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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): July 16, 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 5. OTHER EVENTS
On July 16, 1998, the Company entered into a Purchase Agreement with
Laboratory Corporation of America Holdings ("LabCorp") pursuant to which the
Company agreed to sell certain assets to LabCorp for $9.0 million, and,
following the closing of such asset sale, the Company agreed to sublease certain
real and personal property to LabCorp for six months for aggregate payments of
$1,850,000.
On July 16, 1998, the Company also entered into a Stock Purchase
Agreement with LabCorp pursuant to which the Company agreed to sell to LabCorp
$4.25 million of the Company's Common Stock for $3.00 per share.
The closing of the asset sale and the stock acquisition with LabCorp are
subject to customary closing conditions, including the simultaneous closing of
the two transactions.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
99.1. Press Release dated July 17, 1998
99.2 Purchase Agreement between the Company and Laboratory
Corporation of America Holdings dated July 16, 1998.
99.3 Stock Purchase Agreement between the Company and Laboratory
Corporation of America Holdings dated July 16, 1998.
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: July 21, 1998
UNIVERSAL STANDARD HEALTHCARE, INC.
/s/ Alan S. Ker
-----------------------------------
Alan S. Ker,
Vice President, Finance
Chief Financial Officer
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Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
99.1. Press Release dated July 17, 1998
99.2 Purchase Agreement between the Company and
Laboratory Corporation of America Holdings
dated July 16, 1998.
99.3 Stock Purchase Agreement between the Company
and Laboratory Corporation of America Holdings
dated July 16, 1998.
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EXHIBIT 99.1
UNIVERSAL STANDARD HEALTHCARE, INC.
ANNOUNCES DEFINITIVE AGREEMENTS WITH LABCORP(R)
TO ESTABLISH EQUITY RELATIONSHIP IN
UNIVERSAL STANDARD
AND DIVEST LABORATORY DIVISION
SOUTHFIELD, Mich -- July 17, 1998 -- Universal Standard Healthcare,
Inc. (Universal Standard) (NASDAQ:UHCI) and Laboratory Corporation of America(R)
Holdings (LabCorp(R)) (NYSE: LH) today announced that they have entered into
definitive agreements for LabCorp to acquire Universal Standard's Michigan-based
clinical laboratory business and an equity stake in Universal Standard. The
companies also announced a long term national managed care laboratory services
agreement.
The cash transactions call for LabCorp's purchase of certain of
Universal Standard's clinical laboratory assets for $9.0 million, a lease
arrangement at $1.9 million and LabCorp's purchase of $4.3 million in Universal
Standard Common Stock at $3.00 per share. The agreements are subject to
customary closing conditions.
"The sale of our laboratory business will permit Universal Standard to
focus on its strength-providing unique health services programs - and enable
management to concentrate on the company's significant growth opportunities,"
said Eugene Jennings, Universal Standard's President, CEO and Chairman of the
Board.
Universal Standard Healthcare, Inc. is a premier managed care health
services provider operating in all 50 states, currently providing clinical
laboratory, outpatient diagnostic imaging, and home medical services (including
durable medical equipment and supplies) coverage to employers on a capitated
basis. "Covered Persons" under these managed care contracts exceed 1.6 million.
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Laboratory Corporation of America(R) Holdings (LabCorp(R)) is a
national clinical laboratory organization with annual revenues of $1.5 billion
in 1997. LabCorp operates primary testing facilities nationally, offering more
than 1,700 different clinical assays, from routine blood analyses to more
sophisticated technologies. LabCorp performs diagnostic tests for physicians,
managed care organizations, hospitals, clinics, long-term care facilities,
industrial companies and other clinical laboratories.
CONTACT: Universal Standard Healthcare, Inc.
Southfield, Michigan
Alan Ker, (248) 358-0810
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Exhibit 99.2
PURCHASE AGREEMENT
This AGREEMENT, dated as of this 16th day of July, 1998, by and between
LABORATORY CORPORATION OF AMERICA HOLDINGS, a Delaware corporation ("Purchaser"
or "LabCorp") and UNIVERSAL STANDARD HEALTHCARE, INC., a Michigan corporation
("Seller").
WHEREAS, Seller is engaged in the clinical laboratory business;
WHEREAS, Seller desires to sell and Purchaser desires to purchase
certain properties and assets of Seller, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
I. Sale and Transfer of Assets. Subject to all of the terms and
conditions of this Agreement, Seller hereby agrees to sell and
Purchaser hereby agrees to purchase:
A. Seller's list of customers to be delivered at Closing
in the format attached hereto as Schedule I.A (the
"Customer List").
B. The tangible assets of Seller, including items of
equipment, furniture, and fixtures, that are listed
and described on Schedule I.B attached hereto (the
"Tangible Assets");
C. The covenants provided for in Article VIII hereof.
D. The sale and transfer of the properties and assets
referred to above (collectively the "Purchased
Assets") shall be made by Seller, free and clear of
all liabilities, obligations, security interests,
liens (including tax liens), mortgages and
encumbrances whatsoever. Except as otherwise
expressly agreed by the parties, no liability,
obligation, lease or commitment of Seller, whether
written or oral, whether accrued, absolute,
contingent or otherwise, and whether due or to become
due, shall be assumed by the Purchaser.
II. Purchase Price. The purchase price for the Purchased Assets
shall be the amount of Nine Million Dollars ($9,000,000)
payable at closing as follows:
A. A down payment upon execution of this Agreement equal
to, and payable by the forgiveness of, trade accounts
payable by Seller to Purchaser in the amount set
forth on Schedule II.A hereto (the "Trade Payables")
as of five (5) business days preceding the execution
of this Agreement. The amount of the
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down payment payable in the form of forgiveness of
Trade Payables shall not exceed One Million Dollars
($1,000,000). Notwithstanding any provision of this
Agreement to the contrary, to the extent trade
accounts payable to Purchaser by Seller exceed One
Million Dollars ($1,000,000), such amount in excess
of One Million Dollars ($1,000,000) is expressly not
forgiven. To the extent such trade accounts payable
to Purchaser by Seller have a date of service more
than sixty (60) days prior to Closing, then such
amounts shall be paid by Seller to Purchaser at
Closing (as defined below). Seller acknowledges its
obligation for the Trade Payables and, if the
transactions contemplated by this Agreement do not
close for any reason, this provision shall be null
and void, and Seller shall again become obligated to
Purchaser in the amount of the Trade Payables
otherwise forgiven under this section. The
forgiveness and payments of trade accounts payable to
Purchaser by Seller shall be applied against the
oldest trade payables first.
B. The remainder at Closing.
C. Except for those liabilities related to leases and
contracts which arise after Closing, and which
Purchaser specifically assumes in writing (the
"Assumed Liabilities") which are identified in
Schedule II.C hereto (other than those which
Purchaser notifies Seller in writing, on or before
July 31, 1998, it will not assume), Purchaser shall
not assume any liabilities of Seller, contingent or
otherwise, known or unknown, including laboratory
malpractice claims, arising from or related to the
operation or activities of Seller, its shareholders,
directors, officers, agents or otherwise (the
"Retained Liabilities"). Without limitation of the
foregoing and notwithstanding anything to the
contrary set forth herein, in no event shall
Purchaser assume or be deemed to assume any of
Seller's provider agreements with the federal
Medicare program, any state Medicaid program or any
other governmental payor of health care services
(collectively, "Governmental Payors"), and Purchaser
shall not be liable in any manner for any liability
or obligation of Seller to any Governmental Payor,
whether known or unknown, including without
limitation any liability for past overpayments, civil
monetary penalties or false claims, and any
liabilities arising out of any failure of Seller to
comply with any law, regulation, rule, manual
provision or other requirement applicable to
providers of services paid for by a Governmental
Payor.
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III. Closing.
A. The closing of the transactions provided for in this
Agreement (the "Closing") shall be held at the
offices of Dykema, Gossett, PLLC, Detroit, Michigan,
on either August 3, 1998, or as soon thereafter as
can reasonably be accomplished, or at such other
place and date as may be mutually agreed upon by the
parties (the "Closing Date"). All references herein
to the "Closing" or the "Closing Date" are references
to such terms as defined in this paragraph.
B. All proceedings to be taken and all documents to be
executed and delivered in connection with the
consummation of the transactions provided for herein
shall be reasonably satisfactory in form and
substance to the parties and their respective
counsel. All proceedings to be taken and all
documents to be executed and delivered by the parties
at the Closing shall be deemed to have been taken and
executed simultaneously, and no proceeding shall be
deemed taken nor any document executed and delivered
until all have been taken, executed and delivered.
C. At the Closing, subject to the terms and conditions
of this Agreement:
1. Seller will deliver to Purchaser a General
Assignment and Bill of Sale in the form
attached hereto as Schedule III.C.1;
2. Seller will deliver the Customer List to
Purchaser;
3. Seller and Purchaser shall execute Lease
Agreements, Subleases and/or Assignments in a
form attached as Schedule III.C.3 and
containing such terms and conditions reasonably
satisfactory to Purchaser leasing to Purchaser
properties located at the existing space
located at (1) 3400 Hospital Road, Saginaw,
Michigan and (2) Sublease for 5656 S. Cedar,
Lansing, Michigan ("Material Leases");
4. Seller and Purchaser shall enter into a lease
whereby Purchaser shall lease from Seller its
property and equipment as set forth in the form
attached as Schedule III.C.4;
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5. Seller and Purchaser shall enter into a
laboratory services agreement containing the
terms and conditions set forth in the form
attached as Schedule III.C.5;
6. Seller and Purchaser shall enter into an
assignment and assumption agreement with regard
to the contracts listed in Schedule II.C. Such
assignment and assumption shall be in the form
attached as Schedule III.C.6;
7. The parties shall enter into a Co-marketing
agreement containing the terms and conditions
set forth in the form attached as Schedule
III.C.7;
8. The parties shall enter into a transition
services agreement containing the terms and
conditions set forth in the form attached as
Schedule III.C.8;
9. Each party shall deliver to the other the
Opinions of Counsel referred to in Section
VI-C, and Section VII-D; and the Certified
copies of the Resolutions/Consents referred to
in Section VI-H, and VII-E;
10. The parties shall take such other action as may
be reasonably necessary or appropriate in order
to consummate the transactions provided for
herein in accordance with the terms and
conditions hereof;
11. Seller and Purchaser hereby agree that, upon
reasonable request of the other, whether at or
after the Closing, each will, at its expense
and without further consideration, execute and
deliver such further instruments and documents
and take such further action may be reasonably
necessary to effectuate the provisions of this
Agreement.
IV. Representations and Warranties of Seller. To induce Purchaser
to enter into and perform the terms of this Agreement and to
consummate the transactions provided for herein, Seller hereby
represents and warrants to Purchaser that:
A. Authority to Operate. Seller is duly organized,
validly existing and in good standing under the laws
of the State of Michigan, with full power and
authority to own, lease and operate its properties
and to carry on the laboratory business as now being
conducted.
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B. Due Authorization. Seller has full power, authority
and legal capacity to enter into this Agreement and
to consummate the transactions contemplated hereby,
and, except as set forth in Schedule IV.B, the
execution, delivery and performance of this
Agreement does not conflict with any provision of
any agreement, instrument, judgment, order or law to
which the Seller is a party or by which the
Seller is bound. The entering into of this Agreement
and the consummation of the transactions
contemplated hereby are not subject to the approval
or consent of any government or governmental,
regulatory, or administrative agency.
C. Customers and Customer Relations. Schedule IV.C
(which will show customer numbers and not names
prior to the Closing) list each customer which
represents One Hundred Fifty Thousand Dollars
($150,000) or greater of gross billings by Seller's
laboratory business over the period from June 1,
1997 through June 30, 1998 (each a "Large
Customer"), and the aggregate billings to each
such Large Customer during each month June 1, 1997
through June 30, 1998. Except as set forth in
Schedule IV.C (which will show customer numbers and
not names prior to the Closing, unless Seller in its
sole discretion determines it is appropriate to
disclose a customer to Purchaser before Closing in
the interest of joint efforts to preserve the
business), to the best of Seller's knowledge, no
Large Customer will cease to do business with
Purchaser, or materially decrease the volume of
revenue under such arrangements after, or as result
of the consummation of, the transactions
contemplated hereby, or is significantly in arrears
in payment of amounts owed to Seller. To the best of
Seller's knowledge, Seller has used its reasonable
business efforts to maintain good working
relationships with all of its customers. Except as
set forth in Schedule IV.C, to the best of Seller's
knowledge, no Large Customer has given Seller notice
terminating, canceling, or threatening to
terminate or cancel any contract or relationship
with Seller.
D. Financial Statements. Seller has delivered to
Purchaser unaudited statements of income for Seller's
laboratory business for the four months ended April
30, 1998, and audited statements of income for the
year ending December 31, 1997. To the knowledge of
Seller, such statement of income fairly presents the
total net revenue and provision for doubtful accounts
for the Seller's laboratory operations for the period
covered by such statement of income, except for
disputed claims relating thereto disclosed in writing
to Purchaser concurrently with the execution of this
Agreement. Said statement of income was prepared in
accordance with generally accepted accounting
principles, applied on a consistent basis for the
periods involved.
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E. Transactions Since April 30, 1998. Except as set
forth in Schedule IV.E, between April 30, 1998 and
the Closing, Seller has not:
1. Sold, transferred or otherwise disposed of or
encumbered in any manner any of the Purchased
Assets, except in the ordinary course of that
business and on Seller's usual terms and
conditions.
2. Entered into any contracts, commitments or
agreements of any kind which would have a
Material Adverse Effect, except routine
contracts for sales and purchases of materials,
supplies and services in the ordinary course of
business.
3. Increased any liability which would have a
Material Adverse Effect, except in the ordinary
course of its laboratory business.
4. Engaged in any transaction outside the ordinary
course of its laboratory business, which
transaction would have a Material Adverse
Effect.
"Material Adverse Effect" means a material adverse
effect on the value of the Purchased Assets, taken as
a whole, or prospects of Seller's laboratory business
taken as a whole.
F. No Adverse Change. To the best of the knowledge of
Seller, between April 30, 1998, and the date of this
Agreement, there has been no adverse change in the
financial condition, assets, or business of Seller's
laboratory which has resulted in a Material Adverse
Effect.
For purposes of this Agreement, "to the best of
Seller's knowledge" or "to the knowledge of Seller"
means if any of the Seller's executive officers
("Officers"), as designated in the Seller's Proxy
Statement dated June 3, 1998, after due inquiry of
the persons listed on Schedule IV.F, have conscious
awareness that the statement as given is not true and
correct. Notwithstanding the foregoing, Seller shall
be deemed to have knowledge if its Officers engaged
in conscious or reckless disregard of facts.
G. Title to Assets. Except as may be otherwise agreed in
writing by the parties, Seller will own and have at
the Closing good and marketable title to the
Purchased Assets, free and clear of all mortgages,
pledges, liens, security interests, conditional sales
contracts, leases, claims and encumbrances
whatsoever.
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H. Good Condition and Working Order. To the best of
Seller's knowledge, the Tangible Assets will be in
good condition and working order on the Closing Date,
reasonable wear and tear excepted.
I. Taxes. Except as set forth in Schedule IV.I,
there are no delinquent federal, state, county
or local taxes, duties or payments which
constitute (or which with the passage of time
may constitute) a lien or charge against the
Purchased Assets.
