<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998 Commission File Number 34-0-20400
UNIVERSAL STANDARD HEALTHCARE, INC.
Michigan 38-2986640
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ATTN: Alan S. Ker, Chief Financial Officer
26500 Northwestern Hwy., Suite 400, Southfield, Michigan 48076
(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code: (248) 358-0810
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock, no par value, outstanding as of October 31,
1998:
8,540,200.
<PAGE> 2
UNIVERSAL STANDARD HEALTHCARE, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at September 30, 1998 and December 31, 1997 ..................................... 3
Condensed Consolidated Statements of
Income for the three and nine months ended
September 30, 1998 and 1997 ..................................................... 4
Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 1998 and 1997 ..................................................... 5
Notes to Condensed Consolidated Financial
Statements ...................................................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ...................................................................... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risks ..................... 19
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds ....................................... 19
Item 6. Exhibits and Reports on Form 8-K ................................................ 21
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
------------------------------
Item I. Financial Statements
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,809 $ 1,693
Accounts receivable 614 276
Prepaid expenses and other 958 214
Net assets from discontinued operations 3,445 7,003
------------- ------------
Total current assets 6,826 9,186
Property and equipment, net 7,079 5,806
Intangible assets, net 7,389 7,872
Other assets 1,431 1,522
------------- ------------
Total assets $ 22,725 $ 24,386
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,346 $ 1,236
Accounts payable 646 1,140
Accrued liabilities 3,830 3,110
------------- ------------
Total current liabilities 5,822 5,486
Long-term debt, net of current portion 12,554 12,712
Other liabilities 0 0
------------- ------------
Total liabilities 18,376 18,198
------------- ------------
Common stock, no par; 20,000,000 shares
authorized; 8,566,994 and 6,560,774 shares issued and outstanding
at September 30, 1998 and December 31, 1997, respectively 38,497 32,889
Retained earnings (deficit) (34,148) (26,701)
------------- ------------
Total stockholders' equity 4,349 6,188
------------- ------------
Total liabilities and stockholders' equity $ 22,725 $ 24,386
============= ============
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE> 4
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue:
Managed care $6,633 $4,895 $20,133 $13,744
-------- -------- -------- ---------
Total net revenue 6,633 4,895 20,133 13,744
-------- -------- -------- ---------
Operating expenses:
Claims and Processing 4,781 3,394 14,832 9,608
Selling, general, and administrative 1,410 1,130 4,103 2,886
Depreciation 65 58 186 151
Amortization 57 57 170 172
-------- -------- -------- ---------
Total operating expenses 6,313 4,639 19,291 12,817
-------- -------- -------- ---------
Operating income 320 256 842 927
Interest expense 261 236 764 706
Other income, net (29) (23) (58) (42)
-------- -------- -------- ---------
Income from continuing operations before income taxes 88 43 136 263
-------- -------- -------- ---------
Income taxes 0 0 0 0
-------- -------- -------- ---------
Income from continuing operations 88 43 136 263
-------- -------- -------- ---------
Loss from discontinued operations (4,486) (138) (4,969) (1,079)
Estimated loss on disposal of laboratory (2,228) 0 (2,228) 0
-------- -------- -------- ---------
Net loss ($6,626) ($95) ($7,061) ($816)
======== ======== ======== =========
Earnings per share from continuing operations $0.01 $0.01 $0.02 $0.04
Earnings per share from discontinued operations ($0.79) ($0.02) ($0.84) ($0.16)
Earnings per share (basic and diluted) ($0.78) ($0.01) ($0.82) ($0.12)
Average share outstanding and common stock equivalents 8,540 6,583 8,566 6,583
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
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UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---------------- -----------------
<S> <C> <C>
Net cash provided by (used in) operating activities ($456) $686
Net cash provided by (used in) discontinued operations ($2,193) ($1,164)
---------------- -----------------
Net cash provided by (used in) operating activities ($2,649) ($478)
---------------- -----------------
Cash flows from investing activities:
Purchase of property and equipment (1,011) (249)
Other investing activities (483) (64)
Capital expenditures of discontinued operations (862) (827)
---------------- -----------------
Net cash (used in) investing activities (2,356) (1,140)
---------------- -----------------
Cash flows from financing activities:
Payments on long-term debt (158) (323)
Long-term/Short-term borrowings 110 1,079
Issuance of common stock 5,608 0
---------------- -----------------
Net cash provided by (used in) financing activities 5,560 756
---------------- -----------------
Net increase (decrease) in cash and cash equivalents 555 (862)
Cash and cash equivalents, beginning of period 1,252 2,159
---------------- -----------------
Cash and cash equivalents, end of period $1,807 $1,297
================ =================
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE> 6
UNIVERSAL STANDARD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes included
in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
In the opinion of management, the condensed consolidated financial
statements include all adjustments, consisting of normal recurring items,
necessary for a fair presentation of financial position and results of
operations. The results of operations are not necessarily indicative of
the results which may be expected for the full year.
2. Income Taxes
The effective income tax rate of (0.0%) for the nine months ended
September 30, 1998 (including the loss from discontinued operations and
estimated loss on disposal of laboratory) is less than the statutory rate
of 34% principally due to the Company's operating loss. Under applicable
accounting rules, $2.4 million of tax benefits relating to the first nine
months of 1998 loss could not be recorded in 1998. This loss is treated
as a net operating loss carry forward for accounting purposes and may be
used to offset future profits of the Company.
3. Loss Per Share
Loss per share has been computed by dividing net loss by the weighted
average number of shares of common stock outstanding. The per share
amounts reflected in the consolidated statements of operations are
presented in accordance with Statement of Financial Accounting Standards
(SFAS) No. 128 "Earnings per Share"; the amounts of the Company's "basic"
and "diluted" earnings per share (as defined in SFAS No. 128) are the
same.
4. Contingencies
The Company has from time to time experienced compliance reviews,
including reviews of its billing practices, by its third-party payors.
The Company has not yet received a final determination notice relating to
a compliance review conducted by one of its larger third-party payors.
The ultimate effect, if any, of these compliance revenues cannot be
determined at this time and no liability has been accrued by the Company.
During 1996, the Company received notification from the Internal Revenue
Service (IRS) proposing adjustments to the Company's federal income taxes
totaling approximately $3.3
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million for the years 1991-1994. The proposed adjustments related to the
timing of certain bad debt deductions, claim expense accruals and the
deductibility of certain "sign-on" bonuses and non-compete payments made
in connection with an acquisition. The Company has filed a written
protest with the IRS appeals office regarding this matter.
There can be no assurance that the Company will resolve this dispute with
the IRS in a manner favorable to the Company. The failure to resolve this
dispute with the IRS in a manner favorable to the Company would result in
a current period charge to earnings and would have a material adverse
effect on the business, financial condition, including working capital,
and results of operations of the Company. While management believes its
liability relating to these matters, if any, will not be material to the
Company, the ultimate effect, if any, cannot be determined at this time.
The foregoing statement may be a "forward looking statement" within the
meaning of the Securities Exchange Act of 1934. The outcome of this
dispute with the IRS involves a number of uncertainties, including those
inherent in interpreting and applying Internal Revenue Code and other
federal income tax authority and precedent to actual transactions, those
relating to the valuation of various assets at the time of the
acquisition and those inherent in pursuing any legal action of the type
instituted by the Company. The Company has not accrued a liability
relating to the deficiency assessments or proposed tax adjustments.
5. Discontinued Operations
On August 4, 1998, the Company sold its clinical laboratory customer list
and certain tangible assets, including equipment and furniture related to
its clinical laboratory business, to Laboratory Corporation of
America(TM) Holdings ("LabCorp") for $9 million in cash (the "Asset
Sale") as part of its divestiture of its clinical laboratory operations
division. Accordingly, this division is being reported as a discontinued
operation.
The operating results of the Company's clinical laboratory division have
been segregated from the continuing operations and reported as separate
line items, net of applicable income taxes, in the accompanying
statements of income. The current assets, net of non-current assets and
current liabilities and long-term debt, and cash flow of the clinical
laboratory division have been segmented and reported as separate line
items in the accompanying balance sheets and statements of cash flows.
The financial statements of prior periods have been restated to conform
to this presentation.
The results of operations from the Company's discontinued clinical
laboratory operations included in the Company's consolidated statements
of income for the three and nine months ended September 30, 1998 and 1997
are summarized below:
7
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<TABLE>
<CAPTION>
-------------------------------- -------------------------------
THREE MONTHS NINE MONTHS
ENDED SEPT. 30 ENDED SEPT. 30
----------------- -------------- ---------------- --------------
1998 1997 1998 1997
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
DISCONTINUED OPERATIONS
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Net Revenue $2,682 $9,597 $19,909 $28,317
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Cost of Goods Sold 5,391 7,115 18,999 21,267
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Selling, general, and administrative expenses 1,624 2,353 5,164 7,479
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Loss of disposal of laboratory 2,228 0 2,228 0
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Interest 153 267 715 650
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Loss from discontinued operations and disposal of ($6,714) ($138) ($7,197) ($1,079)
laboratory ======== ====== ======== ========
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
</TABLE>
As of September 30, 1998 and December 31, 1997, assets and liabilities of
the Company's discontinued clinical laboratory operations included in the
Company's consolidated balance sheets at such dates are summarized below:
<TABLE>
<CAPTION>
- - ---------------------------------------------- ----------------------- --------------------
SEPT. 30, 1998 DEC. 31, 1997
- - ---------------------------------------------- ----------------------- --------------------
<S> <C> <C>
ASSETS
- - ---------------------------------------------- ----------------------- --------------------
Current Assets $6,139 $8,666
- - ---------------------------------------------- ----------------------- --------------------
Property & Equipment, Net 1,503 2,975
- - ---------------------------------------------- ----------------------- --------------------
Other Assets 413 11,152
- - ---------------------------------------------- ----------------------- --------------------
LIABILITIES
- - ---------------------------------------------- ----------------------- --------------------
Current Liabilities 4,469 8,569
- - ---------------------------------------------- ----------------------- --------------------
Long-term Debt 141 7,194
- - ---------------------------------------------- ----------------------- --------------------
NET ASSETS OF DISCONTINUED OPERATIONS $3,445 $7,003
------ ------
- - ---------------------------------------------- ----------------------- --------------------
</TABLE>
6. LabCorp Transactions
On August 4, 1998, the Company sold 1,416,667 shares of its Common Stock
(the "Purchased Shares") to LabCorp for $4,250,000 cash (the "Stock
Sale").
The Company has certain call rights, including, but not limited to, the
right at any time from October 1, 2000 to November 30, 2000 to purchase
all, and not less than all, the Purchased Shares then held by LabCorp at
a purchase price of $5.00 per share (the "Call Rights").
The Company and LabCorp entered into a Co-Marketing Agreement, dated as
of August 3, 1998 (the "Co-Marketing Agreement"), for the purpose of
coordinating and complementing their marketing and sales efforts to new
and existing managed care customers and to utilize each company's
expertise and resources in such efforts. The Co-Marketing Agreement
further provides that in the event of the termination of the Co-Marketing
Agreement, as well as, in certain cases, other events, the Company will
pay to LabCorp the Co-Marketing Termination Fee. The Co-Marketing
Termination Fee is
8
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calculated as set forth in the Co-Marketing Agreement, but cannot exceed
$4,250,000. The Company's obligation to LabCorp for the Co-Marketing
Termination Fee is secured by a security interest in all of the Company's
assets and the assets of its wholly-owned subsidiary Universal Standard
Healthcare of Delaware, Inc. ("Universal Delaware"), other than the
capital stock of certain regulated companies owned by Universal Delaware.
The Purchaser has agreed to subordinate the Company's obligation to
LabCorp for the Co-Marketing Termination Fee and LabCorp's security
interest in certain assets of the Company to certain debt of the Company
and the assets securing such debt.
