Universal hereby
requests consent of Portfolio Investment Company Limited, CLF, Ltd. and CLF,
L.P. ("Westsphere") to the issuance to LCA of registration rights in accordance
with Section 10 of the Stock Purchase Agreement, and to amend Section 3.6 of the
Original Stockholders Agreement to provide for the basis on which Westsphere,
Signal and LCA participate in a piggyback registration. Article III of the
Original Stockholders Agreement and Section 10 of the Stock Purchase Agreement
are attached for your information.
Westsphere, by executing this letter where indicated below, consents to
LCA having the right to piggyback on registration rights in accordance with
Section 10 of the Stock Purchase Agreement.
Westsphere, by executing this letter where indicated below, hereby
agrees to the amendment and restatement of Section 3.6 of the Original
Stockholders Agreement as follows:
3.6 Underwriting Requirements. In connection with any offering pursuant
to Section 3.2 involving an underwriting of Securities, the Company
shall not be required under Section 3.2 to include any of the Holders'
or Special Warrantholders' Registrable Securities in such underwriting
unless the Holders and Special Warrantholders accept the terms of the
underwriting as agreed upon between the Company and the underwriters
selected by it. If the managing underwriter advises the Company in
writing that in its
<PAGE> 2
opinion the total number or dollar amount of securities requested to be
included in such registration exceeds the number or dollar amount of
securities which can be offered and sold on reasonable terms and price
under prevailing market conditions, the Company will include in such
registration first the securities which the Company proposes to sell,
if the registration was initiated by the Company, or the securities
which the Initiating Shareholders propose to sell, if the registration
was initiated by or for shareholders of the Company with contractual
registration rights (the "Initiating Shareholders"), and then the
remaining number and dollar amount of securities of the Company which,
in the opinion of the underwriter, can be sold shall be allocated among
(i) the Selling Holders, (ii) the Special Warrantholders, (iii) other
persons or entities with contractual registration rights seeking to
include their securities of the Company in the registration statement
(the "Other Holders") (collectively, the Selling Holders, the Special
Warrantholders, and the Other Holders shall be referred to as the
"Registration Participants") and, (iv) in the case where the
registration was initiated by or for Initiating Shareholders, the
Company, in proportion to the number of shares of Common Stock or other
securities each such person has elected to include in the registration
statement.
Notwithstanding the foregoing, if the Company proposes to sell
any of its securities under the 1933 Act pursuant to the terms of
warrants, rights or convertible securities which are being registered
in connection with the registration of such warrants, rights or
convertible securities or in connection with dividend reinvestment
plans, the Company shall have no obligation to register Registrable
Securities for sale as part of the offering of such warrants, rights or
convertible securities unless the Registrable Securities cannot be
registered and sold in an offering conducted subsequent to such
offering, and provided that if the managing underwriter or their
representative, or the selling dealers or their representatives, if
any, determine, reasonably and in good faith that the number of
securities in any registration exceeds the number of shares which can
be offered and sold on reasonable terms and price under prevailing
market conditions, the Company will include in its registration the
warrants, rights or convertible securities which the Company proposes
to sell and then, in a subsequent offering, the number and dollar
amount of Common Stock or other securities of the Company which the
Registration Participants seek to include in the registration statement
and which can be sold under prevailing market conditions, reduced, if
necessary, on a proportionate basis among the Registration Participants
as described above.
Please execute this letter below to indicate your acceptance of this
amendment.
Sincerely,
UNIVERSAL STANDARD HEALTHCARE, INC.
/s/ Alan S. Ker
Alan S. Ker, Chief Financial Officer
<PAGE> 3
The undersigned hereby consents to the amendment to the Original Stockholders
Agreement set forth above.
PORTFOLIO INVESTMENT COMPANY
LIMITED
By: /s/ Joseph J. Vadapalas
-------------------------------
Its: Authorized Signatory
------------------------------
CLF, LTD.
By: /s/ Joseph J. Vadapalas
-------------------------------
Its: Authorized Signatory
------------------------------
CLF, L.P.
By: /s/ Joseph J. Vadapalas
-------------------------------
Its: Authorized Signatory
------------------------------
The amendment set forth above is hereby acknowledged by Laboratory Corporation
of America Holdings.
LABORATORY CORPORATION OF
AMERICA HOLDINGS
By: /s/ Bradford T. Smith
-------------------------------
Its: Executive Vice President
------------------------------