J. Insurance. Seller has in full force and effect
policies of insurance of the types and in the
amounts listed in Schedule IV.J and will
continue to maintain all such insurance in full
force and effect up to and including the
Closing Date.
K. Licenses. Seller has all necessary material
licenses and permits from all appropriate
federal, state or other authorities for the
operation of its laboratory business.
L. Compliance with Laws. Except as disclosed in
writing to Purchaser's attorney:
1. To the best of Seller's knowledge, Seller
has complied, is complying, and will
comply with all laws, regulations and
orders applicable to its laboratory
business with respect to Purchased
Assets, except to the extent such failure
to comply would not have a Material
Adverse Effect, and there is no
investigation by any governmental agency
or authority pending or, to the Seller's
knowledge, threatened against any Seller
or any basis therefor.
2. To the best of Seller's knowledge,
neither Seller nor any of its respective
officers, directors, principals or
employees has engaged or will engage in
any activity which would be likely to
lead to an investigation by the Office of
the Inspector General, any Medicare or
Medicaid Fraud Control Unit, or other
federal or state prosecutor or
enforcement agency or which would be
likely to lead to an action or proceeding
for recoupment by any third party insurer
or government agency or for mandatory or
permissive exclusion under 42 U.S.C. Sec.
1320a-7 or under any other federal or
state law or for civil monetary penalties
under 42 U.S.C. Sec. 1320a-7a or for
civil monetary penalties under 42 U.S.C.
Sec. 1320a-7 or under any other federal
or state law which would have a Material
Adverse Effect. To the best of Seller's
knowledge, billing by Seller has been
true and correct in all material respects
and in compliance with applicable laws,
regulations and policies except to the
extent such failure would
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not have a Material Adverse Effect. To
the best of Seller's knowledge, neither
Seller nor any of its employees or agents
has solicited or obtained specimen
referrals by means of rebates, kickbacks
or other unlawful arrangements or in a
manner otherwise in violation of any
federal, state or local statute or
regulation, which action would have a
Material Adverse Effect.
M. Pending Claims. Except as disclosed in writing to
Purchaser's attorney, there is no action, suit,
proceeding or claim pending, or, to the knowledge of
Seller, threatened against Seller, which relates to
the Purchased Assets and there is no outstanding
execution, order, writ, injunction, judgment or
decree of any court, government or governmental
agency against Seller which has a Material Adverse
Effect on the Purchased Assets.
N. No Creation of Liens, Etc. Neither the execution of
this Agreement nor the consummation of the
transactions provided for herein will result in the
creation of any lien, charge or encumbrance on any of
the Purchased Assets.
O. No Default. To the best of Seller's knowledge, Seller
is not in default under any contract, transaction,
agreement, lease or instrument to which it is a party
or by which it is bound, which would have a Material
Adverse Effect.
P. Employees. All employees of Seller performing
services for Seller's laboratory operations, all
leased employees of Seller performing services for
Seller's laboratory operations and all individuals
(as opposed to entities) providing services for
Seller's laboratory operations as independent
contractors are listed on Schedule IV.P attached
hereto, which Schedule contains the names, position
and salary or other cash compensation paid to such
individual. Except as set forth on Schedule IV.P,
Seller has no written, or to the best of Seller's
knowledge, oral employment agreements or contracts
with any of its employees or leased employees and, to
the best of Seller's knowledge, no employee or leased
employee has an oral or implied employment agreement
or contract with the Seller. Seller has no collective
bargaining or other agreements with any labor union
or similar employee group with regard to its
laboratory operations and no union has been certified
as a bargaining agent for its employees. Seller has
not received any request for representation by any
employee or group of employees.
Q. Customer List. As of the Closing Date, Seller will
have provided laboratory services to each of its
customers indicated on the Customer Lists in the
format attached as Schedule I.A.
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R. Other Statements. All statements and information
contained in certificates, exhibits, schedules,
lists, documents, or other instruments delivered or
to be delivered to Purchaser pursuant to this
Agreement are deemed representations and warranties
by the party so providing such items.
S. No Untrue Statements. None of the information
contained in the representations and warranties of
Seller set forth in this Agreement or in any of said
certificates, exhibits, schedules, lists, documents
or other instruments delivered or to be delivered to
Purchaser pursuant hereto contains or will contain
any untrue statement of a material fact or omits or
will omit a material fact necessary to make the
statements contained herein or therein not
misleading.
T. Lease Obligations. On the Closing Date, Seller will
have made all required payments and will have
complied in all material respects with all other
obligations under the lease(s) referred to in
Paragraph III-C-3 above.
V. Representations and Warranties of Purchaser. To induce Seller
to enter into this Agreement and to consummate the
transactions provided for herein, the Purchaser represents and
warrants to such parties that:
A. Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in
good standing under the laws of the State of
Delaware, with full power and authority to own, lease
and operate its properties and to carry on its
business as it is now being conducted and is duly
authorized to conduct business in the State of
Michigan.
B. Due Authorization. Purchaser has full power,
authority and legal capacity to enter into this
Agreement and to consummate the transactions
contemplated hereby, and the execution, delivery and
performance of this Agreement does not conflict with
any provisions of any agreement, instrument,
judgment, order or law to which Purchaser is a party
or is subject or by which it is bound. The entering
into of this Agreement and the consummation of the
transactions hereby are not subject to the
jurisdiction, approval or consent of any government
or governmental, regulatory or administrative agency,
except Purchaser must give notice to the government
within thirty (30) days of Closing.
C. No Untrue Statements. None of the information
contained in the representations and warranties of
Purchaser set forth in this Agreement or in any
exhibits or schedules attached hereto contains or
will contain any untrue statement of a material fact
or omits or will omit a material fact necessary to
make the statements contained herein or therein not
misleading.
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VI. Conditions to Purchaser's Performance. The obligations of
Purchaser under this Agreement shall be subject to the
satisfaction, on or prior to the Closing Date, of the
following conditions:
A. All representations and warranties of Seller
contained in this Agreement and in any schedules,
certificates or other documents delivered pursuant to
this Agreement shall be true, correct and complete in
all respects on and as of the date when made and on
and as of the Closing Date, and Seller shall have
delivered to Purchaser certificates, executed by its
president or senior officers and dated as of the
Closing Date, to the foregoing effect.
B. No action or proceeding shall have been instituted or
threatened before any court or governmental agency to
restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or
arises out of, this Agreement or the consummation of
the transactions contemplated herein which, in the
reasonable opinion of Purchaser, make it inadvisable
to consummate such transactions.
C. Purchaser shall have received from Seller's counsel
an Opinion substantially in the form attached hereto
as Schedule VI.C.
D. Seller shall not have disposed of significant
laboratory assets, or incurred significant unusual
liabilities or otherwise engaged in significant
transactions outside the ordinary course of its
laboratory business during such period, which have a
Material Adverse Effect, and that there has been no
adverse change in the financial condition or business
of such laboratory business during such period, which
has a Material Adverse Effect. In connection with
this condition, Purchaser or its accountants shall
have the right to review the accounting and other
records of Seller for the period from April 30, 1998
to a date selected by Purchaser near the Closing
Date.
E. There shall have occurred no damage, destruction or
loss, whether or not covered by insurance, adversely
affecting in any material respect any of the Tangible
Assets to be sold and transferred hereunder.
F. Seller, at the time of closing, except as otherwise
may be agreed to in writing by the parties, shall
have paid to all such employees all amounts due and
payable as of the end of the preceding pay period for
wages, commissions, salaries, holidays and vacation
pay, bonuses and past service claims, and shall have
made and remitted, for all periods through and
including such pay period, all proper deductions,
remittances and contributions for employees' wages,
commissions and salaries required under all contracts
and statutes (including, without limitation, for
health, hospital and medical insurance,
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group life insurance, pension plans, workers'
compensation, unemployment insurance, income tax,
FICA taxes and the like) and, wherever required by
such contracts and/or statutes, all proper deductions
and contributions from its own funds for such
purposes.
G. To the extent required by the applicable lease, the
lessor(s) under the material lease(s) referred to in
Paragraph III-C-3 above shall have consented to the
assignment of said lease(s) to Purchaser.
H. The execution, delivery and performance of this
Agreement, and of the other documents provided for
herein, by Seller shall have been approved by the
Board of Directors and the shareholders thereof, and
by such other persons as are required by applicable
law, corporate by-laws or other instruments to
provide their approval prior to the consummation
thereof, and the Purchaser shall have received a
certified copy of such Resolutions or approvals to
that effect.
I. The full performance by Seller of each and every
covenant and condition imposed upon it hereunder,
including without limitation the execution of the
agreements and performance of the covenants
referenced in Article VIII hereafter, and set forth
in Schedule VIII hereto, provided, however, that
Purchaser may at its option waive the performance of
any of the covenants and conditions imposed
hereunder. Such waiver, however, shall not constitute
any waiver of any claim for damages Purchaser may
otherwise be entitled to make pursuant to the terms
hereof; provided, however, that there shall be no
failure of a condition of closing if (a) the
aggregate of the amounts in controversy of any
Limited Direct Damage Claims (as defined in Section
X(D)(1)) which have arisen or been asserted before
the Closing is less than $700,000, or (b) the
aggregate of the amounts in controversy of any IV(C)
Damage Claims (as defined in Section X(D)(5)) which
have arisen or been asserted before the Closing is
less than $750,000. Any such Limited Direct Damage
Claims or IV(C) Damage Claims shall be treated after
the Closing Date in accordance with the provisions of
Section X.
J. All of the transactions contemplated by the Stock
Purchase Agreement dated July 16, 1998 between Seller
and Purchaser shall be simultaneously consummated.
K. If determined necessary by the Seller, or required by
the Purchaser, any approval of the shareholders of
the Seller or the holders of the Seller's 8.25%
Convertible Subordinated Debentures due February 1,
2006 of the transactions contemplated by this
Agreement shall have been obtained.
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L. As set forth in Section IX(I), prior to Closing,
Purchaser shall be entitled to conduct further due
diligence with regard to health care compliance
issues. With respect to all laws, regulations and
orders applicable to Seller's laboratory business
("Health Care Compliance Issues") as an additional
condition to Closing, competent health care counsel
shall have determined in his/her reasonable opinion
(the entire substance of which opinion shall be
disclosed in full to Seller, in writing only if
requested by Seller) that no Health Care Compliance
Issues, exist with regard to Seller could reasonably
be expected to have a Material Adverse Effect (either
on the Purchased Assets or Purchaser's operation of
the laboratory business after the Closing).
VII. Conditions to Performance by Seller. The obligations of Seller
under this Agreement shall be subject to the satisfaction, on
or prior to the Closing Date, of the following conditions:
A. All representations and warranties of Purchaser
contained in this Agreement and in any schedules,
certificates or other documents delivered pursuant to
this Agreement shall be true, correct and complete in
all material respects on and as of the date when made
and on and as of the Closing Date, and the Purchaser
shall have executed and delivered to Seller
certificates, signed by its duly authorized officer,
dated as of the Closing Date, to the foregoing
effect.
B. The full performance by Purchaser of each and every
covenant and condition imposed upon it hereunder,
provided, however, that Seller may at its option
waive the performance of any of the covenants and
conditions imposed hereunder. Such waiver, however,
shall not constitute a waiver of any other covenant
or condition or constitute any waiver of any claim
for damages such party may otherwise be entitled to
make pursuant to the terms hereof.
C. No action or proceeding shall have been instituted or
threatened before any court or governmental agency to
restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or
arises out of, this Agreement or the consummation of
the transactions contemplated herein which, in the
reasonable opinion of Seller, made it inadvisable to
consummate such transactions.
D. Seller shall have received from Purchaser's counsel
an Opinion substantially in the form attached hereto
as Schedule VII.D.
E. The execution, delivery and performance of this
Agreement, and of the other documents provided for
herein, by Purchaser shall have been approved by the
Board of Directors thereof or such other appropriate
body, and by such other
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<PAGE> 13
persons as are required by applicable law, corporate
bylaws or other instruments to provide their approval
prior to the consummation thereof, and the Seller
shall have received a certified copy of such
Resolutions or approvals to that effect.
F. If determined necessary by the Seller, or required by
the Purchaser, any approval of the shareholders of
the Seller or the holders of the Seller's 8.25%
Convertible Subordinated Debentures due February 1,
2006 of the transactions contemplated by this
Agreement shall have been obtained.
G. All of the transactions contemplated by the Stock
Purchase Agreement dated July 16, 1998 between the
Seller and the Purchaser shall be simultaneously
consummated.
VIII. Covenants with Respect to Competition. Seller warrants that
for a period as contained therein, the non-solicitation and
non-compete agreements shall be executed and in effect as set
forth in Schedule VIII. hereto.
IX. Additional Covenants and Agreements.
A. As of the Closing Date, Seller shall be deemed to
have assigned to Purchaser all of its right, title
and interest in and to such warranties (express and
implied) that continue in effect with respect to any
of the Purchased Assets, and to have nominated
Purchaser as such party's true and lawful attorney to
enforce such warranties against such manufacturers,
and such party shall execute and deliver such
specific assignments of such warranty rights as
Purchaser may reasonably request.
B. Purchaser shall have the exclusive right to represent
itself as the purchaser of the Purchased Assets of
Seller's laboratory business provided, however, that
such representations shall not in any manner attempt
to convey to the public or to any of Seller's
customers or former customers that Purchaser is
acting for or on behalf of Seller. All statements and
releases concerning this Agreement and the
transactions contemplated hereby which are intended
or designed to be disseminated to any third party
shall be subject to the prior written approval of
Purchaser and Seller, provided, however that any
party may make any public disclosure required by
applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which
case the disclosing party will use its best efforts
to advise the other parties prior to making the
disclosure and give the other parties an opportunity
to comment).
C. From and after the Closing, Purchaser shall be
entitled to all of the books, records, [specimens]
and other documents and items of Seller pertaining to
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<PAGE> 14
the Purchased Assets (the "Records") and the
customers listed on the Customer List; provided,
however, that Seller shall have the right to keep all
of the Records necessary for Seller to bill and
collect the Seller's accounts receivable until such
time as Seller determines that its collection efforts
with respect to such accounts receivable are complete
(the "Collection Period"). Purchaser agrees that,
from and after the Closing, Seller may contact
customers listed on the Customer List for the purpose
of obtaining information related to billing and
collection of accounts receivable and any inquiries
by third party payors or government authorities.
During the Collection Period, Seller shall afford
Purchaser and its agents and representatives with
access to the Records retained by Seller. After the
Collection Period, Seller shall transfer all of the
Records retained to Purchaser and Purchaser shall
afford Seller and its agents and representatives with
access to all Records thereafter. Purchaser shall
maintain all Records for the period of time required
by Michigan and United States laws and shall assure
complete confidentiality with regard thereto except
where disclosure is required by law. The parties
agree that no portion of the Purchase Price is
allocated to purchase of medical records.
D. It is understood and agreed that Seller and Purchaser
will not comply with the provisions of the "Bulk
Sales Law" or similar provisions of the laws of any
state insofar as they may be applicable to the
transactions contemplated by this Agreement. Seller
agrees to pay and discharge, promptly and diligently,
when due, or to contest or litigate all claims of
creditors which could be asserted against Purchaser
or the Purchased Assets by reason of such
noncompliance, to indemnify, defend at its own
expense and hold Purchaser harmless from and against
any and all such claims and, upon receipt of written
notice from Purchaser of the existence thereof, to
take promptly all necessary action to remove or cause
to be removed any lien or encumbrance which may be
placed on any of the Purchased Assets by a creditor
of Seller by reason of such noncompliance.