In the event the Co-Marketing Termination Fee is paid, the Company shall
have the right to purchase the Purchased Shares owned by LabCorp (the
"Special Call Right").
Until the payment of the Co-Marketing Termination Fee and the exercise of
and payment of amounts due under the Special Call Right, or the
expiration of the Co-Marketing Termination Fee, the Company is bound by
certain covenants, including restricting dividends on, and redemptions
and repurchases of, its capital stock, limiting its debt, and not issuing
additional shares of capital stock of its subsidiaries.
The Company has leased to LabCorp portions of its clinical laboratory
located in Southfield, Michigan and certain related equipment for a
period of six months ending January 31, 1999, and has sold certain
inventory related to its clinical laboratory business to LabCorp, for
aggregate payments of $1.85 million, which were paid in advance on August
4, 1998 (the "Lease Arrangement").
The Company and LabCorp have entered into a certain Transition Service
Agreement pursuant to which the Registrant will provide certain of its
personnel involved in its clinical laboratory operations to the Purchaser
for a period of up to six months ending January 31, 1999 (the "Transition
Period") with LabCorp reimbursing the Company for the costs associated
with such personnel.
7. Debt
The proceeds of the Asset Sale and Stock Sale were used to pay $11.4
million in bank debt, as well as closing costs and accounts payable. The
Company agreed to terminate its revolving line of credit on August 4,
1998. At September 30, 1998, the Company had a credit facility consisting
of a $1.1 million litigation letter of credit, $2.4 million of managed
care letters of credit and a $750,000 capital lease. The Company was in
default of its bank covenants before the credit facility was paid off on
August 5, 1998, but the bank waived the default pending the sale of
certain assets of the laboratory division. In October, 1998 the Company
and the bank amended their existing credit facility to provide for a new
revolving credit facility in the amount of $2 million. This facility
expires on March 31, 1999. The Company and the bank are working together
to establish a new facility with covenants that correspond to the
Company's managed care business. There are no assurances that a new
facility will be obtained. The interest rate on the revolving line is at
1% above the bank's prime rate. Available borrowings under the revolving
line
9
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are based on a declining percentage of account receivable from its
laboratory division, which is being liquidated, and qualified equipment,
less the face amount of a $1.1 million letter of credit issued in
connection with a pending appeal of a judgement (the "Litigation Letter
of Credit"); provided that in no event may borrowings exceed $2 million
less the Litigation Letter of Credit. Available borrowings under the new
revolving credit facility at November 11, 1998 were $900,000, all of
which were outstanding. Available borrowings under the credit facility
will decline as the laboratory division accounts receivables are
collected and as the applicable percentage of such accounts included in
the borrowing base declines.
Borrowings under the credit facility are collateralized by substantially
all of the assets of the Company and its subsidiaries (including the
stock of the Company's managed care subsidiaries), except for the assets
of the Company's managed care subsidiaries.
Under the credit facility, the Company is required to maintain
consolidated tangible capital funds (tangible net worth plus subordinated
debt) of at least $12,500,000 and is required to negotiate additional
financial covenants by January 15, 1999. The Company is required to
deposit the proceeds from all future sales of assets in a cash collateral
account with the bank, up to the amount due to the bank under the credit
facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
Recent Events
On August 4, 1998, the Company sold its clinical laboratory customer list and
certain tangible assets relating to its clinical laboratory business to
Laboratory Corporation of America Holdings ("LabCorp") as part of its
divestiture of its clinical laboratory operations (the "Asset Sale").
Accordingly, the clinical laboratory business is being reported as a
discontinued operation. See Note 5 to Notes to Condensed Consolidated Financial
Statements.
On August 4, 1998, the Company sold 1,416,667 shares of its Common Stock (the
"Purchased Shares") to LabCorp for $4,250,000 cash (the "Stock Sale").
The Company has agreed to make its principal laboratory facility and related
personnel ("Related Personnel") available to LabCorp for a period of up to six
months, with LabCorp subleasing portions of the Company's Southfield clinical
laboratory facility and reimbursing the Company for the costs of the Related
Personnel (the "Transition Period"). The Company recorded a current liability in
the third quarter of 1998 of $1.85 million to reflect advances of rent payments
by LabCorp.
10
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See Note 6 to Notes to Condensed Consolidated Financial Statements for a
description of these and related transactions with LabCorp.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net
revenue represented by items in the statements of income from continuing
operations.
<TABLE>
<CAPTION>
- - ---------------------------------------------------- -------------------------------- -------------------------------
THREE MONTHS NINE MONTHS
ENDED SEPT. 30 ENDED SEPT. 30
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
1998 1997 1998 1997
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Managed care 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Total net revenue 100.0% 100.0% 100.0% 100.0%
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Claims and Processing 72.1% 69.3% 73.7% 70.0%
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Selling, general, and administrative expenses 21.2% 23.1% 20.4% 21.0%
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Depreciation and amortization 1.9% 2.4% 1.7% 2.3%
---- ---- ---- ----
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Operating income (loss) 4.8% 5.2% 4.2% 6.7%
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Interest expense 3.9% 4.8% 3.8% 5.1%
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Other income, net (0.4%) (0.5%) (0.3%) (0.3%)
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Income taxes 0.0% 0.0% 0.0% 0.0%
---- ---- ---- ----
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Net income from continuing operations 1.3% 0.9% 0.7% 1.9%
==== ==== ==== ====
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
EBITDA * 6.7% 7.6% 6.0% 9.1%
==== ==== ==== ====
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
Net cash provided by operating activities N/A N/A 2.3% 5.0%
from continuing operations** === === ==== ====
- - ---------------------------------------------------- ----------------- -------------- ---------------- --------------
</TABLE>
* EBITDA represents earnings before interest, taxes, depreciation, amortization
and other (income) expense. The Company and laboratory industry analysts use
EBITDA as a method of measuring and comparing the financial performance of
clinical laboratory companies, many of which were formed by combining with and
acquiring other clinical laboratory companies, because it eliminates the effects
of goodwill amortization and acquisition expenses on net income. EBITDA should
not be considered as an alternative to net income as an indicator of the
Company's operating performance or to cash flows as a measure of the Company's
liquidity.
** Net cash provided by operating activities from continuing operations is
determined in accordance with generally accepted accounting principles and is
included in the Company's Condensed Consolidated Statements of Cash Flows. The
amount for each period is determined by adjusting net income from continuing
operations for the period for non-cash expense items from continuing operations,
including restructuring and special charge, depreciation and amortization,
extraordinary item and deferred income taxes, and for increases and decreases in
asset and liability items other than those relating to financing and investing
activities and discontinued operations.
11
<PAGE> 12
Net Revenue. The Company's net revenue from continuing operations is generated
from managed care laboratory programs with major employers, union and government
benefit plans, and large purchasing organizations as a means of controlling
health care costs. In the Managed Care Programs, for a fixed monthly payment,
the Company is the designated provider of substantially all non-hospital
clinical laboratory testing which may be ordered by a Program Member's physician
of choice and home medical services (including durable medical equipment and
supplies), and outpatient diagnostic imaging services.
Total net revenue from continuing operations was $6.6 million in the third
quarter of 1998, compared to $4.9 million in the third quarter of 1997, an
increase of $1.7 million or 34.7%. Total net revenue for the nine months ended
September 30, 1998 was $20.1 million, compared to $13.7 million for the nine
months ended September 30, 1997, an increase of $6.4 million or 46.7%. The
revenue increase in the third quarter of 1998 and the nine months ended
September 30, 1998, was principally due to increased managed care revenue from
the administrative services only contract with General Motors Corporation which
went into effect January 1, 1998. As previously announced, the administrative
services only contract with General Motors Corporation was terminated in
September 1998. Because of the limited profit opportunities available to the
Company on revenues generated by this contract, its termination is expected to
have only a minimal impact on UHCI's net income. The Company's managed care
revenues are not affected by seasonal trends.
Claims and Processing Expenses. The claims and processing expenses were $4.8
million for the third quarter 1998 compared to $3.4 million for the third
quarter 1997, an increase of $1.4 million or 41.2%. The claims and processing
expenses for the nine months ended September 30, 1998 were $14.8 million
compared to $9.6 million for the nine months ended September 30, 1997, an
increase of $5.2 million or 54.2%. As a percentage of net revenue, the claims
and processing expenses increased from 69.3% for the third quarter of 1997 to
72.1% for the third quarter of 1998 and from 70.0% for the nine months ended
September 30, 1997 to 73.7% for the nine months ended September 30, 1998. These
increases are primarily due to the impact of the General Motors Corporation
contract described above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the third quarter of 1998 were $1.4 million,
compared to $1.1 million for the third quarter of 1997, an increase of $.3
million or 27.3%. Selling, general and administrative expenses for the nine
months ended September 30, 1998 were $4.1 million, compared to $2.9 million for
the nine months ended September 30, 1997, an increase of $1.2 million or 41%.
The increase for the third quarter ending September 30, 1998 and the nine months
ending September 30, 1998 reflects the allocation of a greater percentage of the
administrative costs and public reporting costs to the managed care division in
1998 as a result of the discontinuance of laboratory operations. As a percentage
of net revenue, selling, general and administrative expenses decreased from
23.1% for the third quarter of 1997 to 21.2% for the third quarter of 1998. As a
percentage of net revenue, selling, general and administrative expenses
decreased from 21.0% for the nine months ended September 30, 1997 to 20.4% for
the nine months ended September
12
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30, 1998. These decreases are primarily due to the Company's increased net
revenue from the General Motors Corporation contract.
EBITDA. EBITDA was $442,000, or 6.7% of net revenue for the third quarter of
1998, compared to $371,000, or 7.6% of net revenue for the third quarter of
1997. The Company attributes these increases in EBITDA principally to the
General Motors Corporation contract. The Company attributes the decline in the
EBITDA percentage to the lower profit margins associated with the General Motors
Corporation contract.
EBITDA for the nine months ended September 30, 1998 was $1.2 million, or 6.0% of
net revenue, compared to $1.3 million, or 9.1% of net revenue, for the same
period ended 1997. The Company attributes these decreases principally to the
lower profit margins associated with the General Motors Corporation contract and
the costs of establishing new programs and contracts, particularly the General
Motors Corporation contract.
Income Taxes. Under applicable accounting rules, no tax benefit relating to the
1998 or 1997 losses are recorded. These losses are treated as net operating loss
carry forwards and may be used to offset future profits of the Company.
Loss from Discontinued Operations. As a result of the Asset Sale and the
Company's decision to divest its clinical laboratory operations, these
operations have been treated as discontinued operations.
Net revenue from discontinued operations was $2.7 million in the third quarter
of 1998, compared to $9.6 million in the third quarter of 1998, a decrease of
$6.9 million or 71.9%, and $19.9 million in the nine months ended September 30,
1998 as compared to $28.3 million in the nine months ended September 30, 1997, a
decrease of $8.4 million or 29.7%. These declines are principally due to the
discontinuation of laboratory operations on August 4, 1998 and to a lesser
extent a decline in fee-for-service patient visits.
Cost of goods sold from discontinued operations was $5.4 million in the third
quarter of 1998, compared to $7.1 million in the third quarter of 1997, a
decrease of $1.7 million or 23.9%, and $19 million in the nine months ended
September 30, 1998, as compared to $21.3 million in the nine months ended
September 30, 1997, a decrease of $2.3 million or 10.8%. These declines are
principally due to the discontinuation of the laboratory operations.
Selling, and general administrative expenses from discontinued operations were
$1.6 million in the third quarter of 1998, as compared to $2.4 million in the
third quarter of 1997, a decrease of $.8 million or 33.3%, and $5.2 million in
the nine months ended September 30, 1997, as compared to $7.5 million in the
nine months ended September 30, 1997, or a decrease of $2.3 million or 30.7%.
These decreases are principally due to the allocation of a smaller percentage of
administrative costs and public reporting costs to the laboratory operations in
1998 as a result of the discontinued laboratory operations.
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The Company expects limited revenues from discontinued operations in future
periods. However, certain of the costs of the laboratory operations, including
possible additional severance costs and real property and equipment lease
payments, may continue in future periods. As a result, the Company may report
losses from discontinued operations in future periods.
Estimated Loss on Disposal of Laboratory. The estimated loss on disposal of
laboratory reflects a $2.2 million loss on the Asset Sale and a reserve of $4.5
million for losses on the disposition of the remaining laboratory assets,
including the Company's clinical equipment and laboratory accounts receivable.
The Company intends to dispose of the equipment used in its clinical laboratory
business. It is currently considering alternative methods of disposition and is
evaluating the value of this equipment. In the event that the Company determines
that it will not be able to dispose of the equipment at its current net book
value or is not able to collect all of its remaining accounts receivable at
their net book value, the Company will be required to record an additional
charge to earnings to reflect any such loss.
Liquidity and Capital Resources. The Company's working capital ratio decreased
to 1.2 to 1 at September 30, 1998 from 1.7 to 1 at December 31, 1997. Working
capital decreased to $1.0 million at September 30, 1998 from $3.7 million at
December 31, 1997. These decreases resulted primarily from the losses associated
with the divestiture of certain clinical laboratory assets and a decline in the
liquidation value of assets associated with the discontinued laboratory
division. Included in cash and cash equivalents at September 30, 1998 is
$500,000 in cash deposits of one of the Company's wholly owned managed care
subsidiaries, which is generally permitted to make distributions to the Company
only out of the subsidiary's earned surplus and to the extent certain other
regulatory requirements are satisfied.
Net cash flow used in operating activities was $2.6 million for the nine months
ended September 30, 1998, compared to net cash used in operating activities of
$.5 million for the nine months ended September 30, 1997. This increase was
principally due to an increase in net cash used in connection with the
discontinued laboratory operations and the reduction of managed care accounts
payable.
On August 4, 1998, the Company received proceeds from the Asset Sale of $9.0
million and $4.25 million in proceeds from the Stock Sale. These proceeds were
used to pay $11.4 million in bank debt, as well as closing costs and accounts
payable.
At September 30, 1998, the Company had a credit facility consisting of a $1.1
million litigation letter of credit, $2.4 million of managed care letters of
credit and a $750,00 capital lease. The Company was in default of its bank
covenants before the credit facility was paid off on August 5, 1998, but the
bank waived the default pending the sale of certain assets of the Laboratory
division. In October, 1998 the Company and the bank amended their existing
credit facility to provide for a new revolving credit facility in the amount of
$2 million. This facility expires on March 31, 1999. The Company and the bank
are working together to establish a new facility with covenants that correspond
to the Company's managed care business. There are no
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<PAGE> 15
assurances that a new facility will be obtained. The interest rate on the
revolving line is at 1% above the bank's prime rate. Available borrowings under
the revolving line are based on a declining percentage of account receivable
from its laboratory division, which is being liquidated, and qualified
equipment, less the face amount of a $1.1 million letter of credit issued in
connection with a pending appeal of a judgment (the "Litigation Letter of
Credit"); provided that in no event may borrowings exceed $2 million less the
Litigation Letter of Credit. Available borrowings under the new revolving credit
facility at November 11, 1998 were $900,000, all of which were outstanding.
Available borrowings under the credit facility will decline as the laboratory
division accounts receivables are collected and as the applicable percentage of
such accounts included in the borrowing base declines.
Borrowings under the credit facility are collateralized by substantially all of
the assets of the Company and its subsidiaries (including the stock of the
Company's managed care subsidiaries), except for the assets of the Company's
managed care subsidiaries.
Under the credit facility, the Company is required to maintain consolidated
tangible capital funds (tangible net worth plus subordinated debt) of at least
$12,500,000 and is required to negotiate additional financial covenants by
January 15, 1999. The Company is required to deposit the proceeds from all
future sales of assets in a cash collateral account with the bank, up to the
amount due to the bank under the credit facility.
The ratio of debt to capital was 76.2% at September 30, 1998 and 69.3% at
December 31, 1997. This increase is principally due to the losses associated
with the divestiture of certain clinical laboratory assets and the
discontinuation of the operations of the laboratory division.
The Company expects to incur capital expenditures of approximately $0.2 million
during the remainder of 1998 for computer systems enhancements.
The Company expects its managed care subsidiaries, including its subsidiary
conducting managed care operations in Michigan (the "Michigan Managed Care
Subsidiary"), to generate sufficient operating cash to fund their current
operations and planned expansion and make limited distributions to the Company.
The foregoing statement may be a "forward looking statement" within the meaning
of the Securities Exchange Act of 1934. The ability of the Company to generate
operating cash is subject to a number of uncertainties described below. From
time to time the Company's regulated managed care subsidiaries may not be able
to make cash distributions to the Company at levels required to fund the
Company's operating cash flow needs without violating applicable regulatory
requirements. The Company's Michigan Managed Care Subsidiary proposes to enter
into an agreement with the Michigan Insurance Bureau ("MIB") agreeing not to
engage in certain transactions which result in the transfer of cash to
affiliates without 30 days prior notice to the MIB and provided that the MIB
does not disapprove such transactions within such 30 day period. As a result,
future cash transfers from the Michigan Managed Care Subsidiary to the Company
are likely to be limited to payments for services rendered and dividends payable
from the cash transfers made in the past.
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<PAGE> 16
During the Transition Period, the Company will use payments from the purchaser
in the Asset Sale to fund expenses associated with the Related Personnel. The
Company expects to fund expenses associated with the winding down of its
clinical laboratory operations and its ongoing working capital needs, capital
expenditures required for the operation of its business and debt service
requirements, including interest on the 8.25% Convertible Subordinated
Debentures, due February 1, 2006 (the "Debenture"), from its operating cash
flow, including distributions from its managed care subsidiaries, the collection
of its accounts receivable, proceeds from the sale of its clinical laboratory
equipment, and capitalized leases. The Company is also considering the sale of
additional equity as a means of generating additional cash to support the
Company's operations, satisfy its debt service requirements and fund expansion
of its managed care operations. The foregoing statements may be "forward looking
statements" within the meaning of the Securities Exchange Act of 1934. The
Company's ability to sell certain assets and to raise additional equity
financing is subject to a number of uncertainties, including the limited demand
for clinical laboratory equipment, and the price interested parties may be
willing to offer for such equipment, the Company's current financial position
and recent operating results, the financial condition of other parties in the
industry and the current economic condition of the health care industry in
general.
Factors that could adversely affect the Company's operating cash include
uncertainties inherent in the discontinuation of an operation, such as the
amounts which the Company will be able to realize on the disposition of its
laboratory assets and collection of its laboratory accounts receivable, which
could be less than the book value of such assets and could result in additional
losses, and costs in excess of those anticipated resulting from employee
terminations, closure of facilities and resolution of regulatory issues, intense
competition in the managed care business, particularly from larger, better
capitalized companies, dependence of the Company on third parties to provide
services under its managed care programs, uncertainties due to the fact that the
Company's programs are generally terminable by the customer on short notice and
many of the Company's service arrangements are terminable on short notice, the
impact of the highly regulated nature of the managed care business on the
Company's continuing operations and the cost and the ability of the Company to
continue to satisfy increasing regulatory requirements relating to the managed
care business, the long sales cycle involved in the managed care business, the
dependence of the Company on a limited number of large customers for its revenue
and growth, most of whom are involved in the automotive industry, the ability of
the Company to develop new managed care products, the level of interest that
existing and potential new customers may have in managed care products offered
by the Company, the ability of the Company to identify and satisfy market needs,
potential increases in operating costs resulting from the failure of the
Company's principal suppliers to become year 2000 compliant, and economic
conditions in the health care and automotive industries in general
In the event that the Company is not able to generate cash to the extent
required to fund the Company's operations from the sources described above, the
Company will have to consider disposition of assets relating to its managed care
business.
The Company has from time to time experienced compliance reviews, including
reviews of its billing practices, by its third-party payors. The Company has not
yet received a final determination notice from a compliance review conducted by
one of its largest third-party payors. The ultimate effect, if any, of these
compliance reviews cannot be determined at this
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<PAGE> 17
time and no liability has been accrued by the Company.
The Company had received a thirty-day demand letter from the IRS proposing
adjustments to the Company's federal income taxes for the years 1991-1994
totaling $3.3 million. The proposed adjustments principally relate to the timing
of certain bad debt deductions and claim expense accruals and the deductibility
of certain sign on bonus and non-compete payments made in connection with the
MML acquisition. The Company has filed a written protest with the IRS appeals
office regarding this matter. There can be no assurances that the Company will
resolve this dispute with the IRS in a manner favorable to the Company. The
failure to resolve the dispute with the IRS in a manner favorable to the Company
would result in a current period charge to earnings and would have a material
adverse effect on the business, financial conditions, including working capital,
and results of operations of the Company. While management believes the
Company's liability relating to these matters, if any, will not be material to
the Company, the ultimate effects, if any, cannot be determined at this time.
The foregoing statement may be a "forward looking statement" within the meaning
of the Securities Exchange Act of 1934. The outcome of the disputes with the IRS
involves a number of uncertainties, including those inherent in interpreting and
applying the Internal Revenue Code and other federal income tax authority and
precedent to actual transactions, those relating to the valuation of various
assets at the time of the acquisition and those inherent in pursuing any legal
action of the type instituted by the Company. The Company has not accrued a
liability relating to the deficiency assessments or proposed tax adjustments.
Year 2000 Issue. The year 2000 issue is the result of computer programs and
microprocessors using two digits rather than four to define the applicable year
(the "Year 2000 Issue"). Such programs or microprocessors may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations leading to disruptions in the Company's
activities and operations. If the Company or third parties with which it has a
significant relationship fail to make necessary modifications, conversions and
contingency plans on a timely basis, the Year 2000 Issue could have a material
adverse effect on the Company's business, financial condition and results of
operations. However, the effect cannot be quantified at this time because the
Company cannot accurately estimate the magnitude, duration or ultimate impact of
noncompliance by vendors and other third parties. The Company believes that its
competitors face a similar risk. Although the risk is not presently
quantifiable, the disclosure below is intended to summarize the Company's
actions to minimize its risk from the Year 2000 Issue. Programs that will
operate in the year 2000 unaffected by the change in year from 1999 to 2000 are
referred to herein as "year 2000 compliant."
The Company began addressing the Year 2000 Issue in June 1997. It identified
three general categories of systems that require attention: (1) information
technology ("IT") systems, (2) non-IT systems, such as climate control systems,
telephone systems and security systems, which may contain embedded
date-sensitive microprocessors, and (3) IT and non-IT systems of third parties.
The Company currently has three major IT systems: its managed care computer
software, its accounting software and its internal personal computer system and
related software. The
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<PAGE> 18
managed care software, which was purchased and installed in late 1997, is used
for client billings and operates from the Company's personal computer network.
The Company has forward-date tested the system and believes that the managed
care software is year 2000 compliant. The Company's accounting software, which
was recently purchased and is expected to be installed before the end of
November 1998, will operate from the Company's personal computer network. The
vendor of the software has represented to the Company that the software is year
2000 compliant. The software will be tested following installation to verify
compliance and, in the event of a breach of the representation, the Company
would expect to avail itself of its legal remedies. The Company's personal
computer system otherwise operates using "shrinkwrapped" software (such as
Microsoft Windows NT, Microsoft Word and Excel). To the extent any of the
programs used by the personal computer system are not year 2000 compliant, the
Company believes that year 2000 compliant upgrades are or will be readily
available for purchase. The Company intends to test the hardware components of
its personal computer system for the year 2000 compliance during 1999 and
expects any disruption due to the Year 2000 Issue with respect to the hardware
or software used by its personal computer system to be minimal.