E. The parties agree that Seller's accounts receivable
shall not be included among the Purchased Assets. The
parties agree that if either party receives payment
for services provided by the other party, such party
shall promptly (no later than two weeks) turn such
payment over to the party to whom the payment is
owed.
F. Purchaser assumes responsibility for taking all
necessary action, at its own expense to obtain,
transfer or continue any licenses, permits or other
governmental approvals necessary to the operation of
its business at Seller's former laboratory facility.
Seller agrees to cooperate fully in the obtaining
transfer or continuance of such licenses, permits or
approvals.
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<PAGE> 15
G. With regard to work in process at Closing, each party
agrees that Purchaser shall be responsible for
completing performance for all tests received prior
to the Closing Date.
H. Seller shall use its best efforts as requested by
Purchaser to address any customer concerns relating
to this transaction. Seller shall, among other
efforts, meet with customers and Purchaser when so
requested by Purchaser. Prior to the Closing Date,
Seller agrees not to dispose of significant
laboratory assets, or incur significant unusual
liabilities, or otherwise engage in significant
transactions relating to its laboratory business
outside of the ordinary course of its laboratory
business.
I. Prior to the Closing Date, Purchaser shall be
entitled, upon reasonable request, through its
employees and representatives, including, without
limitation, its attorneys, to perform an
investigation (including but not limited to Health
Care Compliance Issues) of the assets, properties,
business, and operations of Seller, including a
review of Seller's books, records, and financial
condition including, but not limited to actual and
existing minute books and stock records of Seller
which are in the current possession and control of
the present officers of Seller. Any such
investigation and review shall be conducted at
reasonable times and under reasonable circumstances.
Purchaser agrees that any such investigation or
review shall not unreasonably interfere with the
ongoing operations of Seller. Seller will cooperate
and shall cause its officers, employees, consultants,
agents, accountants, and attorneys to cooperate with
such employees and representatives in connection with
such review and investigation. If this Agreement
terminates, Purchaser shall keep confidential and
shall not use in any manner any information or
documents obtained from Seller concerning its assets,
properties, business, and operations. If this
Agreement terminates, any documents and copies
thereof obtained by Purchaser from Seller shall be
promptly returned to Seller.
X. Indemnification.
A. Indemnification by Purchaser. Purchaser hereby agrees
to indemnify, defend and hold harmless Seller, its
officers, directors, employees, shareholders, agents
and its successors and assigns, against any and all
liabilities, obligations, losses, damages, demands,
claims, assessments, actions, tax deficiencies,
penalties and interest, reasonable accounting and
attorneys' fees, costs and expenses (individually a
"Loss" and collectively "Losses"), arising out of, or
incident to, any of the following:
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<PAGE> 16
1. Any misrepresentation, or breach of any
warranty of Purchaser contained in this
Agreement;
2. Any breach of any covenant, agreement or other
term or provision hereof to be performed by
Purchaser;
3. The Purchaser's operations after the Closing
Date, including, but not limited to, all
claims arising on or after the Closing Date
with respect to the Assumed Liabilities;
4. All claims asserted against the Seller or
its assets and alleged to arise out of any
act, omission, obligation or liability of
Purchaser or any of its officers, employees
or other agents.
B. Indemnification by Seller. Seller hereby agrees to
indemnify, defend and hold harmless Purchaser, its
officers, directors, employees, shareholders, agents
and its successors and assigns, against any and all
liabilities, obligations, losses, damages, demands,
claims, assessments, actions, tax deficiencies,
penalties and interest, reasonable accounting and
attorneys' fees, costs and expenses (individually a
"Loss" and collectively "Losses"), arising out of, or
incident to, any of the following:
1. Any misrepresentation, or breach of any
warranty of Seller contained in this Agreement;
2. Any breach of any covenant, agreement or other
term or provision hereof to be performed by
Seller;
3. With the exception of the Assumed Liabilities,
all liabilities of Seller, whether accrued,
absolute, contingent or otherwise, and whether
due or to become due, including but not limited
to claims with respect to the Retained
Liabilities; and
4. All claims asserted against the Purchaser or
the Purchased Assets and alleged to arise out
of any act, omission, obligation or liability
of Seller or any of its officers, employees or
other agents.
C. Claims. If either party desires to make a claim
against the other under Section X(A) or X(B) hereof
which does not involve a claim by any person other
than the parties, then such party shall make such
claim by promptly delivering notice to the other in
the form set forth in (1) below. If either party (the
"Claimant") desires to make a claim for indemnity
against the other (the "Indemnitor") under this
Agreement which involves a demand, claim or
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<PAGE> 17
threat of litigation or the actual institution of any
action, suit or proceeding (collectively, a "Claim")
by a person other than the parties, then such Claim
will be made in the following manner and be subject
to the following terms and conditions unless
otherwise provided for in this Agreement:
1. Notice. The Claimant will give prompt notice
(and, if served with a complaint, not later
than seven (7) days after such service) to the
Indemnitor of any Claim at any time served on
or instituted against the Claimant with respect
to which the Claimant believes it would have a
right of indemnification under this Agreement,
setting forth in reasonable detail the facts
relating to such claim and the basis for its
alleged right of indemnification under this
Agreement; provided, that failure to give
notice as provided above shall not relieve
Indemnitor of its obligations under this
Section X except to the extent Indemnitor is
actually prejudiced thereby.
2. Responsibility for Defense. Within thirty (30)
days after receipt of such Notice, but not less
than five (5) business days prior to the time
the Claimant is required to respond to a Claim
(subject to the proviso contained in Section
X(C)(1)), the Indemnitor will, by giving
written notice to the Claimant, have the right
to assume responsibility for the defense of the
Claim in the name of the Claimant or otherwise
as the Indemnitor may elect; provided, however,
that the Indemnitor's determination to conduct
a defense of a Claim shall in no way be deemed
a conclusive admission of an obligation to
indemnify hereunder. Otherwise, the Claimant
will have responsibility for the defense of the
Claim. Subject to the provisions of subsections
(3) and (4) below, the party having
responsibility for the defense of the Claim
(the "Defending Party") will have the full
authority to defend, cure, adjust, compromise
or settle such Claim or appeal any judgment or
ruling of court or other tribunal in connection
with such Claim in its own name and/or in the
name of the other party.
3. Right to Participate. Notwithstanding a
Defending Party's responsibility for the
defense of a Claim, the other party shall have
the right to participate, at its own expense
and with its own counsel, in the defense of a
Claim and the Defending Party will consult with
the other party from time to time on matters
relating to the defense of such Claim. The
Defending Party shall provide the other party
with copies of all pleadings and material
relating to such Claim.
4. Settlement. A Defending Party will provide the
other party with timely written notice of any
proposed adjustment, compromise or
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<PAGE> 18
other settlement, including equitable or
injunctive relief, of a Claim which the
Defending Party intends to propose or accept.
If the other party fails to provide the
Defending Party with timely written notice of
objection to such settlement, then the
Defending Party shall have the authority to
propose or accept such settlement and enter
into any agreement, in its own name and/or in
the name of the other party, giving legal
effect to all aspects of such settlement. If
the other party objects to such settlement,
then the Defending Party may, if it so elects,
tender the defense to the other party by paying
to such other party the amount of money
proposed to be paid in settlement of the claim,
in which case the Defending Party shall have no
further liability to the other party hereunder
with respect to such Claim and the other party
shall have full authority for the future
defense of such Claim and full responsibility
for any and all liabilities, obligations, costs
and expenses resulting therefrom.
Notwithstanding anything above to the contrary,
Seller shall not enter into any settlement
which will in any way, financially or
otherwise, affect Purchaser's operation of the
laboratory business.
D. Limitations on Indemnification. The right of either
party to indemnification under this Section X of the
Agreement shall be subject to the following
provisions:
1. The limitations contained in sections 2, 3, and
4 below shall only apply to indemnification for
damage claims by one party against the other
party relating to damages directly incurred by
the Claimant for breach of the representations
and warranties in Sections IV(D) through IV(S)
inclusive and in Section V(C) hereof ("Limited
Direct Damage Claim"). Notwithstanding anything
contained herein to the contrary, there shall
be no limitation of any kind on indemnification
rights in any way relating to third-party
claims, including but not limited to claims by
patients, governmental entities, employees and
customers, asserted against the Claimant for
which the other party is required to indemnify
Claimant ("Third Party Claims"). The
limitations shall be narrowly construed to
ensure that the parties will be fully
indemnified for Third Party Claims.
2. No Limited Direct Damage Claim shall be
payable to the Claimant unless the total
losses for which Limited Direct Damage
Claims are or have been $200,000 in the
aggregate, whereupon the Claimant would be
entitled to the excess losses over $200,000
in the aggregate.
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<PAGE> 19
3. Once the total losses for Limited Direct
Damage Claims exceed $200,000 in the
aggregate, losses for each party relating to
Limited Direct Damage Claims shall not
exceed an aggregate of an additional
$500,000.
4. Limited Direct Damage Claims shall survive
the Closing Date for a period of one (1)
year. Any Limited Direct Damage Claim must
be asserted within the foregoing period.
5. The limitations contained in this section 5 and
section 6 below shall only apply to
indemnification for damage claims by Purchaser
against Seller relating to damages directly
incurred by Purchaser for breach of the
representations and warranties in Section IV(C)
hereof ("IV(C) Damage Claim"). No IV(C) Damage
Claim shall be payable to Purchaser unless the
total losses for IV(C) Damage Claims are or
have been $750,000 in the aggregate, whereupon
the Purchaser would be entitled to the excess
losses over $750,000 in the aggregate.
6. Any damages recoverable by Purchaser on a IV(C)
Damage Claim shall be offset by any profits
(calculated consistently with any determination
of damages) derived by Purchaser from the
business prospects listed on Schedule X.D.6
(which will show customer numbers and not names
prior to the Closing) to be supplied by Seller
to Purchaser.
7. IV(C) Damage Claims shall survive the Closing
Date for a period of one (1) year. Any IV(C)
Damage Claim must be asserted within the
foregoing period.
8. The limitations contained in Paragraphs 2, 3
and 4 with respect to Limited Direct Damage
Claims shall be determined and shall operate
independently of the limitations set forth in
Paragraphs 5, 6 and 7 with respect to IV(C)
Damage Claims.
E. Mitigation of Losses. A Claimant shall be entitled to
recover the full amount of any Losses incurred due to
the matter for which indemnification is sought,
including reasonable attorney's fees incurred in
connection therewith, but any recovery shall be net
of any economic benefit to which the Claimant is
entitled due to such Losses, including, without
limitation, (a) any insurance proceeds, (b) any
payments received from third parties relating to the
matter, and (c) any refunds from third party payors
attributable to services rendered by Seller prior to
the Closing.
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<PAGE> 20
F. Remedies. The rights and remedies of each party
hereto arising by reason of an inaccuracy in, or
breach of the representations and warranties in
Sections IV(D) through IV(S) inclusive, and Section
V( C) as set forth in D, above, shall be limited to
the indemnification right set forth in this Section.
XI. Seller's Laboratory Employees. Purchaser agrees to reimburse
Seller up to fifty percent (50%) of Seller's liability, if
any, pursuant to the WARN Act. Purchaser's liability to Seller
pursuant to the WARN Act shall be capped at $250,000. Seller
agrees that it shall bear sole responsibility for all costs
and expenses, including but not limited to severance pay and
related obligations, with regard to its employees. Purchaser
shall in good faith offer employment to such of Seller's
employees as Purchaser deems necessary for its laboratory
operations. Seller shall cooperate with and shall not impair
Purchaser's efforts to obtain the employment of such persons.
Purchaser shall attempt to provide Seller prior to Closing
with a list of such persons to whom it intends to offer
employment. The parties agree that, in the event Purchaser
requests Seller to temporarily continue the employment of any
of its employees following the Closing to aid in the business
transition, Seller shall attempt to continue to employ such
persons (but does not guarantee the willingness or
availability) for the period requested by Purchaser following
the Closing, and Purchaser shall promptly reimburse Seller for
the direct employee costs incurred by its connection
therewith.
XII. Termination.
A. This Agreement may be terminated as follows:
1. At any time by mutual written agreement of the
Purchaser and the Seller.
2. By either the Purchaser or Seller, if the
Closing Date has not occurred on or before
August 31, 1998, or if later, 90 days after
any determination by either Seller or
Purchaser that Shareholder or debenture
holder approval is legally required for the
consummation of the transactions
contemplated by this Agreement.
3. By either the Purchaser or Seller, if a
certain Stock Purchase Agreement dated July
16, 1998 between the Purchaser and Seller
(the "Stock Purchase Agreement") terminates
for any reason prior to the consummation of
the transactions contemplated therein.
4. By either the Purchaser or Seller, if it is
determined by the Seller, or required by
Purchaser, that in order to consummate the
sale of the Purchased Assets, such a meeting
is necessary, at a meeting of
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<PAGE> 21
shareholders or holders of Seller's 8.25%
Convertible Subordinated Debentures due
February 1, 2006, held to vote on the sale
of the Purchased Assets, the shareholders do
not approve such sale.
5. By the Purchaser, if any of the conditions
set forth in Article VI shall not be
fulfilled for reasons beyond the reasonable
control of Purchaser and are not waived by
Purchaser.
6. By the Seller, if any of the conditions set
forth in Article VII shall not be fulfilled
for reasons beyond the reasonable control of
the Seller and are not waived by the Seller.
7. By the Seller under the following
circumstances: In the event the Board of
Directors of the Seller receives a proposal
that, in the exercise of its fiduciary
obligations (as determined in good faith by the
Board of Directors), it determines to be a
Superior Proposal (as defined below), the Board
of Directors may, after complying with Section
XIII, withdraw or modify its approval or
recommendation of this Agreement, approve or
recommend any such Superior Proposal, enter
into an agreement with respect to such Superior
Proposal, and/or terminate this Agreement. For
purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal for the
purchase of the Customer List and other assets
of Seller, for a merger or other business
combination involving the Seller or its
Subsidiaries, or for the purchase of an equity
interest in Seller contingent on Seller not
selling the Customer List, in each case, on
terms which the Board of Directors of Seller
determines in its good faith reasonable
judgment to be more favorable to Seller's
shareholders than the transactions contemplated
hereby.
B. Except as set forth in Section XIV, if this Agreement
is terminated pursuant to this Article XII, this
Agreement shall become void and of no effect with no
liability on the part of any party hereto; provided,
however, that if the election to terminate is due to
the default of a party hereunder, then the
non-defaulting party shall be entitled to any and all
remedies available at law or in equity.
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XIII. Other Offers.
A. From the date hereof until the termination of this
Agreement in accordance with Section XII, Seller
shall not, nor shall it authorize any officer,
director or employee of, or any investment banker,
attorney or other advisor or representative of Seller
to, and shall direct its officers and directors,
investment bankers, attorneys and other
representatives to not directly or indirectly:
1. solicit, initiate or encourage the submission
of any "Acquisition Proposal" (as defined
below);
2. participate in any discussions or
negotiations regarding, or furnish to any
person any information with respect to, or
take any other action to facilitate any
inquiries or the making of any proposal that
constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal,
provided, however, that to the extent
required by the fiduciary obligations of the
Board of Directors of Seller, as determined
in good faith by the Board of Directors,
Seller may:
a. in response to an unsolicited
request therefor, furnish
information with respect to Seller
to any person pursuant to a
confidentiality agreement and
discuss (i) such information (but
not the terms of any possible
Acquisition Proposal) and (ii) the
terms of this Section XIII with such
person; and
b. upon receipt by Seller of an
Acquisition Proposal, following
delivery to Purchaser of the notice
required pursuant to Section
XIII(C), participate in negotiations
regarding such Acquisition Proposal.
For purposes of this Agreement,
"Acquisition Proposal" shall have
the same meaning as "Superior
Proposal," except an Acquisition
Proposal shall not yet have been
evaluated by Seller's Board of
Directors and shall not include any
proposal by the Purchaser.
B. Neither the Board of Directors of Seller nor any
committee thereof shall (i) withdraw or modify, in a
manner adverse to Purchaser, the approval or
recommendation by such Board of Directors or any such
committee of this Agreement (or the other
transactions contemplated hereby), (ii) approve or
recommend any Acquisition Proposal, or (iii) enter
into any agreement with respect to any Acquisition
Proposal. Notwithstanding the foregoing, in the event
the Board of Directors of Seller receives an
Acquisition Proposal that,
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<PAGE> 23
in the exercise of its fiduciary obligations (as
determined in good faith by the Board of Directors),
it determines to be a Superior Proposal (as defined
above), the Board of Directors may (subject to the
following sentences) withdraw or modify its approval
or recommendation of this Agreement or the other
transactions contemplated hereby, approve or
recommend any such Superior Proposal, enter into an
agreement with respect to such Superior Proposal or
terminate this Agreement, in each case at any time
after the second business day following Purchaser's
receipt of a written notice (a "Notice of Superior
Proposal") advising Purchaser that the Board of
Directors has received a Superior Proposal,
specifying the material terms and conditions of such
Superior Proposal and identifying the person making
such Superior Proposal.
C. In addition to the obligations of Seller set forth in
Section XIII above, Seller shall promptly advise
Purchaser orally and in writing of any request for
information or of any Acquisition Proposal, or any
inquiry with respect to or which could lead to any
Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or
inquiry, and the identity of the person making any
such Acquisition Proposal or inquiry. Seller will
keep Purchaser fully informed of the status and
details of any such request, Acquisition Proposal or
inquiry.
D. Seller shall immediately cease and cause to be
terminated all existing discussions and negotiations,
if any, with any parties (other than Purchaser)
conducted heretofore with respect to any Acquisition
Proposal.
XIV. Termination Fee. So long as Purchaser has not materially
breached its obligations under this Agreement, Seller shall
pay Purchaser, immediately available funds in the amount of
Four Hundred Fifty Thousand Dollars ($450,000) upon
termination of this Agreement pursuant to Section XII(A)(7).
The parties agree that the termination fee is intended, among
other things, to cover Purchaser's opportunity costs, loss of
benefit of the bargain, and actual expenses incurred, and
Seller agrees that such fee is fair and reasonable under the
circumstances.
XV. General Provisions.
A. Unless otherwise provided herein, all
representations, warranties and agreements herein
contained shall remain operative and in full force
and effect regardless of any investigation made by or
on behalf of either party and shall survive the
Closing and shall continue and not be merged by
reason of the execution and delivery of any documents
of conveyance hereunder.
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<PAGE> 24
B. Whether or not the transactions contemplated herein
shall be consummated, the parties hereto shall pay
their own respective expenses incident to the
preparation of its Agreement and to the consummation
of the transactions provided for herein.
C. Except as set forth in Schedule XV.C, each party
hereto hereby represents to the other that no broker
or finder has acted for or on its behalf in
connection with this Agreement or the transactions
contemplated hereby, and each party hereby
indemnifies the other against all claims for broker's
and finder's fees allegedly due under any agreement
or understanding between such party and any third
party.
D. This Agreement shall be binding upon, and shall inure
to the benefit of, and be enforceable by, the parties
and their respective legal representatives, heirs,
legatees, successors and assigns.
E. The paragraph headings contained in this Agreement
are for reference purposes only and shall not affect
in any way the meaning or interpretation of this
Agreement.
F. This Agreement constitutes the entire contract
between the parties hereto with respect to the
subject matter hereof and may not be changed,
modified or amended, except by an instrument in
writing signed by the party against whom any such
change, modification or amendment is asserted.
G. This Agreement may be executed in any number of
counterparts, each of which when executed and
delivered shall be an original, but all such
counterparts shall constitute one and the same
instrument.
H. This Agreement shall be governed and construed in
accordance with the laws of the State of North
Carolina.
I. Any notices under this Agreement are deemed given on
the date mailed by registered or certified mail and
shall be sent to Seller's Representative at the
following address:
Seller
26500 Northwestern Highway
Southfield, MI 48076
Attention: President
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With a copy to:
Thomas Vaughn
Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243
Purchaser:
Laboratory Corporation of America
Holdings
Attention: Randal L. Stone
358 South Main Street
Burlington, North Carolina 27215
With a copy to:
Laboratory Corporation of America
Holdings
358 South Main Street, Third Floor
Burlington, North Carolina 27215
Attention: General Counsel
With a copy to:
John R. Erwin, Esquire
Mezzullo & McCandlish
4300 Six Forks Road, Suite 825
Raleigh, North Carolina 27609-5734
J. The parties hereto agree to the allocation of the
purchase price indicated on Schedule XV.J attached
hereto.
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<PAGE> 26
K. Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the
parties agrees to use reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the
other parties in doing, all things reasonably
necessary, proper or advisable to consummate and make
effective, in the most expeditious manner
practicable, the transactions contemplated by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATTEST: LABORATORY CORPORATION OF AMERICA
HOLDINGS
/s/ John R. Erwin By: /s/ Bradford T. Smith
------------------------------- ------------------------------
Executive Vice President
ATTEST: UNIVERSAL STANDARD HEALTHCARE, INC.
/s/ Alan S. Ker By: /s/ Eugene E. Jennings
------------------------------- ------------------------------
26
<PAGE> 27
SCHEDULES TO PURCHASE AGREEMENT
<PAGE> 28
SCHEDULES TO PURCHASE AGREEMENT
INDEX
Schedule I. A -- Form of Customer List
Schedule I. B -- Tangible Assets
Schedule II. A -- Trade Payables
Schedule II. C -- Assumed Liabilities
Schedule III.C.1 -- Form of General Assignment and Bill of Sale
Schedule III.C.3 -- Form of Lease Assignment
Schedule III.C.4 -- Form of Property and Equipment Lease (Sublease)
Schedule III.C.5 -- Form of Laboratory Services Agreement
Schedule III.C.6 -- Form of Assumption and Assignment Agreement
Schedule III.C.7 -- Form of Co-Marketing Agreement
Schedule III.C.8 -- Form of Transition Services Agreement
Schedule IV.B. -- Due Authorization
Schedule IV.C. -- Customers and Customer Relations
Schedule IV.E -- Transactions Since April 30, 1998
Schedule IV.F. -- Due Inquiry
Schedule IV.I -- Taxes
Schedule IV.J -- Insurance
Schedule IV.P -- Employees
Schedule VI.C -- Seller's Opinion of Counsel
<PAGE> 29
Schedule VII.D -- Purchaser's Opinion of Counsel
Schedule VIII. -- Form of Non-Compete Agreement
Schedule X.D.6 -- Business Prospects
Schedule XV.C -- Brokers or Finders
Schedule XV.J -- Allocation of Purchase Price
<PAGE> 1
EXHIBIT 99.3
UNIVERSAL STANDARD HEALTHCARE, INC.
STOCK PURCHASE AGREEMENT
July 16, 1998
Laboratory Corporation of America Holdings
358 South Main Street, Third Floor
Burlington, North Carolina 27215
Gentlemen:
The undersigned, Universal Standard Healthcare, Inc., a Michigan
corporation (the "Company") , agrees with you (the "Purchaser") as follows:
1. Sale and Purchase of Purchased Shares; Closing.
1.1 Agreement to Sell and Purchase Purchased Shares.
(a) The Company agrees to sell to the Purchaser and the
Purchaser agrees to purchase from the Company, subject to the terms and
conditions hereof and in reliance upon the representations and warranties
contained herein, on the Closing Date hereinafter referred to, the number of
shares of common stock of the Company (the "Common Stock") set forth opposite
the Purchaser's name in Exhibit 1.1 hereto (the "Purchased Shares"). The
purchase price of such shares shall be $3.00 per share (the "Purchase Price").
The Purchase Price for the Common Stock purchased pursuant to this Section
1.1(a) shall be payable in cash on the Closing Date.
(b) The shares of Common Stock issued pursuant to Section
1.1(a) shall be referred to in this Agreement as the Purchased Shares.
1.2 Closing. Delivery of and payment for the Purchased Shares
shall be made on August 3, 1998, at the offices of Dykema Gossett, PLLC, 400
Renaissance Center, Detroit, Michigan 48243 or such other date and at such
place as is mutually agreed upon by the Company and the Purchaser (the "Closing
Date"), subject to Section 5(a) below. On the Closing Date, (i) the Company
will deliver to the Purchaser, against payment of the Purchase Price therefor
in immediately available funds delivered by wire transfer to Company, a
certificate dated such Closing Date and registered in the Purchaser's name for
the number of Purchased Shares set forth opposite the Purchaser's name in
Exhibit 1.2A hereto, (ii) the Purchaser and the Company shall have entered into
a Shareholders' Agreement, in the form attached hereto as Exhibit 1.2B (the
<PAGE> 2
"Shareholders' Agreement"); (iii) there shall be delivered an opinion of counsel
for the Purchaser in a form acceptable to the Company relating to this Agreement
and the other agreements to be delivered at the closing (the "Other Agreements")
and the transactions contemplated by this Agreement and such Other Agreements
and there shall be delivered an opinion of counsel for the Company in a form
acceptable to the Purchaser relating to this Agreement and the Other Agreements
to be delivered at the closing (the "Other Agreements") and the transactions
contemplated by this Agreement and such Other Agreements; (iv) there shall be
delivered the certificates referred to in Section 5(a)(i) and 5(b)(i); (v) there
shall be delivered a certificate of the secretary of the Purchaser certifying
the resolutions of the Board of Directors of the Purchaser approving this
Agreement and the performance by the Purchaser of its obligations hereunder;
(vi) there shall be delivered a certificate of the secretary of the Company
certifying the resolutions of the Board of Directors of the Company approving
this Agreement and the performance by the Company of its obligations hereunder;
(vii) the Company, the Purchaser and NBD Bank shall have entered into and
delivered the NBD Subordination Agreement (as defined below), in a form mutually
acceptable to the parties thereto; (viii) the parties to the Voting Agreement,
the Co- Marketing Agreement and the Security Agreement shall enter into and
deliver such agreements in the form attached hereto as Exhibits 1.2C, 1.2D and
1.2E, respectively; (ix) there shall be delivered the consent of NBD Bank to
this Agreement and the performance by the Company of its obligations hereunder,
which consent shall include a waiver of the provisions of the Loan Agreement (as
defined below) in a form reasonably acceptable to the Purchaser; and (x) there
shall be delivered the waiver by The Kaufmann Fund, Inc. of the Kaufmann
Preemptive Rights (as defined below) in a form acceptable to the Purchaser.
2. Representations and Warranties. (a) The Company represents and
warrants to the Purchaser as of the date hereof as follows:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Michigan with corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted and to enter into
and perform its obligations under this Agreement. Exhibit 2(i)(A) is a true copy
of the Articles of Incorporation (with all amendments) of the Company (the
"Articles of Incorporation"). Exhibit 2(i)(B) is a certificate of good standing
of the Company certified by the Michigan Department of Consumer and Industry
Services, dated July 14, 1998. Exhibit 2(i)(C) is a true copy of the By-laws of
the Company (with all amendments) (the "By-Laws"). The Company is duly qualified
as a foreign corporation to do business in all jurisdictions in which the nature
of its properties and business require such qualification, except to the extent
that the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the assets, liabilities, business
prospects, earnings or business affairs of the Company and its subsidiaries,
considered as one enterprise ("Material Adverse Effect").
(ii) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to own,
lease and operate its properties and to conduct its
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<PAGE> 3
business as currently conducted; all of the issued and outstanding capital stock
of each such subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity, except for pledges to NBD Bank. Each subsidiary of
the Company is duly qualified as a foreign corporation to do business in all
jurisdictions in which the nature of its properties and business require such
qualification, except to the extent that the failure to so qualify would not
have a Material Adverse Effect.
(iii) The Company has delivered the SEC Filings (as defined
below), including audited financial statements of the Company and its
subsidiaries as of and at December 31, 1997 and unaudited financial statements
of the Company and its subsidiaries as of and at March 31, 1998, and unaudited
monthly financial statements of the Company and its subsidiaries as of and at
April 30, 1998 and May 31, 1998 (the "Monthly Financials"), shown on Exhibit
2(iii)(A) attached hereto. (The audited and unaudited financial statements of
the Company are hereinafter referred to as the "Financials.) The unaudited
Financials, including the Monthly Financials, have been prepared in accordance
with GAAP (as defined below) consistently applied (subject to the lack of
footnote disclosure and charges resulting from normal year-end adjustments). The
Financials fairly present the financial condition of the Company as of the dates
thereof. Since May 31, 1998, except as set forth on Exhibit 2(iii)(B), (A) there
has been no material adverse change in the condition, financial or otherwise, or
in the assets, liabilities, business prospects, earnings or business affairs of
the Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, from that disclosed in the SEC
Filings and Monthly Financials, (B) there have been no transactions entered into
by the Company or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock. This Agreement, the Exhibits hereto, the SEC Filings and the
Monthly Financials do not contain any untrue statement of a material fact and do
not omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
(iv) The authorized capital of the Company consists of
20,000,000 shares of Common Stock; provided that the Company has obtained
shareholder approval to increase the authorized capital of the Company
to 40,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock
(the "Amendment"). All the outstanding Common Stock is validly issued, fully
paid and non-assessable and has been issued in full compliance with applicable
law. The Purchased Shares have been duly authorized for issuance and sale to the
Purchaser pursuant to this Agreement and, when issued and delivered by the
Company pursuant to this Agreement against payment therefor in the manner herein
described, will be validly issued and fully paid and non-assessable; and the
issuance of the Purchased Shares is not subject to preemptive or other similar
rights, except for preemptive rights held by The Kaufmann Fund, Inc. under a
certain Stock Purchase Agreement (the "Kaufmann Agreement") dated June 8, 1998
(the "Kaufmann Preemptive Rights"). No further approval or authority of any
shareholder (except as may be required to list the Purchased Shares with The
Nasdaq Stock Market, Inc. (" Nasdaq")) or the Board of Directors
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<PAGE> 4
of the Company is required for the issuance and sale of the Purchased Shares as
contemplated herein. None of the outstanding shares of the Common Stock are
entitled to cumulative voting rights, preemptive rights, anti-dilution rights or
registration rights under the Securities Act of 1933, as amended (the
"Securities Act"), (except as set forth in the Kaufmann Agreement, a
Stockholders Agreement dated June 28, 1991 (the "Original Stockholders
Agreement"), the Westsphere Warrant (as defined below), the Debentures (as
defined below) and a Warrant dated July 8, 1998 issued to NBD Bank (the "NBD
Warrant") copies of which are attached as Exhibits 2(iv)A, 2(iv)B, 2(iv)C,
2(iv)D and 2(iv)E respectively). The Company has outstanding no option, warrant
or other commitment to issue or to acquire any shares of its capital stock, or
any security or obligations convertible into or exchangeable for its capital
stock nor has it given any person or entity any right to acquire from the
Company or sell to the Company any shares of its capital stock, except as
provided in the Kaufmann Agreement, a certain Warrant dated June 18, 1992,
issued to WestSphere Funding, Ltd. (the "WestSphere Warrant"), the 1992 Stock
Option Plan, the Directors Stock Option Plan, the Employee Stock Purchase Plan,
Non-Qualified Stock Option Agreements with Robert DeCresce, Thomas Marquard,
Alan Ker, Anthony Bonelli, Marvin Eisner and Marvin Eisner, dated February 13,
1992, May 31, 1992, May 31, 1992, June 24, 1992, June 20, 1992 and June 28,
1992, respectively, the 8.25% Convertible Subordinated Debentures Due February
1, 2006 (the "Debentures"), and the NBD Warrant. Certain information with
respect to the foregoing documents are set forth on Exhibit 2(iv)F. There is,
and immediately upon the Closing hereunder there will be, no agreement,
restriction or encumbrance with respect to the sale or voting of any shares of
capital stock of the Company to which the Company is a party, except the Voting
Agreement, the LCA Voting Agreement, the Shareholders' Agreement and the
Original Stockholders Agreement. Assuming the accuracy of the Purchaser's
representations set forth in Section 3 hereof, the issuance of the Purchased
Shares in accordance with the terms of this Agreement is exempt from
registration under the Securities Act and the Company has complied with all
federal and state securities laws in connection with such issuance which are
required to be complied with prior to the date hereof and will comply with all
such requirements in connection with such issuance which are required to be
complied with prior to the Closing Date.