The Company's major non-IT system is its telephone system. Testing of the
telephone system is complete and replacement equipment will be purchased in the
first quarter of 1999 to remediate the portion of the system which was not year
2000 compliant. Testing of the upgraded equipment is expected to be completed by
April 1999. The Company intends to assess, in the first quarter of 1999, the
year 2000 compliance of its facilities and related non-IT embedded systems and
will determine at that time the need for and cost of remediation.
The Company has relationships with, and is to varying degrees dependent upon,
various third parties that provide funds, information, goods and services to the
Company. These include the Company's bank lender, utility providers and other
vendors, such as LabCorp with whom it subcontracts to provide services under its
managed care contracts. The Company is attempting, through informal contacts, to
assess the compliance of these third parties. These vendors have been giving the
Company updates on their progress. The year 2000 compliance of the systems of
these third parties is outside the Company's control. There can be no assurance
that any of these third parties will not experience a systems failure due to the
Year 2000 Issue.
Because the Company expects that the systems within its control will be year
2000 compliant before the end of 1999, the Company believes that the most
reasonably likely worst case scenario is a compliance failure by one or more of
the third parties described above. Such a failure would likely have an effect on
the Company's business, financial condition and results of operations. The
magnitude of that effect, however, cannot be quantified at this time because of
variables such as the type and importance of the third party, the possible
effect on the Company's operations and the Company's ability to respond. Thus,
there can be no assurance that there will not be a material adverse effect on
the Company if such third parties do not remediate their systems in a timely
manner and in a way that is compatible with the Company's systems.
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<PAGE> 19
As a result, the Company will develop contingency plans that assume some
estimated level of noncompliance by, or business disruption to, these third
parties. The Company intends to have contingency plans developed by June 30,
1999 for third parties determined to be at high risk of noncompliance or
business disruption or whose noncompliance or disruption could materially affect
the Company. The contingency plans will be developed on a case-by-case basis,
and may include alternative vendors that can assure year 2000 compliance.
Judgments regarding contingency plans are subject to many uncertainties and
there can be no assurance that the Company will correctly anticipate the level,
impact or duration of noncompliance or that its contingency plans will be
sufficient to mitigate the impact of any noncompliance. Some material adverse
effect to the Company may result despite such contingency plans.
To date, the Company has expended approximately $915,000 to remediate year 2000
problems, principally to replace its managed care and accounting software.
Replacement of the managed care claim processing system, which represents
$850,000 of this expenditure and was part of the laboratory division system,
would have been required when the laboratory division was divested irrespective
of the Year 2000 Issue. These costs have been expensed or capitalized in the
period incurred. The Company estimates total year 2000 remediation costs at less
than $1 million, with the remaining costs to be incurred over the next six
quarters. Estimates of time, cost and risks are based on currently available
information. Developments that could affect estimates include, without
limitation, the availability of trained personnel, the ability to locate and
correct all noncompliant systems, cooperation and remediation success of third
parties material to the Company, and the ability to correctly anticipate risks
and implement suitable contingency plans in the event of system failures at the
Company or third parties.
The foregoing discussion of the Year 2000 Issue contains various "forward
looking statements", within the meaning of the Securities Exchange Act of 1934,
and are subject to uncertainties which are described in the foregoing
discussion.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On August 4, 1998, pursuant to the Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated as of July 16, 1998, between the Company and Laboratory
Corporation of America Holdings ("LabCorp"), the Company sold 1,416,667 shares
of its common stock (the "Common Stock") to LabCorp at a price per share of
$3.00 for a total purchase price of $4,250,000, which was paid in cash. In
addition, the Company granted LabCorp the preemptive right to purchase a
percentage of any shares of stock of the Company issued after July 16, 1998, but
prior to August 31, 2000 equal to LabCorp's percentage holding of the issued and
outstanding Stock of the Company at the date of such issuance.
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<PAGE> 20
The Company did not register the shares of Common Stock issued to LCA under the
Securities Act of 1933, as amended, (the "Act"), and does not plan to register
any Shares of Common Stock that may be issued to LabCorp in the future under the
Act, based upon exemptions from registration set forth in Section 4(2) of the
Act and Regulation D. The Company relied upon these exemptions based on
LabCorp's representations set forth in the Stock Purchase Agreement and the
negotiated nature of the transaction. The Company has agreed, subject to certain
restrictions and limitations, to register for resale under the Act, on Form S-3
or its successor form, upon written request of the holders of a majority of the
Purchased Shares then subject to the registration rights under the Stock
Purchase Agreement all shares of Common Stock issued to LabCorp.
In connection with the Stock Purchase Agreement, the Company issued to NBD Bank
a Warrant to Purchase 100,000 Shares of Common Stock, dated as of August 3,
1998, (the "Warrant"), at the price of $2.50 per share, exercisable in whole or
in part, at any time and from time to time from August 3, 1998 through August 3,
2001, subject to certain terms and conditions set forth therein. The Warrant
amended and replaced the Warrant to Purchase 100,000 Shares of Common Stock,
dated as of July 8, 1998, issued by the Company to NBD Bank. The Company does
not plan to register any shares of Common Stock which may be issued to NBD Bank
under the Act, based upon exemptions from registration set forth in Section 4(2)
of the Act and Regulation D. The Company shall rely upon these exemptions based
on NBD Bank's representations set forth in the Warrant and the negotiated nature
of this and related transactions between the Company and NBD Bank.
The Warrant further entitles the Holder of the Warrant (the "Holder") to
additional shares of Common Stock of the Company if the Company issues Common
Stock, Convertible Securities, or certain other rights to purchase stock of the
Company at a purchase price per share that is lower than the purchase price of
the Warrants. In addition, upon exercise of the Warrant the Holder is entitled
to receive, for no additional consideration, the amount of any dividend issued
after the effective date of the Warrant, that the Holder would have been
entitled to receive had it been the holder of record of such shares on the date
of issuance of such dividend. The Holder also has a put right whereby, in lieu
of exercising the Warrant or any portion thereof and paying the exercise price,
the Holder may require the company to purchase any exercisable portion of the
Warrant. Upon the request of the Holder, the Company is required to file a
"shelf" registration statement to register any or all of the Holders registrable
shares under the Securities Act of 1933, as amended. The Company must pay all
expenses in connection with the first requested registration statement and the
Holder must pay expenses for subsequent registration statements.
The Company also became obligated as of the closing date of the Laboratory
Purchase Agreement to issue 50,000 shares of its Common Stock to MedSEC, Inc.
("MedSEC"), in partial payment for certain consulting services provided by
MedSEC to the Company, pursuant to an agreement with MedSEC, dated March 17,
1995. The Company does not plan to register the shares of Common Stock to be
issued to MedSEC under the Act, based upon exemptions from registration set
forth in Section 4(2) of the Act and Regulation D. The Company shall rely upon
these exemptions based
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on MedSEC's representations set forth in a certain Stock Subscription Agreement
and the negotiated nature of the transactions with MedSEC.
Pursuant to the terms of an agreement with Laboratory Corporation of America,
the Company is bound by certain covenants, including restricting dividends on,
and redemptions and repurchases of, its capital stock, limiting its debt and not
issuing additional shares of capital stock of its subsidiaries.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Purchase Agreement between the Company and Laboratory
Corporation of American Holdings dated July 16, 1998,
incorporated by reference from the Company's Current Report on
Form 8-K dated July 21, 1998. The Registrant agrees to furnish
supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
3.1 Restated Articles of Incorporation of the Company, filed with
the Michigan Department of Commerce--Corporation and
Securities Bureau on October 2, 1992, as amended.
4.1 Letter Agreement, dated October 8, 1998, among NBD Bank, the
Company, Universal Standard Healthcare of Michigan, Inc.,
Universal Standard Healthcare of Ohio, Inc., Universal
Standard Healthcare of Delaware, Inc., A/R Credit, Inc., and
T.P.A., Inc.
10.1 Stock Purchase Agreement between the Company and Laboratory
Corporation of America Holdings dated July 16, 1998,
incorporated by reference from the Company's Current Report on
Form 8-K dated July 21, 1998. The Registrant agrees to furnish
supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
10.2 Co-Marketing Agreement, dated as of August 3, 1998, between
the Company and Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report on
Form 8-K dated August 19, 1998.
10.3 Shareholders' Agreement, dated as of August 3, 1998, between
the Company and Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report on
Form 8-K dated August 19, 1998.
10.4 Voting Agreement among the Company, Laboratory Corporation of
America Holdings, Anixter International, Inc., Signal Capital
Corporation, Portfolio Investment Company Limited, CLF, Ltd
and CLF, LP, incorporated by reference from the Company's
Current Report on Form 8-K dated August 19, 1998.
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10.5 Laboratory Services Agreement, dated as of August 3, 1998,
between the Company and Laboratory Corporation of America
Holdings, incorporated by reference from the Company's Current
Report on Form 8-K dated August 19, 1998. Exhibit A to this
Agreement was filed separately with the Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934 governing
requests for confidential treatment of information.
10.6 Security Agreement dated as of August 3, 1998, among the
Company, Universal Standard Healthcare of Delaware, Inc. and
Laboratory Corporation of America Holdings, incorporated by
reference from the Company's Current Report on Form 8-K dated
August 19, 1998. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
10.7 Sublease dated as of August 3, 1998, between the Company and
Laboratory Corporation of America Holdings, incorporated by
reference from the Company's Current Report on Form 8-K dated
August 19, 1998. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
10.8 Transition Services Agreement dated as of August 3, 1998,
between the Company and Laboratory Corporation of America
Holdings, incorporated by reference from the Company's Current
Report on Form 8-K dated August 19, 1998. Portions of Schedule
A to this Agreement were filed separately with the Commission
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934
governing requests for confidential treatment of information.
10.9 Non-Compete Agreement, dated as of August 3, 1998, by the
Company and all of its subsidiaries and affiliated companies
for the benefit of Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report on
Form 8-K dated August 19, 1998.
10.10 Universal Subordination Agreement, dated as of August 3, 1998,
among the Company, Universal Standard Healthcare of Delaware,
Inc. and Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report on
Form 8-K dated August 19, 1998. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
10.11 Sublease Agreement, dated as of August 4, 1998, between the
Company and Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report on
Form 8-K dated August 19, 1998. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
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10.12 Consent of Signal Capital Corp., dated July 30, 1998, to the
Amendment to Stockholders Agreement dated as of June 28, 1991
by and among Universal Standard Equity, Ltd., WestSphere
Capital Associates, L.P., WestSphere Capital, Inc., Westsphere
Funding II, L.P., Fleet National Bank, Signal Capital Corp.,
Marvin Eisner, MML, Inc., Robert Nowikowski, Barbara Pace,
John Watkins, Perry McClung, Janney Montgomery Scott, Inc.,
Richard J. Berman, Marcus & Katz and Elan Holdings Corp,
incorporated by reference from the Company's Current Report on
Form 8-K dated August 19, 1998.
10.13 Consent of Portfolio Investment Company Limited, CLF, LTD. And
CLF, L.P., dated July 31, 1998, to the Amendment to
Stockholders Agreement dated as of June 28, 1991 by and among
Universal Standard Equity, Ltd., WestSphere Capital
Associates, L.P., WestSphere Capital, Inc., WestSphere Funding
II, L.P., Fleet National Bank, Signal Capital Corp., Marvin
Eisner, MML, Inc., Robert Nowikowski, Barbara pace, John
Watkins, Perry McClung, Janney Montgomery Scott, Inc., Richard
J. Berman, Marcus & Katz and Elan Holdings Corp., incorporated
by reference from the Company's Current Report on Form 8-K
dated August 19, 1998.
27. Financial Data Schedule
(b) Reports on Form 8-K.