(v) The execution, delivery and performance of this Agreement,
the Voting Agreement, the Shareholders' Agreement, the Co-Marketing Agreement,
the NBD Subordination Agreement and the Security Agreement and the consummation
of the transactions contemplated herein and therein, and compliance by the
Company with its obligations hereunder and thereunder (A) have been duly
authorized by all necessary corporate action, (B) will not conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the Company
or any of its subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any of its
subsidiaries is subject, (C) will not violate the provisions of the Articles of
Incorporation or By-laws of the Company or the articles of incorporation or
certificate of incorporation or by-laws of any of its subsidiaries and will not
violate any law, administrative regulation or administrative or court decree
applicable to the Company or any of its subsidiaries, (D) do not give any person
or entity rights to terminate any
4
<PAGE> 5
agreements with the Company or any of its subsidiaries or otherwise exercise any
rights against the Company of any of its subsidiaries, and (E) will not cause
any payment or performance obligation of the Company or any of its subsidiaries
to be accelerated, including, but not limited to any acceleration of any payment
due under any note, debenture or bond, and (f) will not cause the acceleration
of any outstanding rights to purchase or convert any instrument into capital
stock of the Company, except (i) as set forth in the Security Agreement, (ii)
that the consent of NBD Bank is required prior to the consummation of the
transactions contemplated herein, and the compliance by the Company with its
obligations hereunder, pursuant to a certain Revolving Credit and Loan Agreement
dated September 27, 1997 (the "Loan Agreement"), (iii) to the extent any
approval of the shareholders of the Company is required by the rules of Nasdaq,
and (iv) that the waiver by The Kaufmann Fund Inc. of the Kaufmann Preemptive
Rights is required prior to the issuance of the Purchased Shares.
(vi) No authorization, approval or consent of any court,
governmental authority or agency or any securities exchange including Nasdaq, is
necessary in connection with the execution, delivery and performance by the
Company of this Agreement, the Voting Agreement, the Shareholders' Agreement,
the Co-Marketing Agreement, the NBD Subordination Agreement and the Security
Agreement, the consummation of the transactions contemplated herein or therein,
the compliance by the Company with its obligations hereunder or thereunder,
including the offering, issuance or sale of the Purchased Shares hereunder,
except to the extent any approval of the shareholders of the Company is required
by the rules of Nasdaq.
(vii) The Company has the unconditional corporate power and
authority, and has taken all required corporate action necessary to execute and
deliver this Agreement, the Voting Agreement, the Shareholders' Agreement, the
Co-Marketing Agreement, the NBD Subordination Agreement and the Security
Agreement, and to sell the Purchased Shares and otherwise to perform its
obligations hereunder and thereunder, except to the extent the approval of the
shareholders of the Company is required by the rules of Nasdaq. This Agreement,
the Voting Agreement, the Shareholders' Agreement, the Co-Marketing Agreement,
the NBD Subordination Agreement and the Security Agreement have been duly
authorized, executed and delivered by the Company, and constitute the legal,
valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms.
(viii) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Securities Act) and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder (the "Securities
Act Regulations") has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected to
cause or result, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise, in stabilization or manipulation of the price of
any security of the Company, to facilitate the sale or resale of the Purchased
Shares.
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<PAGE> 6
(ix) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940, as amended.
(x) The Company is eligible to use Form S-3 as promulgated
by the SEC.
(xi) The net proceeds to the Company of the transactions
contemplated hereby will be used in strict accordance with Exhibit 2(xi)
attached hereto.
(xii) Assuming the accuracy of the Purchaser's representations
set forth in Section 3 hereof and The Kaufmann Fund, Inc.'s representations set
forth in the Kaufmann Agreement, all securities issued by the Company which are
issued and outstanding immediately after the Closing Date will have been offered
and sold in full compliance with all applicable federal and other securities
laws in effect at the time of any such issuance and sale.
(xiii) Attached hereto as Exhibit 2(xiii) is a true, correct
and complete list of all of the Company's Debt (as defined below) which is
secured by a security interest in the assets of the Company or its subsidiaries,
setting forth the name of such creditor, the amount due to such creditor as of a
specified date within 45 days of the date of this Agreement, and the assets of
the Company or its subsidiaries subject to each such security interest.
(xiv) Except as set forth in the SEC Filings and on Exhibit
2(xiv), the Company and its subsidiaries have no outstanding unpaid tax
liabilities (except for taxes which are currently accruing from its current
operations and ownership of property, and which are not delinquent), no tax
deficiencies have been proposed or assessed against the Company or any of its
subsidiaries and there are no pending audits of the Company or any of its
subsidiaries' federal or state income tax returns, which have resulted in or are
likely to result in the assessment of any material tax liability against the
Company or any of its subsidiaries. Except as set forth on Exhibit 2(xiv), to
the best of the knowledge of the Company, the Company has accurately completed
and filed, or will file within the time prescribed by law (including extensions
of time to be filed, approved by the appropriate taxing authorities) all tax
returns and reports required to be filed and has paid or made adequate provision
in the Financials for the payment of all taxes, interest and penalties due or to
be due for periods covered by the Financials.
(xv) Except as set forth on Exhibit 2(xv), neither the Company
nor any of its subsidiaries is a party to any litigation or administrative
proceeding, nor to the knowledge of the Company, is any such litigation or
administrative proceeding threatened against the Company or its subsidiaries,
which in either case would have a Material Adverse Effect, or which concerns the
transactions contemplated by this Agreement, the Voting Agreement, the
Shareholders' Agreement, the NBD Subordination Agreement, the Co-Marketing
Agreement or the Security Agreement..
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<PAGE> 7
(xvi) Except as set forth on Exhibit 2(xvi), to the Company's
knowledge, the Company and its subsidiaries are not in violation of any
Environmental Law or regulations involving the Company or any of its
subsidiaries' operations, facilities and property. Neither the Company nor any
of its subsidiaries has received notice that it is currently in violation of
any Environmental Law or regulation. To the Company's knowledge, the Company
and its subsidiaries have all necessary permits, licenses and approvals
required by any Environmental Law to operate their businesses, and is in
compliance with such permits, licenses and approvals. "Environmental Law" means
any federal, state or local law, whether common law, court or administrative
decision, ordinance, regulation, rule, court order or decree or administrative
order relating to the environment, public health, any hazardous material or
environmental activity or condition in effect from time to time, including, but
not limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 9601 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 2601 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 6451 et seq.), as such laws have been amended or supplemented from time
to time, and any similar present or future Federal, state or local statute,
ordinance, rule or regulation.
(xvii) Except as set forth on Exhibit 2(xvii), each Plan of the
Company which is not a Multiemployer Plan is Fully-Funded and no Reportable
Event has occurred with respect to any such Plan. Further, except as set forth
on Exhibit 2(xvii), the Company has no Withdrawal Liability to any Multiemployer
Plan. "Plan" means any pension plan as defined in Section 3(2) of ERISA which is
subject to Title IV of ERISA. "Fully-Funded" means that a plan has sufficient
assets to satisfy the Plan's accrued liabilities to participants as determined
by the Plan's enrolled actuary. "Reportable Event" means an event described in
ERISA Section 4043(c) and the regulations thereunder. "Withdrawal Liability"
means the amount determined under ERISA Section 4211 and the regulations
thereunder, computed as if the Company is currently withdrawing. "Multiemployer
Plan" means a multiemployer plan described in ERISA Section 3(37). "ERISA" means
the Employee Retirement Income Security Act of 1974.
(xviii) Except as set forth in Exhibit 2(xviii) the Company has
not made a commitment, and has taken no action that could result in a claim, for
any brokers', finders', or similar fees or commitments in respect to the
transactions described in this Agreement.
(xix) To the best of the Company's knowledge, neither the
Company, its subsidiaries nor any employee, agent or representative thereof has
directly or indirectly used funds or other assets of the Company or its
subsidiaries for illegal contributions, gifts, or payments to or for the benefit
of any governmental official or employee, has received or made bribes or
kickbacks or have paid amounts with an understanding that rebates or refunds
will be made in contravention of any laws.
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<PAGE> 8
(xx) Attached as Exhibit 2(xx) are financial projections for
the Company's managed care operations for the three years ended December
31, 2001 (the "Projections"). To the best of the Company's knowledge,
as of the date of this Agreement, the Company has a reasonable basis for making
the Projections.
(xxi) Except as set forth in Exhibit 2(xxi), the Company and
its subsidiaries have all necessary permits, licenses and approvals required by
any applicable law or regulation (outside of Environmental Laws) to operate
their businesses and are in compliance with such permits, licenses and
approvals.
3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
3.1 Investment Representations. The Purchaser is purchasing the
Purchased Shares for its own account for investment and not with a view to or
for sale or transfer, except for sales or transfers permitted hereunder.
3.2 Status of Investor.
(a) The Purchaser is an Accredited Investor as that term is
defined in Regulation D (17 C.F.R. 230.501 - 230.506).
(b) The Purchaser was not organized for the specific purpose
of acquiring the Purchased Shares.
(c) The address set forth on the first page of this letter is
the Purchaser's principal place of business, unless otherwise disclosed to the
Company in writing.
3.3 Restrictions. The Purchaser is aware that the Purchased Shares
delivered hereunder have not been registered under the Securities Act, or under
applicable state securities laws, and that the Company in issuing the Purchased
Shares will be relying upon, among other things, the Purchaser's representations
and warranties contained in Section 3 of this Agreement, in concluding that such
issuance is a "private offering" and does not require compliance with the
registration provisions of the Securities Act and applicable state securities
laws. The Purchaser will not sell, transfer or otherwise dispose of the
Purchased Shares except in compliance with Section 3.7 of this Agreement. In
addition, the Purchaser is aware that the Purchased Shares shall contain the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY OTHER SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THESE SECURITIES UNDER SAID ACT AND ANY
OTHER APPLICABLE
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<PAGE> 9
SECURITIES LAW, OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED OR A WRITTEN ADVICE FROM THE SECURITIES
AND EXCHANGE COMMISSION AND APPLICABLE STATE SECURITIES
AGENCIES, OR A MEMBER OF THE STAFF THEREOF, THAT
"NO-ACTION" WOULD BE RECOMMENDED IF THE PROPOSED
TRANSFER WERE TO BE MADE WITHOUT THE FILING OF A
REGISTRATION STATEMENT (OR ANY COMBINATION OF THE
FOREGOING).
The Purchaser agrees that the Company may issue instructions to its transfer
agent to place, or may itself place, a "stop transfer order" with respect to the
Purchased Shares, provided, however, that such "stop transfer orders" shall not
be enforced if the Purchased Shares are sold or transferred in a transaction
which complies with Section 4.7 hereof.
3.4 Access. The Purchaser has received and reviewed a copy of the
following documents: (a) the Company's Annual Report on Form 10-K, and the
amendment thereto on Form 10-K-A, for the fiscal year ended December 31, 1997,
and (b) the Company's Quarterly Report on Form 10-Q for the period ended March
31, 1998 (the "SEC Filings"). The Purchaser has been given access to the
Company's facilities, records and books; the Purchaser has had an opportunity to
ask questions of and receive answers from the Company and its officers and
directors concerning the Company, its subsidiaries and the terms and conditions
of the sale of the Purchased Shares and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of the information furnished to
the Purchaser; and the Purchaser has made such investigation and examination of
the affairs of the Company and its subsidiaries and have obtained such
information relating thereto as the Purchaser deems necessary. The Purchaser
understands that the Purchased Shares issuable pursuant to this Agreement are
"restricted securities" within the meaning of Rule 144 (17 C.F.R. 230.144)
promulgated under the Securities Act, and that they must be held indefinitely,
unless they are subsequently registered under the Securities Act, and under
applicable securities laws, or exemptions from such registrations are available.
By virtue of the Purchaser's investment acumen, knowledge and business
experience and independent advice, the Purchaser is capable of understanding and
evaluating the risks, hazards and merits of participating in the purchase of
Purchased Shares to be made by the Purchaser. The Purchaser has substantial
financial means and is able to bear the economic risk of participating in the
purchase of the Purchased Shares.
3.5 Due Execution of Agreement. This Agreement, the Voting
Agreement, the Shareholders' Agreement, the Co-Marketing Agreement, the NBD
Subordination Agreement and the Security Agreement have been duly authorized,
executed and delivered by the Purchaser and constitute the legal, valid and
binding obligations of the Purchaser enforceable in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization,
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<PAGE> 10
moratorium or other similar laws affecting enforcement, creditors' rights
generally and by general principles of equity whether considered in a proceeding
at law or in equity.
3.6 Inducement. The Purchaser agrees with the Company that each
warranty, representation and covenant contained in Section 3 of this Agreement
is a material inducement to the Company to enter into and to perform each of the
obligations undertaken by it in this Agreement and to sell the Purchased Shares.
3.7 Transferability. The Purchaser hereby agrees that it will not
transfer any of its Purchased Shares without an effective registration statement
relating thereto, or an opinion of counsel reasonably satisfactory to the
Company that such registration is not required under the Securities Act and
applicable state law, or a written advice from the SEC and applicable state
securities agencies, or a member of the staff thereof, that "no-action" would be
recommended if the proposed transfer were to be made without the filing of a
registration statement (or any combination of the foregoing). In addition, the
Purchaser hereby agrees that it will not transfer any of its Purchased Shares
except in compliance with the Shareholders Agreement.
3.8 Incorporation. The Purchaser has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to own, lease and operate its
properties and to conduct its business as now conducted and to enter into and
perform its obligations under this Agreement.