On July 31, 1998, the Company filed a Current Report on Form 8-K, dated
July 21, 1998, whereby it reported under Item 5 that the Company had
entered into an Asset Purchase Agreement (the "Asset Purchase
Agreement"), dated July 16, 1998, with 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, agreed to sublease certain
real and personal property to LabCorp for six months for aggregate
payments of $1.85 million. In addition, the Company reported that it
entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated July 16, 1998, pursuant to which it agreed to sell
to LabCorp the Company's Common Stock.
On August 19, 1998 the Company filed a Current Report on Form 8-K,
dated August 19, 1998, whereby it reported under Item 2 that pursuant
to the Asset Purchase Agreement, on August 4, 1998, the Company sold
its clinical laboratory customer list and certain tangible assets
related to its clinical laboratory business to LabCorp for $9.0 million
in cash and agreed not to engage in the business of providing
commercial laboratory services for 5 years, except in certain limited
circumstances related to the Company's managed care business.
The Company further reported under Item 5 that, pursuant to the Stock
Purchase Agreement, it (i) sold 1,416,667 shares of its Common Stock to
LabCorp for $4.25 million
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cash; (ii) granted certain registration rights to LabCorp; (iii)
increased the number of board seats of the Company from eight to nine
members and elected Larry L. Leonard, who was designated by LabCorp, to
fill the vacancy created thereby; (iv) agreed to certain covenants; (v)
granted certain preemptive rights to LabCorp; (vi) obtained certain
call rights; and (vii) entered into a Co-Marketing Agreement, a
Laboratory Services Agreement, a Shareholders' Agreement and a Lease
Arrangement with LabCorp.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL STANDARD HEALTHCARE, INC.
(Registrant)
Date: November 16, 1998 Eugene Jennings
---------------------------------------
Eugene Jennings
President and
Chief Executive Officer
Date: November 16, 1998 Alan S. Ker
---------------------------------------
Alan S. Ker
Vice President, Finance,
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
- - ------------------------------
2.1 Purchase Agreement between the Company and Laboratory
Corporation of American Holdings dated July 16, 1998,
incorporated by reference from the Company's Current Report
on Form 8-K dated July 21, 1998. The Registrant agrees to
furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
3.1 Restated Articles of Incorporation of the Company, filed with
the Michigan Department of Commerce - Corporation and
Securities Bureau on October 2, 1992, as amended.
4.1 Letter Agreement, dated October 8, 1998, among NBD Bank, the
Company, Universal Standard Healthcare of Michigan, Inc.,
Universal Standard Healthcare of Ohio, Inc., Universal
Standard Healthcare of Delaware, Inc., A/R Credit, Inc., and
T.P.A., Inc.
10.1 Stock Purchase Agreement between the Company and Laboratory
Corporation of America Holdings dated July 16, 1998,
incorporated by reference from the Company's Current Report
on Form 8-K dated July 21, 1998. The Registrant agrees to
furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
10.2 Co-Marketing Agreement, dated as of August 3, 1998, between
the Company and Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report
on Form 8-K dated August 19, 1998.
10.3 Shareholders' Agreement, dated as of August 3, 1998, between
the Company and Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report
on Form 8-K dated August 19, 1998.
10.4 Voting Agreement among the Company, Laboratory Corporation of
America Holdings, Anixter International, Inc., Signal Capital
Corporation, Portfolio Investment Company Limited, CLF, Ltd
and CLF, LP, incorporated by reference from the Company's
Current Report on Form 8-K dated August 19, 1998.
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Exhibit No. Description
- - ------------------------------
10.5 Laboratory Services Agreement, dated as of August 3, 1998,
between the Company and Laboratory Corporation of America
Holdings, incorporated by reference from the Company's
Current Report on Form 8-K dated August 19, 1998. Exhibit A
to this Agreement was filed separately with the Commission
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934
governing requests for confidential treatment of information.
10.6 Security Agreement dated as of August 3, 1998, among the
Company, Universal Standard Healthcare of Delaware, Inc. and
Laboratory Corporation of America Holdings, incorporated by
reference from the Company's Current Report on Form 8-K dated
August 19, 1998. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
10.7 Sublease dated as of August 3, 1998, between the Company and
Laboratory Corporation of America Holdings, incorporated by
reference from the Company's Current Report on Form 8-K dated
August 19, 1998. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
10.8 Transition Services Agreement dated as of August 3, 1998,
between the Company and Laboratory Corporation of America
Holdings, incorporated by reference from the Company's
Current Report on Form 8-K dated August 19, 1998. Portions of
Schedule A to this Agreement were filed separately with the
Commission pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934 governing requests for confidential treatment of
information.
10.9 Non-Compete Agreement, dated as of August 3, 1998, by the
Company and all of its subsidiaries and affiliated companies
for the benefit of Laboratory Corporation of America
Holdings, incorporated by reference from the Company's
Current Report on Form 8-K dated August 19, 1998.
10.10 Universal Subordination Agreement, dated as of August 3,
1998, among the Company, Universal Standard Healthcare of
Delaware, Inc. and Laboratory Corporation of America
Holdings, incorporated by reference from the Company's
Current Report on Form 8-K dated August 19, 1998. The
Registrant agrees to furnish supplementally a copy of any
omitted Schedule to the Securities and Exchange Commission
upon request.
27
<PAGE> 28
Exhibit No. Description
- - -----------------------------
10.11 Sublease Agreement, dated as of August 4, 1998, between the
Company and Laboratory Corporation of America Holdings,
incorporated by reference from the Company's Current Report
on Form 8-K dated August 19, 1998. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
10.12 Consent of Signal Capital Corp., dated July 30, 1998, to the
Amendment to Stockholders Agreement dated as of June 28, 1991
by and among Universal Standard Equity, Ltd., WestSphere
Capital Associates, L.P., WestSphere Capital, Inc.,
Westsphere Funding II, L.P., Fleet National Bank, Signal
Capital Corp., Marvin Eisner, MML, Inc., Robert Nowikowski,
Barbara Pace, John Watkins, Perry McClung, Janney Montgomery
Scott, Inc., Richard J. Berman, Marcus & Katz and Elan
Holdings Corp, incorporated by reference from the Company's
Current Report on Form 8-K dated August 19, 1998.
10.13 Consent of Portfolio Investment Company Limited, CLF, LTD.
And CLF, L.P., dated July 31, 1998, to the Amendment to
Stockholders Agreement dated as of June 28, 1991 by and among
Universal Standard Equity, Ltd., WestSphere Capital
Associates, L.P., WestSphere Capital, Inc., WestSphere
Funding II, L.P., Fleet National Bank, Signal Capital Corp.,
Marvin Eisner, MML, Inc., Robert Nowikowski, Barbara pace,
John Watkins, Perry McClung, Janney Montgomery Scott, Inc.,
Richard J. Berman, Marcus & Katz and Elan Holdings Corp.,
incorporated by reference from the Company's Current Report
on Form 8-K dated August 19, 1998.
27 Financial Data Schedule.
28
<PAGE> 1
EXHIBIT 3.1
MICHIGAN DEPARTMENT OF COMMERCE -
CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY) Date Received
10-2-92
RESTATED ARTICLES OF INCORPORATION
OF
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
(domestic profit corporation)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Restated Articles of
Incorporation:
1. The present name of the corporation is: UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
2. The corporation identification number ("CID") assigned by the Bureau
is: 301-181.
3. All former names of the corporation are: Elan Medical Diagnostics,
Inc.; and Universal-Metric Laboratories, Inc.
4. The date of filing of the original Articles of Incorporation was:
October 16, 1990. The original Articles of Incorporation were subsequently
amended by a Certificate of Amendment to the Articles of Incorporation filed on
April 11, 1991, a Certificate of Amendment filed on May 6, 1991, and a
Certificate of Designations filed on June 28, 1991. Restated Articles of
Incorporation were filed on June 28, 1991, as amended by a Certificate of
Amendment filed on July 2, 1991.
The following Restated Articles of Incorporation supersede the Articles
of Incorporation, as amended, and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
---------
NAME
The name of the corporation is UNIVERSAL STANDARD MEDICAL LABORATORIES,
INC.
<PAGE> 2
ARTICLE II
----------
PURPOSE
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Michigan Business Corporation Act, as amended (the "MBCA").
ARTICLE III
-----------
AUTHORIZED SHARES
The total authorized shares of stock which the corporation shall have
authority to issue is 20,000,000, all of which shares shall be Common Stock
(hereinafter referred to as "Common Stock"). The shares of stock of the
corporation may be issued from time to time for such consideration as may be
fixed from time to time by the Board of Directors.
A statement of all or any of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof is as follows:
1. The holders of Common Stock are entitled to receive such dividends
as may be declared from time to time by the Board of Directors.
2. In the event of any liquidation, dissolution, or winding up of the
corporation, the holders of Common Stock shall be entitled to receive all of the
remaining assets of the corporation available for distribution.
3. The holders of Common Stock shall have equal voting and other rights
consistent with the MBCA and each holder of Common Stock is entitled to one (1)
vote for each share so held with respect to all matters voted on by the
shareholders of the corporation.
ARTICLE IV
----------
REGISTERED OFFICE AND RESIDENT AGENT
The address and mailing address of the registered office is The
Corporation Company, 615 Griswold, Suite 1020, Detroit, Michigan 48226.
The name of the resident agent is The Corporation Company.
ARTICLE V
---------
ELECTION OF DIRECTORS
A. The number of directors of the corporation shall be determined by
and provided for in the manner set forth in the Bylaws of the corporation, but
shall not for any time be less than seven (7), and at least two (2) of the
directors shall be Independent Directors. For purposes of these Restated
Articles of Incorporation an Independent Director shall mean a director who
meets all of the following requirements:
<PAGE> 3
1. Is elected by the shareholders.
2. Is designated as an Independent Director by resolution of the
Board.
3. Is not any of the following:
(A) An officer or employee of the corporation or any Affiliate
(as defined in Article X of these Restated Articles of
Incorporation) of the corporation.
(B) An individual having a relationship which, in the opinion
of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities
of a director.
B. The directors shall be classified, with respect to the time for
which they severally hold office, into three (3) classes, as nearly equal in
number as reasonably possible, with the term of office of the first class to
expire initially at the 1993 annual meeting of shareholders, the term of office
of the second class to expire initially at the 1994 annual meeting of
shareholders, the term of office of the third class to expire initially at the
1995 annual meeting of shareholders, and with the directors of each class to
hold office until their successors are duly elected and qualified. At each
annual meeting of shareholders following such classification and election,
directors elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third annual meeting of shareholders after
their election.
C. Advance notice of nominations for the election of directors, other
than by the Board or a committee thereof, shall be given in the manner provided
in the Bylaws.
D. All elections of directors by shareholders shall be determined by a
vote of a majority of the shares present in person or represented by proxy and
voting on such elections.
E. A newly created directorship resulting from any increase in the
authorized number of directors and any vacancies on the Board resulting from
death, resignation, retirement, disqualification, removal from office or other
cause shall be filled only by a majority vote of the remaining directors then in
office though less than a quorum, and directors so chosen shall hold office for
a term expiring at the annual meeting of shareholders at which the term of
office of the class to which they have been elected expires or until their
successors have been duly elected and qualified. No decrease in the number of
directors constituting the Board shall shorten the term of any incumbent
director.
F. Any director, or the entire Board, may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of at
least a majority of the voting power of all of the then outstanding shares of
capital stock of the corporation entitled to vote generally in the election of
directors, voting together as a single class at a duly convened meeting of the
shareholders.
<PAGE> 4
G. Election of the corporation's directors need not be by written
ballot unless the corporation's Bylaws shall so provide.
ARTICLE VI
----------
BYLAWS
The provisions for the regulation of the corporation's internal affairs
are to be stated in the corporation's Bylaws, as the same may be amended from
time to time.