3.9 Due Authorization. The execution, delivery and performance of
this Agreement, the Voting Agreement, the Shareholders' Agreement, the
Co-Marketing Agreement, the NBD Subordination Agreement and the Security
Agreement and the consummation of the transactions contemplated herein and
compliance by the Purchaser with its obligations hereunder have been duly
authorized by all necessary corporate action and will not conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Purchaser or any of its subsidiaries pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the
Purchaser or any of its subsidiaries is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Purchaser or any
of its subsidiaries is subject, nor will such action result in any violation of
the provisions of the charter or by-laws of the Purchaser or any applicable
law, administrative regulation or administrative or court decree.
3.10 Consents. No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the execution,
delivery and performance of this Agreement, the Voting Agreement, the
Shareholders' Agreement, the Co-Marketing Agreement, the NBD Subordination
Agreement and the Security Agreement by the Purchaser and the consummation of
the transactions contemplated therein and compliance by the Purchaser with its
obligations thereunder.
<PAGE> 11
4. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties, indemnifications, covenants and agreements
contained in this Agreement or the Exhibits hereto, or contained in certificates
of officers of the Company or the Purchaser delivered at the Closing Date
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made or not made by or on behalf of any Purchaser or
controlling person, or by or on behalf of the Company or any controlling person,
and further regardless of whether the Company or the Purchaser could have known
of a misrepresentation or breach of representation, warranty or agreement, and
shall survive the execution and delivery of the Agreement, the closing hereunder
and the delivery of the Purchased Shares to the Purchaser.
5. Conditions to Closing.
(a) The obligations of the Purchaser to go forward on the
Closing Date with the consummation of the transactions contemplated herein is
subject to the satisfaction, or waiver, of each of the following conditions
precedent:
(i) On and as of the Closing Date, all of the
representations and warranties of the Company set forth herein shall be true
and correct in all material respects (without any exception for approval of
shareholders of the Company with respect to any representations or warranties
contained herein). At the Closing, the Company shall deliver to the Purchaser
a written certificate, dated the Closing Date, reaffirming such representations
and warranties as of the Closing Date, including that any representations and
warranties are no longer qualified by an exception concerning the approval of
the shareholders of the Company.
(ii) To the extent it is determined that any approval of
shareholders of the Company required by the rules of Nasdaq for the issuance by
the Company of the Purchased Shares is required, such approval shall have been
obtained; provided, however, that in the event there is a closing hereunder
without shareholder approval being obtained, the Company shall be deemed to have
made a representation and warranty to the Purchaser that such approval was not
required.
(iii) All of the transactions contemplated by the Purchase
Agreement, dated July 15, 1998, between the Company and the Purchaser (the
"Purchase Agreement") shall simultaneously be consummated.
(iv) On and as of the Closing Date, there shall not be
pending any litigation or governmental proceeding to restrict or prohibit any
of the transactions contemplated by this Agreement, the Voting Agreement, the
Shareholders' Agreement, the Co-Marketing Agreement, the NBD Subordination
Agreement or the Security Agreement, including the issuance of the Purchased
Shares, nor shall there be outstanding any order, injunction or decree of any
court or governmental body restricting or prohibiting any of the transactions
contemplated by this Agreement, the Voting Agreement, the Shareholders'
Agreement, the Co-Marketing Agreement,
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the NBD Subordination Agreement or the Security Agreement, including the
issuance of the Purchased Shares.
(v) The consent of NBD Bank of the issuance by the
Company of the purchased Shares as described in Section 1.2 above shall have
been obtained.
(vi) The waiver by The Kaufmann Fund, Inc. of its
preemptive rights as described in Section 1.2 above shall have been obtained.
(vii) Each of the documents, agreements and stock
certificate described in Section 1.2 above required to be delivered at
Closing by persons other than the Purchaser shall have been delivered.
(viii) The Company shall have performed and complied with
all agreements and conditions contained herein required to be performed
or complied with by it prior to or at the Closing Date.
(ix) A person designated by the Purchaser shall have
been validly elected to the Company's Board of Directors for a term expiring at
the Company's Annual Meeting of Shareholders to be in 2001.
(b) The obligation of the Company to go forward on the Closing
Date with the consummation of the transactions contemplated herein is subject to
the satisfaction, or waiver, of each of the following conditions precedent:
(i) On and as of the Closing Date, all of the
representations and warranties of the Purchaser set forth herein shall be true
and correct in material respects. At the Closing the Purchaser shall deliver
to the Company a written certificate, dated the Closing Date, reaffirming such
representations and warranties as of the Closing Date.
(ii) To the extent it is determined that any approval of
shareholders of the Company required by the rules of Nasdaq for the issuance by
the Company of the Purchased Shares is required, such approval shall have been
obtained.
(iii) All of the transactions contemplated by the Purchase
Purchase Agreement shall simultaneously be consummated.
(iv) On and as of the Closing Date, there shall not be
pending any litigation or governmental proceeding to restrict or prohibit any of
the transactions contemplated by this Agreement, the Voting Agreement, the
Shareholders' Agreement, the Co-Marketing Agreement, the NBD Subordination
Agreement or the Security Agreement, including the issuance of the Purchased
Shares, nor shall there be outstanding any order, injunction or decree of any
court or governmental body restricting or prohibiting any of the transactions
contemplated by this
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<PAGE> 13
Agreement, the Voting Agreement, the Shareholders' Agreement, the Co-Marketing
Agreement, the NBD Subordination Agreement or the Security Agreement, including
the issuance of the Purchased Shares.
(v) The consent of NBD Bank of the issuance by the Company
of the Purchased Shares as described in Section 1.2 above shall have been
obtained.
(vi) The waiver by The Kaufmann Fund, Inc. of its preemptive
rights as described in Section 1.2 above shall have been obtained.
(vii) Each of the documents, agreements and stock certificate
described in Section 1.2 above required to be delivered at Closing by persons
other than the Company shall have been delivered.
(viii) The Purchaser shall have performed and complied with
all agreements and conditions contained herein required to be performed
or complied with by it prior to or at the Closing Date.
(ix) The Purchaser shall have entered into an agreement, in
a form mutually acceptable to the Company and the Purchaser, pursuant to which
the Purchaser's security interest under the Security Agreement and rights to
receive the Co-Marketing Termination Fee (the "Obligation") are subordinated to
the liens in the Company's assets held by holders of Senior Debt and the
obligations of the Company to the holders of the Senior Debt, on substantially
the same terms as contained in the NBD Subordination Agreement. 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 Company to the
holders of the Senior Debt, including all attorneys fees and other costs of
enforcement incurred by the holders of the Senior Debt, relating to (i) all
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 Securities Act, and (ii) any and
all extensions and renewals of any of the foregoing; provided, however, that
Senior Debt shall not include the Debentures 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 Obligation.
6. Reasonable Efforts. Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties agrees to use reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
reasonably necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement; provided that the foregoing shall not prohibit the Board of
Directors of the Company from taking any action permitted by Section XIIA.7. of
the Purchase Agreement and shall not require the Purchaser or
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<PAGE> 14
the Company to enter into any of the Other Agreements which are not exhibits
hereto, except in the sole discretion of each of the Purchaser and the Company.
7. Termination. This Agreement may be terminated as follows:
(a) At any time by mutual written agreement of the
Purchaser and the Company
(b) By either the Purchaser or the Company, if the
Purchase Agreement terminates for any reason prior to the consummation of the
transactions contemplated therein.
(c) By Purchaser if any of the conditions set forth in
Section 5(a) shall not be fulfilled for reasons beyond the reasonable control of
Purchaser and are not waived by Purchaser.
(d) By the Company if any of the conditions set forth in
Section 5(b) shall not be fulfilled for reasons beyond the reasonable control of
the Company and are not waived by the Company.
If this Agreement is terminated pursuant to this Section 7, this
Agreement shall become void and of no effect with no liability on the part of
any party hereto; provided, however, that, if the election to terminate is due
to the default of a party hereunder, then the non-defaulting party shall be
entitled to any and all remedies available at law or in equity.
8. Covenants.
(a) Company Covenants. Until the payment of the
Co-Marketing Termination Fee provided for under the Co-Marketing Agreement (the
"Co-Marketing Termination Fee"), and exercise of the Co-Marketing Agreement
Call Right (as defined below) and payment of the Co-Marketing Call Price (as
defined below), or the expiration of the Co-Marketing Termination Fee, without
being exercised, the Company shall comply with the following covenants:
(i) Information and Financial Reports. The
Company shall:
(A) deliver to Purchaser as soon as
possible, and in any event within 90 days after the close of each
fiscal year of the Company, an audited consolidated balance sheet of
the Company and its consolidated subsidiaries as of the close of each
such fiscal year and audited consolidated statements of income, cash
flows and stockholders' equity of the Company and its consolidated
subsidiaries for the fiscal year then ended, accompanied by an audit
report thereon containing an opinion of an independent certified
public accountant firm of national recognition.
(B) deliver to Purchaser as soon as
available, and in any event within 45 days after the close of each
fiscal quarter of the Company, an unaudited consolidated balance sheet
of the Company and its subsidiaries as of the close of each such
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<PAGE> 15
fiscal quarter and unaudited consolidated statements of income, cash
flows and stockholders' equity of the Company and its subsidiaries for
the fiscal quarter and from the beginning of the fiscal year to the
end of that quarter.
(C) deliver to Purchaser within 45 days
after the end of each calendar month of each fiscal year of the
Company, unaudited financial statements of the Company, including an
unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such month and unaudited consolidated
statements of income and cash flows of the Company and its
subsidiaries for such month and for the period from the beginning of
the fiscal year to the end of that month.
(ii) Directors and Officers' Insurance. Subject
to the approval of the Board of Directors as to the reasonableness of applicable
premiums, the Company shall use reasonable efforts to maintain directors and
officers' insurance ("D&O Insurance") with an aggregate loss limit of at least
$7,000,000, the amount in effect as of the date of this Agreement. The Company's
current D&O Insurance policy is attached as Exhibit 8(a)(ii).
(iii) Restrictions on Dividends, Redemptions and
Repurchases. The Company will give the Purchaser written notice (a "Distribution
Notice") at least thirty (30) days prior to the approval by the Board of
Directors of any of the following actions (or if Board approval is not required
or will not be obtained, at least thirty (30) days prior to the occurrence of
any of the following actions):
(A) payment or declaration of any
dividend on any shares of capital stock of the Company, common or
preferred, (except dividends with respect to shares of common stock
payable solely in shares of common stock), or
(B) making of any other distribution on
account of any shares of capital stock of the Company, common or
preferred, or
(C) redemption, purchase or other
acquisition, directly or indirectly, any shares of capital stock of
the Company, common or preferred.
(collectively, "Distributions"). For the thirty (30) days following such notice
(the "Distribution Notice Period"), the Purchaser may elect (the "Purchaser's
Election") to terminate the Co- Marketing Agreement pursuant to Section 9(b)
thereof as though the Co-Marketing Agreement was being terminated by Purchaser
without cause, in which case, the Co-Marketing Termination Fee shall become due
and payable in full by the Company on the effective date of the termination of
the Co-Marketing Agreement. Following the Company's receipt of the Purchaser's
Election, no Distribution may be approved or made (unless being made pursuant to
a prior Distribution Notice, the Distribution Notice Period for which terminated
without the Purchaser making a Purchaser's Election) before the payment by the
Company of the Co-Marketing Termination Fee
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<PAGE> 16
in full, other than as required by the terms of NBD Warrant. In addition to the
prohibition set forth above, the Company will not make any Distribution unless,
after giving effect thereto, the aggregate amount of all such Distributions
(including Distributions under the NBD Warrant) made after December 31, 1998
would not exceed the sum of (1) 50% of Consolidated Net Income for the period
commencing on January 1, 1998 to and including the date of the making of the
proposed Distribution, computed on a cumulative basis for such entire period,
(2) plus the net cash proceeds received by the Company from the sale, subsequent
to the Closing Date, of shares of its capital stock, plus (3) the aggregate
principal amount of Debentures converted, after the Closing Date, into shares of
Common Stock of the Company or (ii) except as required by the NBD Warrant.
"Consolidated Net Income" shall mean for any period the Net Income of the
Company and its subsidiaries for such period determined on a consolidated basis
in accordance with GAAP consistently applied and after eliminating earnings or
losses attributable to outstanding minority interests in the capital stock of
any subsidiary.
"GAAP" shall mean generally accepted accounting principles in effect from time
to time.
"Net Income" of any person means, for any period, the net income (or the net
deficit) of such person for such period, determined in the following manner:
(A) The gross revenues and other proper income
credits of such person shall be computed for such period in accordance
with GAAP; provided, however, that in any event there shall not be
included in such gross revenues and income credits any of the following
items: (i) any proceeds of any life insurance policy; (ii) any
restoration to income of any contingency or other reserve resulting
from unusual or non-recurring transactions, (iii) any net gain arising
from any sale or other disposition of any capital assets, and (iv) any
gain arising from or represented by items which would, in accordance
with GAAP, require separate treatment or classification in the
preparation of financial statements.
(B) From the amount of such gross revenues and other
proper income credits for such period, determined as provided in the
preceding clause (a), there shall be deducted an amount equal to the
aggregate of all expenses and other proper income charges, exclusive of
(i) any losses arising from any write-down or abandonment of any
capital assets and of any losses arising from the sale or other
disposition of any capital assets, and (ii) any charge or expense which
would, in accordance with GAAP, require separate treatment or
classification in the preparation of financial statements for such
period, determined in accordance with GAAP.
(iv) Amendments. The Company shall not amend,
modify or repeal any provision of the Articles of Incorporation (except for the
Amendment, solely in terms of the number of shares of capital stock of the
Company authorized) or the By-laws of the Company which changes the rights of
the holders of Common Stock as set forth in the Articles of Incorporation and
the By-laws of the Company as of the date of the Agreement or which would
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<PAGE> 17
prohibit the Company from paying the Co-Marketing Termination Fee or adversely
affects the rights of the Purchaser under the Agreement, the Voting Agreement,
the Co-Marketing Agreement or the Security Agreement.
(v) Limitation on Debt. Prior to August 31, 2000,
the Company will not, and will not permit its subsidiaries to, become liable for
any Debt, except as follows:
(A) Up to $4,000,000 in Senior Debt (as
defined in the Security Agreement) at the Closing Date, $5,000,000 in
Senior Debt at June 30, 1999 and $6,000,000 in Senior Debt at June 30,
2000.
(B) Capital Leases in effect at the
Closing Date and up to $1,000,000 in Capital Leases and Purchase Money
Debt in each calendar year thereafter.
(C) Up to $1,500,000 in Letters of
Credit (as defined below).
(D) Debt due to the Purchaser.
"Debt" means all liabilities of the Company and its 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 the Company or its subsidiaries, (iii) Capital Leases, in each case
to the extent required to be recorded as a liability on the consolidated balance
sheet of the Company in accordance with generally accepted accounting principles
("GAAP"), whether outstanding on the date hereof or hereafter created, (iv)
obligations evidenced by bonds, debentures, notes or other similar instruments,
(v) all obligations to pay the deferred purchase price of property or services
(other than customary trade payables), (vi) all debt of any other person or
entity guaranteed by the Company or any of its subsidiaries and (vii) all
obligations, contingent or otherwise, with respect to letters of credit and
banker's acceptances ("Letters of Credit"), other than letters of credit issued
to customers of the Company to secure the performance by the Company of its
obligations to such customers under managed care agreements between the customer
and the Company. "Capital Leases" are leases of property, the obligations for
rental of which are required to be capitalized on the consolidated balance sheet
of the Company in accordance with GAAP. "Purchase Money Debt" is Debt incurred
by the Company or its subsidiaries to acquire property which is secured solely
by such property or other property securing Purchase Money Debt.
(vi) Restrictions on Piggyback Registration
Rights. The Company will not grant to any other person rights to have their
shares of Common Stock participate in a Piggyback Registration (as defined
below) in a manner superior to the Purchased Shares held by the Purchaser
(except for an Initiating Shareholder (as defined below)), but rather shall
cause the Purchased Shares and such shares of Common Stock to be included in any
such Piggyback Registration in proportion to the number of shares the Purchaser
and each such person request be
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<PAGE> 18
included in such Piggyback Registration. The Company shall deliver notice to the
Purchaser of grants by the Company to any person of rights to have their shares
of Common Stock participate in a Piggyback Registration.
(vii) Preemptive Rights. Except for shares of the
Company's voting capital stock (the "Stock") issued in a public offering of
shares registered under the Securities Act, shares of Stock issued as
compensation or in conjunction with any employee benefit plan or program,
shares of Stock issued in connection with the conversion of the Debentures or
exercise of options or warrants, or shares of Stock issued for consideration
other than money (which, for purposes hereof, includes notes, bonds, debentures
or other similar debt instruments), in the event that the Company after the date
of this Agreement, but prior to August 31, 2000, issues any shares of Stock as a
new issue or from treasury (the "New Issue"), the Purchaser shall have the
pre-emptive right to purchase a percentage of such New Issue equal to the
Purchaser's percentage holding of the issued and outstanding Stock of the
Company at the date of such issuance. The Purchaser may exercise this
pre-emptive right at any time within fifteen (15) days after it receives written
notice from the Company of the contemplated offer, sale or issuance of the New
Issue, by delivery of a written notice stating the number of shares of the New
Issue it elects to so purchase and representing and warranting that the
Purchaser's representations and warranties to the Company set forth in Section 3
are true and correct in all material respects as though made on the date of such
notice.
(viii) Subsidiary Stock. The Company shall cause
its subsidiaries to not, and to require their subsidiaries to not, issue any
additional shares of capital stock of such subsidiaries, other than to (i) the
Company or (ii) a wholly owned subsidiary of either the Company or a wholly
owned subsidiary of the Company.
(b) Company Board Covenant. So long as the Purchased
Shares owned by the Purchaser represent beneficial ownership of at least five
percent (5%) of the Common Stock of the Company, calculated in accordance with
the requirements of Section 13(d) of the Exchange Act, the Company agrees that,
as an inducement to the Purchaser to enter into this Agreement, a person
designated by the Purchaser shall be a member of the Company's Board of
Directors. The Company agrees that if such person is not a member of the
Company's Board of Directors as required by the foregoing sentence, except for
causes in the absolute control of Purchaser or the Purchaser's designee, such
circumstance shall be deemed to be a breach and violation of this Agreement by
the Company and the Purchaser shall have all remedies provided herein and at law
or in equity. A person designated by LCA or the LCA Group (as such terms are
defined in the Voting Agreement) pursuant to the Voting Agreement as their
designee for election to the Board of Directors of the Company shall be a person
designated by the Purchaser for purposes of this Section 8(b).
(c) Purchaser Covenants.
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(i) NBD Subordination Agreement. The Purchaser
agrees to negotiate with NBD Bank on the terms and conditions to be contained in
an agreement to be entered into at Closing between the Company, the Purchaser
and NBD Bank subordinating (A) the Purchaser's right to payment of a
Co-Marketing Termination Fee (as defined in the Security Agreement) to the
indebtedness and obligations due to NBD Bank from the Company and its
subsidiaries and (B) the Purchaser's security interest in certain assets of the
Company and its subsidiaries granted in the Security Agreement to the security
interest of NBD Bank in the same assets of the Company and its subsidiaries (the
"NBD Subordination Agreement"). The Purchaser agrees to enter into the NBD
Subordination Agreement at Closing, on terms mutually acceptable to the Company,
the Purchaser and NBD Bank, in their sole respective discretions.
9. Call of Common Stock.
(a) At any time from October 1, 2000 to November 30, 2000
(the "Call Period"), the Company shall have the right, by written notice to the
Purchaser (the "Call Notice"), 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 Price"). The "Call Effective Date" shall be the first business
day occurring more than thirty (30) days after the date the Purchaser receives
the Company's Call Notice. At the Call Effective Date, the Purchaser shall
deliver to the Company the certificates for the Purchased Shares, duly endorsed
in blank, in proper form for transfer, with all signatures properly guaranteed
by a member firm of the New York Stock Exchange or a commercial bank or trust
company that is a member of a signature guarantee medallion program, and the
Company shall deliver to the Purchaser the Call Price payable therefor in
immediately available funds.
(b) At any time after termination of the Co-Marketing
Agreement in a manner which requires the Company to pay the Co-Marketing
Termination Fee, and upon the full payment of such fee to the Purchaser, the
Company shall have the right (the "Co-Marketing Agreement Call Right"), by
written notice to the Purchaser (the "Co-Marketing Call Notice"), to purchase,
all and not less than all, the Purchased Shares then held by the Purchaser at a
purchase price of $0.50 per share; provided that if the Co-Marketing Termination
Fee is not paid within 90 days after its due date the purchase price shall
increase to $0.75 per share and if the Co-Marketing Termination Fee is not paid
within 150 days after its due date the purchase price shall increase to $1.00
per share (the "Co-Marketing Call Price"). The "Co-Marketing Call Effective
Date" shall be the first business day occurring more than thirty (30) days after
the date the Purchaser receives the Company's Co-Marketing Call Notice. At the
Co-Marketing Call Effective Date, the Purchaser shall deliver to the Company the
certificates for the Purchased Shares, duly endorsed in blank, in proper form
for transfer, with all signatures properly guaranteed by a member firm of the
New York Stock Exchange or a commercial bank or trust company that is a member
of a signature guarantee medallion program, and the Company shall deliver to the
Purchaser the Co-Marketing Call Price payable therefor in immediately available
funds. During any period in which Universal is required to pay the Co-Marketing
Termination Fee, but in no event more than six (6) months after the due date of
the Co-Marketing Termination Fee (the "Restricted Period"), the Purchaser agrees
not to sell or transfer the Purchased Shares held by it. If the Co-Marketing Fee
is due and
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payable by the Company, but is not paid prior to the end of the Restricted
Period, then, after the end of the Restricted Period and until the Co-Marketing
Termination Fee is paid in full, the Purchaser may sell the Purchased Shares and
promptly following such sale the Company will pay the Purchaser an amount equal
to $4.00 per share times the number of shares of Purchased Shares actually so
sold, less the proceeds (net of selling commissions and discounts and expenses
incurred in connection with the sale) received by the Purchaser from the sale of
such shares of Purchased Shares.
(c) Upon the occurrence of an Extraordinary Common Stock
Event, the Call Price and the Co-Marketing Call Price, respectively, shall,
simultaneously with the occurrence of such Extraordinary Common Stock Event, be
adjusted by multiplying the Call Price and the Co- Marketing Call Price,
respectively, in effect immediately before such Extraordinary Common Stock Event
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately before such Extraordinary Common Stock Event and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such Extraordinary Common Stock Event and the
product so obtained shall thereafter be the Adjusted Call Price and the Adjusted
Co-Marketing Call Price, respectively. The Adjusted Call Price and the Adjusted
Co-Marketing Call Price, respectively, as so adjusted, shall be readjusted in
the same manner upon the occurrence of any subsequent successive Extraordinary
Common Stock Event or Events. "Extraordinary Common Stock Event" shall mean (i)
the issuance of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) the subdivision of outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (iii)
the combination of outstanding shares of Common Stock into a smaller number of
shares of Common Stock.
10. Registration Rights.
(a) Demand Registration. At any time after July 1, 1999,
upon written request (a "Registration Request") of holders of a majority of the
Purchased Shares then subject to the registration rights provided for in this
Section 10(a) (who for purposes of this Section 10 shall be referred to
collectively as the "Purchaser"), the Company hereby agrees to file with the
Securities and Exchange Commission (the "SEC"), as soon as practicable
thereafter but not later than 30 days after receipt of such request, a
registration statement on Form S-3 or its successor form (the "Form S-3
Registration Statement"), registering the Purchased Shares then outstanding for
resale by the Purchaser. Upon receipt of the Registration Request, the Company
will give notice to all other holders of Purchased Shares then subject to the
registration rights provided for in this Section 10(a) of the Registration
Request (other than those making such request) (the "Other Purchasers"), and
offer to include in the Form S-3 Registration Statement Purchased Shares
(subject to the registration rights provided for in this Section 10) then held
by the Other Purchasers, and will include all such shares held by the Other
Purchasers in the Form S-3 Registration Statement which such Other Purchasers
elect, by a written notice to the Company within 15 days of their receipt of the
Company's notice. The Company will furnish the Purchaser with copies of the Form
S-3 Registration Statement prior to the filing of the same. The Company will use
its reasonable efforts
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to have such Form S-3 Registration Statement declared effective promptly by the
SEC. The Company shall keep such Form S-3 Registration Statement effective for
the period necessary for the Purchaser to complete the public resale or other
disposition or distribution of the Purchased Shares or, if earlier, the date
when all of the Purchased Shares are eligible for sale in one 3-month period
under Rule 144 under the Securities Act. If in the good faith judgment of the
Board of Directors of the Company (as evidenced by an appropriately adopted
resolution), the filing, effectiveness or continued use of the Form S-3
Registration Statement would be materially detrimental to the Company and its
shareholders, then the Company shall have the right to defer such filing or
effectiveness, and may suspend the Purchaser's right to sell Common Stock under
the Form S-3 Registration Statement, for the period during which such filing,
effectiveness or use would be materially detrimental to the Company, provided
that such deferral or suspension shall be for a period of not more than sixty
(60) days and the Company shall not make such a deferral or suspension more than
once in any twelve month period, and, further provided, that during such
deferral or suspension the Company shall not file a registration statement for
securities to be issued and sold for its own account or for the account of any
other security holder of the Company, or both. The Company shall have the right
to defer the filing of the Form S-3 Registration Statement for a period of 180
days after the effective date of a registration statement, the preparation of
which the Company initiated at the time of the Purchaser's request for
registration. The Company shall not be required to file the Form S-3
Registration Statement on a date when the inclusion in such Form S-3
Registration Statement of financial statements of the Company, other than the
historical financial statements of the Company required to be contained in the
most recently required reports of the Company on SEC Forms 10-K and 10-Q and the
required reports on SEC Form 8-K since the end of the fiscal year covered by the
most recently required report on Form 10-K, would be required under the General
Rules and Regulations of the SEC.
(b) Piggyback Registration. Whenever the Company proposes to
register any of its securities under the Securities Act for sale by the Company
solely for cash (other than securities to be issued in connection with any
compensation plan, program or agreement), or, upon the request of any of its
shareholders who have contractual registration rights, for sale for the account
of any of its shareholders, other than Signal Capital Corporation ("Signal")
pursuant to the Original Stockholders Agreement, (an "Initiating Shareholder"),
(a "Piggyback Registration"), the Company will give written notice to the
Purchaser of its intentions to effect such a registration not later than the 20
days prior to the anticipated filing date. Before and after the Closing Date,
the Company will use its reasonable efforts to cause Signal to amend the
Original Stockholders Agreement to allow the Purchaser to piggyback on a
registration statement initiated by Signal in accordance with the provisions of
this Section 10(b) provided that the Company in doing so shall not be required
to provide Signal with any greater registration rights then those currently
provided under the original Stockholders Agreement. The Company will include in
such Piggyback Registration all of the Purchased Shares then subject to this
Agreement with respect to which the Company has received written request for
inclusion therein with 15 days after the receipt by the Purchaser of the
Company's notice. The Purchaser shall be permitted to withdraw all or any part
of the Purchased Shares from a Piggyback Registration at any time prior to the
effective date of such Piggyback Registration. If a Piggyback Registration is an
underwritten offering, the
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<PAGE> 22
Purchaser shall be obligated to sell its Purchased Shares on the same terms and
conditions as apply to the securities being issued and sold by the Company;
provided, however, that if an underwritten offering is being conducted in which
the Purchaser seeks to exercise its piggyback rights and 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 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, 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 the Purchaser
and persons or entities, other than the Company and the Purchaser, with
contractual registration rights seeking to include their securities of the
Company in the registration statement (the "Other Holders") (collectively, the
Purchaser and the Other Holders shall be referred to as the "Selling Holders")
and, 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 Securities 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 Purchased Shares for sale as part of the offering of such
warrants, rights or convertible securities unless the Purchased Shares can be
registered and sold in an offering conducted subsequent to such offering, and
provided that if the managing underwriter or their representatives, or the
selling dealers or their representatives, if any, determine, reasonably and in
good faith that the number of securities in any such 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 such
registration first 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 can be
sold under prevailing market conditions, reduced, if necessary, on a
proportionate basis among such Selling Holders as described above.
Nothing in this Section 10(b) shall be deemed to require the Company to
proceed with any registration of its securities after giving the notice herein
provided.
(c) Blue Sky. The Company shall use its reasonable efforts
to register or qualify the Purchased Shares under such securities acts or laws
of such states of the United States as the Purchaser shall reasonably request;
provided, however, that in no event shall the Company be obligated, in
connection therewith, to qualify to do business in any jurisdiction where it
shall not then be qualified, grant a general consent to service of process in
any jurisdiction in which such
22
<PAGE> 23
consent to service has not been previously given or subject itself to taxation
in any jurisdiction where it is not then subject to taxation.
(d) Additional Obligations. The Company hereby agrees to:
(i) Supply to the Purchaser one true copy of each
Form S-3 Registration Statement and each registration statement filed in
connection with a Piggyback Registration (collectively, the "Registration
Statement") (and any supplement or amendment thereto) and such number of the
preliminary, final and any other prospectus and amendments thereto, prepared in
conformity with the requirements of the Securities Act and the rules and
regulations thereunder, as each such Purchaser may reasonably request in order
to facilitate the public sale of shares owned by the Purchaser.
(ii) Remove all "stop transfer orders" relating
to the Purchased Shares once registered with the SEC under Section 5 of the
Securities Act and, thereafter, remove all legends from stock certificates
representing such Purchased Shares restricting the transferability of such stock
under applicable securities laws;
(iii) Notify the Purchaser immediately, and
confirm the notice in writing, (A) of the effectiveness of the Registration
Statement and any amendment thereto (including any post-effective amendment),
(B) of the receipt of any comments from the SEC, (C) of any request by the SEC
for any amendment to the Registration Statement or any amendment or supplement
to any prospectus relating thereto or for additional information, (D) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose and
(E) immediately notify the Purchaser at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing. The Company will use its best efforts to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(iv) Give the Purchaser notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the final prospectus
(including any revised prospectus which the Company proposes for use by the
Purchaser in connection with the offering of the Purchased Shares which differs
from the prospectus on file at the SEC at the time the Registration Statement
becomes effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the Securities Act Regulations), and furnish
the Purchaser with copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be. The
term "Prospectus" shall refer to the final prospectus and any revised prospectus
provided to the Purchaser from time to time thereafter and all material
incorporated by reference
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<PAGE> 24
therein. The Company shall prepare and file with the SEC all amendments and
supplements to the Registration Statement and Prospectuses necessary to comply
with the Securities Act and to keep the Registration Statement effective as
required by Section 10(a) in the case of a Form S-3 Registration Statement and
Section 10(b) in the case of a Piggyback Registration.