ARTICLE VII
-----------
LIMITATION OF DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that the foregoing shall not eliminate or limit the
liability of a director for any of the following: (i) breach of the director's
duty of loyalty to the corporation or its shareholders; (ii) acts or omissions
not in good faith or that involve intentional misconduct or knowing violation of
law; (iii) a violation of Section 551(l) of the MBCA; (iv) a transaction from
which the director derived an improper personal benefit; or (v) an act or
omission occurring prior to October 16, 1990 (i.e. the date of filing of the
original Articles of Incorporation).
If the MBCA hereinafter is amended to authorize the further elimination
or limitation of the liability of directors, then the liability of a director of
the corporation, in addition to the limitation on personal liability contained
herein, shall be limited to the fullest extent permitted by the amended MBCA.
No amendment or repeal of this Article VII shall apply to or have any
effect on the liability or alleged liability of any director of the corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
ARTICLE VIII
------------
CERTAIN SHAREHOLDER RIGHTS
A. Any action required or permitted by the MBCA to be taken at any
annual or special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote, if consents in writing, setting for the
action so taken, are signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
the action at a meeting at which all shares entitled to vote thereon were
present and voted. The written consents shall bear the date of signature of each
shareholder who signs the consents. No written consents shall be effective to
take the corporate action referred to unless, within 60 days after the record
date for determining shareholders entitled to express consent or to dissent from
a proposal without a meeting, written consents signed by a sufficient number of
shareholders to take the action are delivered to the corporation. Delivery shall
be to the corporation's registered office, its principal place of business, or
an officer or agent of the corporation having custody of the minutes of the
<PAGE> 5
proceedings of its shareholders. Delivery made to a corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to shareholders who have
not consented in writing.
B. Special meetings of the shareholders of the corporation may be
called by the Board of Directors, such person or persons as may be authorized to
call a special meeting by the corporation's Bylaws, or holders of a majority of
the Common Stock. The holders of a majority of the Common Stock shall constitute
a quorum at all meetings of shareholders. When a quorum is present or
represented by proxy at any meeting, the vote of the holders of a majority of
the Common Stock present in person or represented by proxy and voting shall
decide any question brought before the meeting, except as otherwise provided by
these Restated Articles of Incorporation, the Bylaws or by law. All Common Stock
shall be entitled to one vote per share on any matter submitted to a vote of
shareholders. All proxies, ballots, votes and tabulations that identify the
particular vote of holders of Common Stock shall be confidential and shall not
be disclosed except (i) to independent election inspectors appointed by the
corporation, who shall not be directors, officers, or employees of the
corporation, (ii) as required by law, or (iii) when expressly requested by the
voting shareholder.
C. No holder of the corporation's shares of any class, now or hereafter
authorized, shall have any preferential or preemptive right to subscribe for,
purchase or receive any shares of the corporation of any class, now or hereafter
authorized, or any options or warrants for any securities convertible into or
exchangeable for such shares, that may at any time or from time to time be
issued, sold or offered for sale by the corporation; provided, however, that in
connection with the issuance or sale of any such shares, options, warrants or
securities, the Board may, in its sole discretion, offer such shares, options,
warrants or securities, or any part thereof, for purchase or subscription by the
holders of shares of the corporation.
ARTICLE IX
----------
CERTAIN AUTHORITY OF DIRECTORS
A. In addition to the rights, powers, privileges and discretionary
authority expressly conferred by statute upon the Board, the Board is hereby
authorized and empowered to adopt, amend and repeal the Bylaws of the
corporation and to exercise any and all powers and privileges and to do any and
all acts and things as may at any time or from time to time be exercised or done
by the corporation; subject, nevertheless, to the provisions of the statutes of
the State of Michigan, of these Restated Articles of Incorporation, and of any
Bylaws of the corporation from time to time adopted; provided, however, that no
Bylaw so adopted shall serve to invalidate any prior action of the Board which
would have been valid if such Bylaw had not been adopted.
B. Any adoption, amendment or repeal of the corporation's Bylaws shall
be effected in the manner provided in the Bylaws.
<PAGE> 6
ARTICLE X
---------
BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS
A. The corporation shall not be governed by Chapters 7A and 7B of the
MBCA.
B. The corporation shall not purchase, directly or indirectly, at a
price above Market Price (as hereinafter defined), any shares of any class, now
or hereafter authorized, of the corporation's capital stock from any Selling
Shareholder (as hereinafter defined) or any Affiliate or Associate (as
hereinafter defined) of a Selling Shareholder, unless such purchase has been
approved in advance by an affirmative vote of the holders of at least a majority
of the voting power of all of the outstanding shares of capital stock of the
corporation held by shareholders other than the Selling Shareholder or any
Affiliate or Associate of the Selling Shareholder who is, or whose Affiliate or
Associate is, a party to the transaction described in this Section B being voted
upon, voting together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or any agreement with any national
securities exchange, or otherwise but no such affirmative vote shall be required
with respect to any purchase or other acquisition of securities made as part of
a tender or exchange offer by the corporation to purchase securities of the same
class made on the same terms to all holders of such securities and complying
with the applicable requirements of the Securities Exchange Act of 1934 ("1934
Act") and the rules and regulations thereunder as then in effect.
C. For purposes of this Article X:
(a) "Selling Shareholder" shall mean any Person (other than the
corporation or any Subsidiary (as hereinafter defined)) who or
which proposes to sell to, or cause to be acquired by, the
corporation all or any portion of the capital stock of the
corporation then beneficially owned, directly or indirectly, by
such Person and who or which:
(i) is the beneficial owner, directly or indirectly, of 3% or
more of the class of capital stock to be acquired; or
(ii) is an Affiliate of the corporation and at any time within
the two year period immediately prior to the date in
question was the beneficial owner, directly or
indirectly, of 3% or more of the class of capital stock
to be acquired; or
(iii) is an assignee or has otherwise succeeded to any shares
of the class of shares to be acquired which were at any
time within the two-year period immediately prior to the
date in question beneficially owned by a Selling
Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or transactions
not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
<PAGE> 7
(b) "Person" shall mean any individual, firm, corporation or other
entity and shall include any group comprising any Person with
whom such Person or any Affiliate or Associate of such Person
has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or
disposing of the corporation's capital stock.
(c) A Person shall be a "beneficial owner" of or shall "beneficially
own" any shares:
(i) which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly, within the
meaning of Rule 13d-3 of the General Rules and
Regulations under the 1934 Act, as in effect on the
effective date of these Restated Articles of
Incorporation; or
(ii) which such Person or any of its Affiliates or Associates
has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or
(b) the right to vote pursuant to any agreement,
arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of its
Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding,
voting or disposing of such shares.
(d) "Market Price" shall mean the average closing sale price during
the 30-day period immediately preceding the date in question of
a share of the corporation's capital stock on the principal
United States securities exchange registered under the 1934 Act
on which such stock is listed, or, if such stock is not listed
on any such exchange, the average closing bid quotation with
respect to a share of such stock during the 30-day period
immediately preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations
System or any comparable system then in use, or if no such
quotations are available the fair market value on the date in
question of a share of such stock as determined in good faith by
a majority of the directors.
(e) An "Affiliate" of a specified Person, is a Person that directly,
or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, the Person
specified. The term "control" (including the terms
"controlling", "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a
Person, whether through the ownership of voting capital stock,
by contract, or otherwise.
<PAGE> 8
(f) An "Associate" of a specified Person means (i) any corporation
or organization (other than the corporation or a Subsidiary)
of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of
any class of capital stock, (ii) any trust or other estate in
which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary
capacity, or (iii) any relative or spouse of such Person, or any
relative of such spouse, who has the same residence as such
Person or who is a director or officer of the corporation or a
Subsidiary.
(g) Nothing contained in this Article X shall be construed to
relieve any Selling Shareholder or any other Person from any
fiduciary obligation imposed by law.
(h) The Board shall have the power and duty to construe and
interpret this Article X, including, without limitation (i)
whether a Person is a Selling shareholder, (ii) whether a Person
is an Affiliate or Associate of another, (iii) whether Section B
of this Article X is or has become applicable in respect of a
proposed transaction, (iv) what the Market Price is and whether
a price is above Market Price, and (v) when or whether a
purchase or agreement to purchase any share or shares of any of
the capital stock of the corporation has occurred and when or
whether a Person has become a beneficial owner of any of the
corporation's shares.
(i) "Subsidiary" means any corporation of which a majority of each
class of voting capital stock is owned, directly or indirectly,
by the corporation.
(j) Notwithstanding any other provision of these Restated Articles
of Incorporation or the corporation's Bylaws (and
notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, these Restated Articles of
Incorporation or the corporation's Bylaws, the affirmative vote
(excluding votes cast by the Selling Shareholder or its
Affiliate or Associate who is, or whose Associate or Affiliate
is, a party to the transaction described in Section B of this
Article X being voted upon) of the holders of at least 66-2/3%
of the voting power of all outstanding capital stock, voting
together as a single class, shall be required to amend, repeal
or adopt any provision inconsistent with this Article X.
3. In the event that a purchase of shares of any capital stock by the
corporation is subject to and governed by paragraph B of this Article X and such
capital stock is listed on a national securities exchange, including the
National Association of Securities Dealers, Inc. Automated Quotations Systems,
the purchase of such capital stock, in addition to satisfying all other
requirements of this Article X, shall be made on the open market and not as the
result of a privately negotiated transaction.
<PAGE> 9
ARTICLE XI
----------
1. The Board reserves the right to amend, alter, change or repeal any
provision contained in these Restated Articles of Incorporation in the manner
prescribed by the laws of the State of Michigan, except that no amendment which
would increase or decrease the aggregate number of authorized shares of a class
of shares of the corporation may be made unless approved by the affirmative vote
of the holders of at least 50% of the then-outstanding shares of such class, and
no amendment which would change any powers, preferences or rights with respect
to any class or series of shares of the corporation, including but not limited
to reducing the amounts payable thereon upon liquidation of the corporation or
diminishing or eliminating any voting rights pertaining thereto, may be made
unless approved by the affirmative vote of the holders of at least 50% of the
then-outstanding shares of such class or series of shares of the corporation,
and all rights, powers, privileges and discretionary authority granted or
conferred upon shareholders or directors herein are granted subject to this
reservation.
2. Notwithstanding any provision in these Restated Articles of
Incorporation or any provision of law which might otherwise require a lesser
vote or no vote, but in addition to any vote of the holders of any class or
series of the corporation's capital stock required by these Restated Articles of
Incorporation or by law, the affirmative vote of the holders of at least 80% of
the voting power of all the then-outstanding shares of the corporation's capital
stock entitled to vote generally in the election of directors, voting together
as a single class, shall be required to amend or repeal, or to adopt any
provision inconsistent with, Article X and this Article XI.
3. These Restated Articles of Incorporation were duly adopted on the
31st day of August, 1992, in accordance with the provisions of Section 642 of
the MBCA and were duly adopted by the written consent of all the shareholders
entitled to vote in accordance with Section 407(2) of the MBCA.
<PAGE> 10
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY) Date Received
FILED Dec 28, 1992
JAN 4, 1993
Administrator
MICHIGAN DEPT OF COMMERCE
Corporation & Securities Bureau
CERTIFICATE OF MERGER
FOR USE BY PARENT AND SUBSIDIARY PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporations execute the following Certificate:
1. The Plan of Merger is as follows:
a. The name each constituent corporation and its corporation
identification number (CID) is:
LCM/UNIVERSAL STANDARD, INC. 534-273
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC. 301-181
b. The name of the surviving corporation and its corporation
identification number (CID) is:
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC. 301-181
c. For each constituent corporation, state:
<TABLE>
<CAPTION>
Designation and
number of outstanding Indicate class or Indicate class or
shares in each class series of shares series entitled to
Name of corporation or series entitled to vote vote as a class
<S> <C> <C> <C>
LCM/Universal 1000 Common Common Common
Standard, Inc.