(v) Amend or supplement the Prospectus forthwith
if any event shall occur as a result of which it is necessary to amend or
supplement the Prospectus in order to make the Prospectus not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
so that, as so amended or supplemented, the Prospectus will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading, and furnish
to the Purchaser such copies of such amendment or supplement as Purchaser shall
request.
(vi) Make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(vii) Take such other actions as are reasonably
requested by the Purchaser in connection with the registration of the Purchased
Shares pursuant to this Section 10.
(viii) Use its reasonable efforts to cause all
Purchased Shares covered by such Registration Statements described in this
Section 10 to be listed on Nasdaq, if the Common Stock of the Company is then
listed on Nasdaq, or any securities exchange on which the Common Stock of the
Company is then listed.
(e) Expenses of Registration. All expenses, other than
underwriting discounts and selling commissions, incurred in effecting any
registration pursuant to this Section 10, including, without limitation, all
costs of preparation and registration, filing fees, printing expenses, expenses
of compliance with Blue Sky laws, fees and disbursements of counsel for the
Company and fees and disbursements of counsel for the Purchaser, up to a maximum
of $20,000.00 for Purchaser's counsel, shall be borne by the Company; provided
that, in connection with any Piggyback Registration, the Purchaser shall bear
the cost of additional filing fees, printing costs and Blue Sky fees and
expenses resulting from the inclusion of the Purchased Shares in such
registration in proportion to the relative amounts of Purchased Shares included
by the Purchaser in such Piggyback Registration in relation to all shares of
Common Stock included in such Piggyback Registration by shareholders of the
Company.
(f) Conditions to Company's Obligations. The Company's
obligations under this Section 10 shall be conditioned upon a timely receipt by
the Company (after the Company's
24
<PAGE> 25
delivery of notice requesting the same and providing for a reasonable response
period) in writing of:
(i) Information as to the terms of such public
offering furnished by or on behalf of the Purchaser; and
(ii) Such other information as the Company may
reasonably require from the Purchaser for inclusion in such Registration
Statement.
(g) Indemnification.
(i) The Company agrees to indemnify and hold
harmless the Purchaser, its directors, officers and employees and each person,
if any, who controls the Purchaser within the meaning of Section 15 of the
Securities Act, against any and all loss, liability, claim, damage and expense
whatsoever (including court costs and attorneys' fees) arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment or supplement thereto), including the
information deemed to be part of the Registration Statement pursuant to Rule
430A of the rules and regulations of the SEC under the Securities Act (the
"Securities Act Regulations"), if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or any violation by the Company of any applicable securities law or
regulation or any action brought by the Purchaser to enforce this
indemnification; provided, however, that this indemnity agreement shall not
apply to any loss, liability, claim, damage or expense to the extent (i) arising
out of any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Registration Statement (or
any amendment or Supplement thereto) or any Prospectus (or any amendment or
supplement thereto) or (ii) arising from the fact that a copy of the Prospectus
was not timely delivered by the Purchaser to a purchaser who became a plaintiff
in a lawsuit.
(ii) The Purchaser agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, officers and employees and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions made in the Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
to the Company by the Purchaser for use in the Registration Statement (or any
amendment thereto) or such final Prospectus (or any amendment or supplement
thereto) or any
25
<PAGE> 26
violation by the Purchaser of any applicable securities law or regulation or any
action brought by the Company to enforce this indemnification.
(iii) Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability which it may have otherwise than on account of this
indemnity agreement. In case such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof and so long as
the indemnifying party continues to defend vigorously and in good faith the
matter, the indemnifying party shall not be liable under this indemnity for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof, provided however, that the indemnified party shall
have the right to employ separate counsel at its expense in any such action and
participate in the defense thereof. No indemnifying party shall be liable for
any settlement entered into without its consent. No indemnifying party shall,
except with the written consent of the indemnified party, consent to the entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant to the indemnified party
of a release from all liability concerning the claim. An indemnifying party who
elects not to assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by the
indemnifying party with respect to the claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between the
indemnified party and any other indemnified party with respect to the claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel to defend such indemnified party having a
conflict of interest with another indemnified party, provided that the Company
shall not be required to pay for more than one additional counsel per venue for
all such indemnified parties having a similar conflict of interest with such
other indemnified party, unless they have conflicts of interest among themselves
with respect to the claim, in which case, the indemnifying party shall be
required to pay for one additional counsel per venue for each such indemnified
party which has a conflict of interest.
(h) Contribution. If the indemnification provided for in
Section 10(g) is unavailable to an indemnified party in respect of any losses,
liabilities, claims, damages, or expenses referred to therein, then each
indemnifying party thereunder shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, liabilities, claims, damages
or expenses in such proportion as is appropriate to reflect the relative fault
of the Company and the Purchaser in connection with the statements or omissions
that resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Purchaser shall be determined by reference to, among other
things, whether the untrue or alleged statement of a material fact or the
26
<PAGE> 27
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Purchaser and the parties' relative intent and
knowledge.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 10(h) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section, each director of the Purchaser, each officer of the Purchaser
and each person, if any, who controls the Purchaser within the meaning of
Section 15 of the Securities Act shall have the same rights to contributions as
such Purchaser, and each director of the Company, each officer of the Company
who signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act shall have the
same rights to contribution as the Company.
(i) Survival. The indemnification provided in this
Section 10 shall survive the registration and sale of the Purchased Shares by
the Purchaser and the expiration or termination of this Agreement.
(j) Transfers. The rights granted to the Purchaser by the
Company under this Section 10 may be transferred or assigned by the Purchaser
only to a transferee or assignee of 285,000 or more of the Purchased Shares (as
presently constituted and subject to subsequent adjustments for stock splits,
stock dividends, reverse stock splits, and the like), provided that the Company
is given written notice at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of the transferee or
assignee and, provided further, that the transferee or assignee of such rights
assumes the obligations of Purchaser under this Section 10. The Purchased Shares
are no longer covered by the provisions of this Section 10 once sold in a
registered public offering or in accordance with the requirements of Rule 144
under the Securities Act or other similar provision.
(k) Rule 144 Reporting. The Company agrees to make and
keep public information available, as those terms are understood and defined in
Rule 144 of the Securities Act, at all times after the date of this Agreement.
The Company further agrees to use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act. So long as the Purchaser owns Purchased
Shares, the Company agrees to furnish promptly to the Purchaser, upon its
reasonable request, a written statement by the Company as to its compliance
with reporting requirements of said Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly financial
statements of the Company and such other reports and documents so filed with
the SEC by the Company which will allow the sale of any such Purchased Shares
under Rule 144 without registration.
11. Indemnification.
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<PAGE> 28
(a) Indemnification by Purchaser. The Purchaser hereby
agrees to indemnify, defend and hold harmless the Company, its officers,
directors, employees, shareholders, agents and its successors and assigns,
against any and all liabilities, obligations, losses, damages, demands, claims,
assessments, actions, tax deficiencies, penalties and interest, reasonable
accounting and attorneys' fees, costs and expenses (individually a "Loss" and
collectively "Losses"), arising out of, or incident to, any of the following:
1. Any misrepresentation, or breach of any
warranty of Purchaser contained in this
Agreement.
2. Any breach of any covenant, agreement or
other term or provision hereof to be
performed by Purchaser.
(b) Indemnification by the Company. The Company hereby
agrees to indemnify, defend and hold harmless the Purchaser, its officers,
directors, employees, shareholders, agents and its successors and assigns,
against any and all liabilities, obligations, losses, damages, demands, claims,
assessments, actions, tax deficiencies, penalties and interest, reasonable
accounting and attorneys' fees, costs and expenses (individually a "Loss" and
collectively "Losses"), arising out of, or incident to, any of the following:
1. Any misrepresentation, or breach of any
warranty of the Company contained in this
Agreement.
2. Any breach of any covenant, agreement or
other term or provision hereof to be
performed by the Company.
(c) Claims. If either party desires to make a claim
against the other under Section 11(a) or (b) hereof which does not involve a
claim by any person other than the parties, then such party shall make such
claim by promptly delivering notice to the other in the form set forth in (1)
below. If either party (the "Claimant") desires to make a claim for indemnity
against the other (the "Indemnitor") under this Agreement which involves a
demand, claim or threat of litigation or the actual institution of any action,
suit or proceeding (collectively, a "Claim") by a person other than the
parties, then such Claim will be made in the following manner and be subject to
the following terms and conditions unless otherwise provided for in this
Agreement:
Each Claimant shall give notice as promptly as
reasonably practicable to each Indemnitor of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
Indemnitor shall not relieve such Indemnitor from any liability which it may
have otherwise then on account of this Section 11. In case such action is
brought against any Claimant, and it notifies the Indemnitor of the
commencement thereof, the Indemnitor will be entitled to participate in,
and, to the extent that it may wish, jointly with any Indemnitor similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory
to such Claimant and after notice from the Indemnitor to such Claimant of its
election to assume
28
<PAGE> 29
the defense thereof and so long as the Indemnitor continues to defend vigorously
and in good faith the matter, the Indemnitor shall not be liable under this
indemnity for any legal expenses subsequently incurred by such Claimant in
connection with the defense thereof, provided however, that the Claimant shall
have the right to employ separate counsel at its expense in any such action and
participate in the defense thereof. No Indemnitor shall be liable for any
settlement entered into without its consent. No Indemnitor shall, except with
the written consent of the Claimant, consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant to the Claimant of a release from all
liability concerning the claim. Any Indemnitor who elects not to assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by the Indemnitor with respect to
the claim, unless in the reasonable judgment of any Claimant a conflict of
interest may exist between the Claimant and any other indemnified party with
respect to the Claim, in which event the Indemnitor shall be obligated to pay
the fees and expenses of such additional counsel to defend such Claimant having
a conflict of interest with another indemnified party, provided that the
Indemnitor shall not be required to pay for more than one additional counsel per
venue for all such indemnified parties having a similar conflict of interest
with such other indemnified party, unless they have a conflict of interest among
themselves with respect to the Claim, in which case, the Indemnitor shall be
required to pay for one additional counsel per venue for each such Claimant
which has a conflict of interest.
(d) Mitigation of Losses. A Claimant shall be entitled to
recover the full amount of any Losses incurred due to the matter for which
indemnification is sought, including reasonable attorney's fees incurred in
connection therewith, but any recovery shall be net of (a) any insurance
proceeds, or (b) any payments received from third parties relating to the
matter.
12. Governing Law and Time. This Agreement shall be governed by
and construed in accordance with the laws of the State of Michigan applicable to
agreements made and to be performed in said State (without regard to its choice
of law or conflict of law rules). The Company hereby consents to the personal
jurisdiction of the federal courts (or, if any such federal court is without
jurisdiction, a state court) located in or including Burlington, North Carolina
in connection with any controversy related to this Agreement and waives any
argument that venue in any such forum is not convenient.
13. 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.
14. 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.
15. Assignment. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party hereto.
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<PAGE> 30
16. Attorneys' 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 attorneys' fees and costs incurred at the
trial and appellate levels.
17. Amendment and Certain Waivers. This Agreement may be amended or
modified only by a written agreement executed by the Company and the Purchaser.
The Company may take any action prohibited by this Agreement or omit to perform
any act required to be performed by it under this Agreement, if the Company
obtains the written consent of the Purchaser. No failure to exercise and no
delay in exercising any right under this Agreement shall operate as a waiver on
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.
18. 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.
19. 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:
If to the Company, to:
Universal Standard Healthcare, 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:
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<PAGE> 31
Laboratory Corporation of America Holdings
358 South Main Street
Burlington, NC 27215-9990
Attention:
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.
20. Table of Contents and Captions. The captions of the Sections of
this Agreement are solely for convenient reference and shall not be deemed to
affect the meaning or interpretation of any provision of this Agreement.
21. 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.
22. Knowledge. For purposes of this Agreement, "to the best of
Company's knowledge" or "to the knowledge of the Company" means if any of the
Company's executive officers ("Officers"), as designated in the Company's Proxy
Statement dated June 3, 1998, being:
Eugene E. Jennings Chairman of the Board, President, Chief Executive Officer
Robert J. Helbling Vice President and Chief Operating Officer of Universal
Diagnostics
Alan S. Ker Vice President, Finance, Chief Financial Officer,
Treasurer and Assistant Secretary
Perry C. McClung Executive Vice President and President of Universal
Standard Healthcare of Delaware, Inc.
Imtiaz H. Sattaur Vice President -- Chief Information Officer
31
<PAGE> 32
have conscious awareness that the statement as given is not true and correct.
Notwithstanding the foregoing, the Company shall be deemed to have knowledge if
its Officers engaged in conscious or reckless disregard of facts.
23. Brokers. Except as set forth in Schedule 2(xviii), each party
hereto hereby represents to the other that no broker or finder has acted for or
on its behalf in connection with this Agreement or the transactions contemplated
hereby, and each party hereby indemnifies the other against all claims for
broker's and finder's fees allegedly due under any agreement or understanding
between such party and any third party.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Purchaser and the Company in accordance with its terms.
Very truly yours,
UNIVERSAL STANDARD HEALTHCARE, INC.
By: /s/ Eugene Jennings
---------------------------------
Eugene Jennings, President
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<PAGE> 33
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written:
LABORATORY CORPORATION OF
AMERICA HOLDINGS
By: /s/ Bradford T. Smith
-------------------------------------
Title: Executive Vice President
33
<PAGE> 34
EXHIBIT 1.1
to Universal Standard Healthcare, Inc.
Stock Purchase Agreement
Number of
Name Purchased Shares
- ------------------------------------------ ----------------
Laboratory Corporation of America Holdings 1,416,667
34
<PAGE> 35
STOCK PURCHASE AGREEMENT BETWEEN
UNIVERSAL STANDARD HEALTHCARE, INC. AND
LABORATORY CORPORATION OF AMERICA HOLDINGS
July 16, 1998
EXHIBIT LIST
Exhibit 1.1 Number of Purchased Shares
Exhibit 1.2A Stock Certificate dated the Closing Date and
registered in the Purchaser's name for the number
of Purchased Shares
Exhibit 1.2B Shareholders' Agreement
Exhibit 1.2C Voting Agreement
Exhibit 1.2D Co-Marketing Agreement
Exhibit 1.2E Security Agreement
Exhibit 2(i)(A) Articles of Incorporation
Exhibit 2(i)(B) Certificate of Good Standing of the Company
Exhibit 2(i)(C) By-laws of the Company
Exhibit 2(iii)(A) SEC Filings and the Monthly Financials
Exhibit 2(iii)(B) Material Adverse Changes
Exhibit 2(iv)(A) The Kaufman Agreement
Exhibit 2(iv)(B) Original Stockholders Agreement
Exhibit 2(iv)(C) Westphere Warrant
Exhibit 2(iv)(D) Debentures
Exhibit 2(iv)(E) NBD Warrant
Exhibit 2(iv)(F) Information Regarding Stock Options, Warrants and
Debentures
Exhibit 2(xi) Net Proceeds to the Company
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Exhibit 2(xiii) The Company's Debt
Exhibit 2(xiv) Tax Matters
Exhibit 2(xv) Litigation
Exhibit 2(xvi) Environmental
Exhibit 2(xvii) Plans
Exhibit 2(xviii) Brokers or Finders
Exhibit 2(xx) Projections
Exhibit 2(xxi) Permits, Licenses, Approvals
Exhibit 8(a)(ii) D & O Insurance
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