Universal Standard 6,155,721 Common Common
Medical Laboratories, Inc. Common
</TABLE>
<PAGE> 11
If the number of shares is subject to change prior to the effective date of the
merger, the manner in which the change may occur is as follows:
d. The terms and conditions of the proposed merger, including the
manner and basis of converting the shares of each constituent
corporation into shares, bonds, or other securities of the
surviving corporation, or into cash or other consideration,
are as follows:
See attached Agreement of Merger. The merger of LCM/Universal
Standard, Inc., a wholly-owned subsidiary of Universal
Standard Medical Laboratories, Inc., with and into Universal
Standard Medical Laboratories, Inc., does not require the
conversion of shares of each constituent corporation.
e. The amendments to the Articles of Incorporation of the
surviving corporation to be effected by the merger are as
follows:
Not applicable.
f. Other provisions with respect to the merger are as follows:
See attached Agreement of Merger.
<TABLE>
<CAPTION>
<S><C>
2. (Complete for any foreign corporation only)
This merger is permitted by the laws of the State of _________________________, the
jurisdiction under which __________________________________________________
(Name of foreign corporation)
</TABLE>
is formed and the plan of merger was adopted and approved by such
corporation pursuant to and in accordance with the laws of that
jurisdiction.
3. The number of outstanding shares of each class of the subsidiary
corporation and the number of shares of each class owned by the parent
corporation is as follows:
Total shares Shares owned by
Class outstanding parent corporation
Common 1000 Shares 1000 Shares
4. (Delete if not applicable)
5. (Delete if not applicable)
<PAGE> 12
6. (Complete only if an effective date is desired other than the date of
filing)
The merger shall be effective on the ______ day of __________, 19____.
Signed this ___ day of December, 1992
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
/s/ Marvin M. Eisner
By Marvin M. Eisner, President
DOCUMENT WILL BE RETURNED Name of person or organization remitting fees:
TO NAME AND MAILING ADDRESS
INDICATED IN THE BOX BELOW. Universal Standard Medical Laboratories, Inc.
John J. Walsh, Esquire Preparer's name and business telephone
LEWIS, WHITE & CLAY, P.C. number:
1300 First National Building
Detroit, Michigan 48226 John J. Walsh, Esquire
(313) 961-2550
<PAGE> 13
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Merger Agreement") is entered into as of
December 23, 1992, by and between Universal Standard Medical Laboratories, Inc.,
a Michigan corporation ("USML"), and LCM/Universal Standard, Inc., a Michigan
corporation ("LCM"), pursuant to Section 711 of the Michigan Business
Corporation Act (the "Act").
W I T N E S S E T H :
WHEREAS, USML is the record and beneficial owner of all of the issued
and outstanding capital stock of LCM, constituting 1000 shares of common stock.
WHEREAS, the parties intend that, subject to the terms and conditions
set forth herein, LCM be merged with and into USML (the "Merger"), with USML
being the surviving corporation, pursuant to a certificate of merger (the
"Certificate of Merger") and the applicable provisions of the laws of the State
of Michigan.
WHEREAS, the Board of Directors of USML has approved the Merger
pursuant to Section 711(1) of the Act.
WHEREAS, approval of the Merger by (i) the shareholders of USML, (ii)
the Board of Directors of LCM, or (iii) the shareholders of LCM, is not required
under Section 711(1) of the Act or the Articles of Incorporation of USML or LCM.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
covenants set forth herein, the parties hereto agree as follows:
Section 1. Merger.
LCM shall be merged with and into USML pursuant to the Certificate of
Merger, attached hereto as Exhibit A and incorporated herein by reference, and
in accordance with the applicable provisions of the laws of the State of
Michigan, on the fourth day of January, 1993.
Section 2. Miscellaneous.
(a) This Merger Agreement constitutes the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements or understandings.
<PAGE> 14
(b) This Merger Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon, and all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Merger
Agreement as of the date first above written.
UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
/s/ Marvin M. Eisner
By: Marvin M. Eisner
Its: President
LCM/UNIVERSAL STANDARD, INC.
/s/ Marvin M. Eisner
By: Marvin M. Eisner
Its: Chairman
<PAGE> 15
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY) Date Received
FILED Dec 28, 1992
JAN 4, 1993
Administrator
MICHIGAN DEPT OF COMMERCE
Corporation & Securities Bureau
CERTIFICATE OF MERGER
FOR USE BY PARENT AND SUBSIDIARY PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporations execute the following Certificate:
1. The Plan of Merger is as follows:
a. The name each constituent corporation and its corporation
identification number (CID) is:
BPS UNIVERSAL STANDARD, INC. 489-642
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC. 301-181
b. The name of the surviving corporation and its corporation
identification number (CID) is:
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC. 301-181
c. For each constituent corporation, state:
<TABLE>
<CAPTION>
Designation and
number of outstanding Indicate class or Indicate class or
shares in each class series of shares series entitled to
Name of corporation or series entitled to vote vote as a class
<S> <C> <C> <C>
BPS Universal 100 Common Common Common
Standard, Inc.
Universal Standard 6,155,721 Common Common
Medical Laboratories, Inc. Common
</TABLE>
If the number of shares is subject to change prior to the effective date of the
merger, the manner in which the change may occur is as follows:
<PAGE> 16
d. The terms and conditions of the proposed merger, including the
manner and basis of converting the shares of each constituent
corporation into shares, bonds, or other securities of the
surviving corporation, or into cash or other consideration,
are as follows:
See attached Agreement of Merger. The merger of BPS Universal
Standard, Inc., a wholly-owned subsidiary of Universal
Standard Medical Laboratories, Inc., with and into Universal
Standard Medical Laboratories, Inc., does not require the
conversion of shares of each constituent corporation.
e. The amendments to the Articles of Incorporation of the
surviving corporation to be effected by the merger are as
follows:
Not applicable.
f. Other provisions with respect to the merger are as follows:
See attached Agreement of Merger.
2. (Complete for any foreign corporation only)
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<CAPTION>
<S><C>
This merger is permitted by the laws of the State of _________________________, the
jurisdiction under which __________________________________________________
(Name of foreign corporation)
</TABLE>
is formed and the plan of merger was adopted and approved by such
corporation pursuant to and in accordance with the laws of that
jurisdiction.
3. The number of outstanding shares of each class of the subsidiary
corporation and the number of shares of each class owned by the parent
corporation is as follows:
Total shares Shares owned by
Class outstanding parent corporation
Common 100 Shares 100 Shares
4. (Delete if not applicable)
5. (Delete if not applicable)
6. (Complete only if an effective date is desired other than the date of
filing)
<PAGE> 17
The merger shall be effective on the 23rd day of December, 1992.
Signed this 23rd day of December, 1992
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
/s/ Marvin M. Eisner
By Marvin M. Eisner, President
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<CAPTION>
<S> <C>
DOCUMENT WILL BE RETURNED TO Name of person or organization remitting fees:
NAME AND MAILING ADDRESS
INDICATED IN THE BOX BELOW. Include Universal Standard Medical Laboratories, Inc.
name, street and number (or P.O. box), city,
state and ZIP code. Preparer's name and business telephone number:
John J. Walsh, Esquire John J. Walsh, Esquire
LEWIS, WHITE & CLAY, P.C. (313) 961-2550
1300 First National Building
Detroit, Michigan 48226
</TABLE>
<PAGE> 18
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Merger Agreement") is entered into as of
December 23, 1992, by and between Universal Standard Medical Laboratories, Inc.,
a Michigan corporation ("USML"), and BPS UNIVERSAL Standard, Inc., a Michigan
corporation ("BPS"), pursuant to Section 711 of the Michigan Business
Corporation Act (the "Act").
W I T N E S S E T H :
WHEREAS, USML is the record and beneficial owner of all of the issued
and outstanding capital stock of BPS, constituting 100 shares of common stock.
WHEREAS, the parties intend that, subject to the terms and conditions
set forth herein, BPS be merged with and into USML (the "Merger"), with USML
being the surviving corporation, pursuant to a certificate of merger (the
"Certificate of Merger") and the applicable provisions of the laws of the State
of Michigan.
WHEREAS, the Board of Directors of USML has approved the Merger
pursuant to Section 711(1) of the Act.
WHEREAS, approval of the Merger by (i) the shareholders of USML, (ii)
the Board of Directors of BPS, or (iii) the shareholders of BPS, is not required
under Section 711(1) of the Act or the Articles of Incorporation of USML or BPS.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
covenants set forth herein, the parties hereto agree as follows:
Section 1. Merger.
BPS shall be merged with and into USML pursuant to the Certificate of
Merger, attached hereto as Exhibit A and incorporated herein by reference, and
in accordance with the applicable provisions of the laws of the State of
Michigan, on the fourth day of January, 1993.
Section 2. Miscellaneous.
(a) This Merger Agreement constitutes the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements or understanding.
(b) This Merger Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon, and all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Merger
Agreement as of the date first above written.
UNIVERSAL STANDARD MEDICAL LABORATORIES,
INC.
/s/ Marvin M. Eisner
By: Marvin M. Eisner
Its: President
BPS UNIVERSAL STANDARD, INC.
/s/ Marvin M. Eisner
By: Marvin M. Eisner
Its: Chairman
<PAGE> 19
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<CAPTION>
<S><C>
MICHIGAN ANNUAL REPORT
DOMESTIC PROFIT CORPORATIONS
C&S 2500 (Rev. 9/94) 0958#8117 0530 P-MAR $15.00
0958#8117 0530 ORGLFI $5.00
IDENTIFICATION NUMBER
301181 1995 FOR BUREAU USE ONLY
REQUIRED BY SECTION 911, PUBLIC ACTS OF 1972, FAILURE TO FILE THIS REPORT MAY RESULT IN THE AUTOMATIC DISSOLUTION OF THE CORPORATION
THIS REPORT MUST BE FILED ON OR BEFORE MAY 15, 1995 If the Resident Agent, Registered Office, or the mailing address of
the Registered Office has changed, enter the corrections below
and add $5.00 to the $15.00 filing fee. Make remittance payable
to the State of Michigan.
1. CORPORATE NAME
Universal Standard Medical Laboratories, Inc.
21705 Evergreen
Southfield, MI 48975 1A. MAILING ADDRESS OF REGISTERED OFFICE IF DIFFERENT THAN 1
2. RESIDENT AGENT 2A. ADDRESS OF REGISTERED OFFICE IF DIFFERENT THAN 3
NO., STREET, CITY, ZIP
Alan Ker
3. REGISTERED OFFICE ADDRESS IN MICHIGAN, 3A. ADDRESS OF REGISTERED OFFICE IF DIFFERENT THAN 3
NO., STREET, CITY, ZIP NO., STREET, CITY, ZIP
21705 Evergreen 26500 Northwestern Hwy., Ste. 400
Southfield, MI 48075 Southfield, MI 48076-3754
The corporation states that the address of its
registered office and the address of the business FOR BUREAU USE ONLY
office of its registered agent are identical. Any -------------------
changes were authorized by resolution duly FILED BY DEPARTMENT JUN 14 '95
adopted by its board of directors.
4. FEDERAL EMPLOYER NUMBER 5. TERM OF EXISTENCE) 6. THE ACT UNDER WHICH 7. INCORPORATION DATE
(IF NOT PERPETUAL) INCORPORATED
38-2986640 284-1972 10/16/90
8. STATE THE NATURE AND TYPE OF BUSINESS IN WHICH THE CORPORATION IS ENGAGED: 9. TOTAL AUTHORIZED SHARES
Medical Laboratory 20,000,000
10. CORPORATE OFFICERS AND DIRECTORS (NAME, STREET ADDRESS, CITY, STATE, ZIP CODE)
See attached
REPORT MUST BE SIGNED IN INK. IF THE MAILING ADDRESS OF THE REGISTERED OFFICE,
RESIDENT AGENT, OR REGISTERED OFFICE IS CHANGED, THIS REPORT MUST BE SIGNED IN
INK BY EITHER THE PRESIDENT, VICE-PRESIDENT, CHAIRPERSON, VICE-CHAIRPERSON,
SECRETARY, OR ASSISTANT SECRETARY OF THE CORPORATION. EXCEPT, IF ONLY THE
REGISTERED OFFICE IS CHANGED, THIS REPORT MAY BE SIGNED BY THE RESIDENT AGENT. I
certify that for a Professional Service Corporation, the corporation meets the
requirements of Act 192, PA of 1962, as amended.
SIGNATURE OF AUTHORIZED OFFICER OR AGENT TITLE DATE
/s/ Alan S. Ker V.P. Finance May 2, 1995
PREPARER'S NAME DAYTIME TELEPHONE NUMBER
Lorraine Goodrich May 25, 1995 (810) 358-0810
GOLD SEAL APPEARS ONLY ON ORIGINAL
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
<S><C>
IDENTIFICATION NUMBER
301181
11. The following is a statement of the assets and liabilities, within and
outside Michigan, as shown by the books of the corporation on December 31,
1994 or __________________ (enter the closing date of the latest corporate
fiscal year prior to May 15, 1995). The balance sheet must be the same as
furnished to the shareholders.
WITHIN OUTSIDE
ASSETS TOTAL MICHIGAN MICHIGAN LIABILITIES AND EQUITY
Cash 543,516 543,516 Notes and Accounts Payable, trade 5,339,433
Notes and Accounts Receivable 14,356,311 14,356,311 Notes and Accounts Payable, Other 7,405,242
Inventories 1,221,460 1,221,460 Accrued Expenses 4,227,167
Prepaid Expenses 2,317,890 2,317,890 Long Term Indebtedness 13,668,602
Noncurrent Notes and
Accounts Receivable & Other 519,282 519,282 Other Long Term 1,218,205
Land
Machinery and Equipment 3,811,087 3,811,087 Reserves and Contingent Liabilities
Furniture and Fixtures 1,495,407 1,495,407 Deferred Income Tax 1,247,895
Buildings
Other 5,939,951 5,939,951 Stockholders Equity
Less Depreciation (3,400,799) (3,400,799) Common Stock 31,464,286
Net Depreciable Assets 7,845,646 7,845,646 Preferred Stock
Investments Additional Paid-In Capital
Investments in Subsidiaries 745,400 745,400 Retained Earnings (deficit) 349,536
Other Investments Other
Other Assets 37,370,861 37,370,861 Total Stockholders Equity 31,813,822
TOTAL ASSETS 64,920,366 64,920,366 TOTAL LIABILITIES & EQUITY 64,920,366
12. PRINCIPAL BUSINESS OFFICE, AND IF DIFFERENT, PRiNCIPAL PLACE OF 12A. NAME OF PARENT CORPORATION:
BUSINESS IN MICHIGAN: N/A
12B. LIST ALL SUBSIDIARY CORPORATIONS:
Universal Standard Managed Care
TPA, Inc.
This report will be open to reasonable inspection pursuant to Section 915, Act
284 of 1972, as amended.
RETURN TO: THE OFFICE IS LOCATED AT:
MICHIGAN DEPARTMENT OF COMMERCE 6546 MERCANTILE WAY
CORPORATION AND SECURITIES BUREAU LANSING, MI 48910
CORPORATION DIVISION (517) 334-6300
P.O. BOX 30057
LANSING, MI 48909-7557
</TABLE>
<PAGE> 21
ARTICLE V: BOARD OF DIRECTORS
-----------------------------
NAME ADDRESS
- - ---- -------
John T. Watkins 21705 Evergreen Road
Southfield, MI 48075
Eduardo Bohorquez 280 Park Avenue, 25th Floor
New York, NY 10017
Anthony A. Bonelli 29 Woodcliff Road
Willesley Hills, MA 02181
Robert P. DeCresce 839 W. Belden Avenue
Chicago, IL 60614
Thomas R. Donahue 280 Park Avenue, 25th Floor
New York, NY 10017
Nicholas Peters 280 Park Avenue, 25th Floor
New York, NY 10017
Joseph J. Vadapalas 280 Park Avenue, 25th Floor
New York, NY 10017
Thomas Gorman 55 Ferncroft Road
Danvers, MA 01923
P. Thomas Hirsch Path Lab
195 Hanover Street
Portsmith, New Hampshire 03801
<PAGE> 22
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY)
Date Received: August 21, 1997
Filed: August 21, 1997
Effective Date: 8/25/97 9:00 a.m.
Administrator
NAME Janice M. Thieleman
ADDRESS Dykema Gossett PLLC, 400 Renaissance Center
CITY Detroit
STATE MI
ZIP CODE 48243-1668
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
(a Michigan corporation)
Pursuant to the provision of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following certificate:
1. The present name of the Corporation is UNIVERSAL STANDARD MEDICAL,
LABORATORIES, INC.
2. The corporation identification number (CID) assigned by the Bureau
is: 301-181.
3. The location of its registered office is: 26500 Northwestern
Highway, Suite 400, Southfield, Michigan 48076-3754.
4. Article I of the Articles of Incorporation is hereby amended to read
as follows:
ARTICLE I
THE PRESENT NAME OF THE CORPORATION IS UNIVERSAL STANDARD HEALTHCARE,
INC.
5. This amendment is to be effective on August 25, 1997 at 9:00 a.m.
<PAGE> 23
The foregoing amendment to the Articles of Incorporation was duly
adopted on the 20th day of June, 1997 by vote of the shareholders in accordance
with Section 611(2) of the Act. The necessary votes were cast in favor of the
Amendment.
Signed this 18th day of August, 1997
By: /s/ Eugene E. Jennings
-------------------------
Its: President
Name of person or organization Preparer's name and business
remitting fees:
Janice M. Thieleman Janice M. Thieleman
Dykema Gossett, PLLC (313) 568-6706
<PAGE> 24
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
UNIVERSAL STANDARD HEALTHCARE, INC.
(a Michigan corporation)
Pursuant to the provision of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following certificate:
1. The present name of the Corporation is UNIVERSAL STANDARD
HEALTHCARE, INC.
2. The corporation identification number (CID) assigned by the
Bureau is: 301-181.
3. The location of its registered office is: 26500 Northwestern
Highway, Suite 400, Southfield, Michigan 48076-3754.
4. Article III of the Articles of Incorporation is hereby amended
and restated to read as set forth on Annex A hereto:
5. Section B of Article VIII of the Articles of Incorporation is
hereby amended and restated to read as set forth on Annex B
hereto.
6. The foregoing amendments to the Articles of Incorporation were
duly adopted on the 29th day of June, 1998 by the shareholders
at a meeting. The necessary votes were cast in favor of the
amendments.
Signed this 20th day of July, 1998.
By: /s/ Alan S. Ker
-------------------------------
(Signature of President, Vice
President, Chairperson or Vice
Chairperson)
Alan S. Ker, CFO
------------------------------
(Type or Print Title)
(Type or Print Name)
Name of person or organization Preparer's name and business
remitting fees: telephone number
Universal Standard Healthcare, Inc. Mark A. Metz
(313) 568-5434
<PAGE> 25
ANNEX A
ARTICLE III
-----------
CAPITAL STOCK
The total authorized shares of stock which the corporation shall have
authority to issue is as set forth below. The shares of stock of the corporation
may be issued from time to time for such consideration as may be fixed from time
to time by the Board of Directors.
COMMON STOCK
The total number of authorized shares of Common Stock (hereinafter
referred to as "Common Stock") which the corporation has authority to issue is
Forty Million (40,000,000) shares. A statement of all or any of the designations
and the powers, preferences and rights, and the qualifications, limitations or
restrictions of the Common Stock is as follows:
1. The holders of Common Stock are entitled to receive such dividends
as may be declared from time to time by the Board of Directors, subject to the
prior and superior rights of any outstanding Preferred Stock of the corporation.
2. In the event of any liquidation, dissolution, or winding up of the
corporation, the holders of Common Stock shall be entitled to receive all of the
remaining assets of the corporation available for distribution, subject to the
prior and superior rights of any outstanding Preferred Stock of the corporation.
3. The holders of Common Stock shall have equal voting and other rights
consistent with the MBCA and each holder of Common Stock is entitled to one (1)
vote for each share so held with respect to all matters voted on by the holders
of the Common Stock of the corporation.
PREFERRED STOCK
The total number of authorized shares of Preferred Stock (hereinafter
referred to as "Preferred Stock") which the corporation has authority to issue
is Ten Million (10,000,000) shares. The Board of Directors of the corporation is
authorized to issue shares of Preferred Stock from time to time in one or more
series of such numbers of shares with such distinctive serial designations and
(a) may have such voting powers, full or limited, or may be without voting
powers; (b) may be subject to redemption at such time or times and at such
prices; (c) may be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions, and at such times and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or series of shares; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the corporation; (e)
may be made convertible into, or exchangeable for, shares of the same or any
other class or classes, or of any other series of the same or any other class or
classes, of shares of the corporation, at such price or prices or at such rates
of exchange, and with such adjustments; and (f) may have such other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, all as shall hereafter be stated and expressed in the
resolution or resolutions providing for the issue of each such series of
Preferred Stock from time to
<PAGE> 26
time adopted by the Board of Directors of the corporation pursuant to authority
so to do which is hereby expressly vested in the Board of Directors. Such
resolutions, when filed, shall constitute an amendment to these Articles of
Incorporation. Notwithstanding the foregoing, no shares of Preferred Stock, may
be issued by the Board of Directors after December 31, 2003, except for shares
of Preferred Stock issued (i) upon the exercise of warrants, options or other
rights to acquire Preferred Stock issued or granted on or prior to December 31,
2003, (ii) pursuant to the terms of Preferred Stock issued on or prior to
December 31, 2003, or (iii) pursuant to the terms of any resolution authorizing
the issuance of Preferred Stock and setting forth the rights, qualifications,
limitations or restrictions thereof, approved by the Board of Directors on or
prior to December 31, 2003. All shares of Preferred Stock issued and outstanding
at December 31, 2003 shall remain issued and outstanding in accordance with the
rights, qualifications, limitations or restrictions of such Preferred Stock
approved by the Board of Directors (as the same may be amended from time to time
in accordance with the terms of such Preferred Stock), provided that the Board
of Directors shall not have the authority to reissue such shares after December
31, 2003 except as set forth above in the prior sentence.
<PAGE> 27
ANNEX B
B. Special meetings of the shareholders of the corporation may be
called by the Board of Directors, such person or persons as may be authorized to
call a special meeting by the corporation's Bylaws, or holders of a majority of
the issued and outstanding shares of the Common Stock. Shares entitled to cast a
majority of the votes at a meeting of shareholders shall constitute a quorum at
such meeting of shareholders. When a quorum is present or represented by proxy
at any meeting, the vote of the holders of a majority of shares entitled to vote
at the meeting present in person or represented by proxy and voting shall decide
any question brought before the meeting, except as otherwise provided by these
Articles of Incorporation, the Bylaws or by law. All proxies, ballots, votes and
tabulations that identify the particular vote of holders of capital stock of the
corporation shall be confidential and shall not be disclosed except (i) to
independent election inspectors appointed by the corporation, who shall not be
directors, officers, or employees of the corporation, (ii) as required by law,
or (iii) when expressly requested by the voting shareholder.
<PAGE> 1
EXHIBIT 4.1
NBD Bank
28660 Northwestern Highway
Southfield, Michigan 48034
Telephone: (248) 799-5817
Fax: (248) 799-5826
Robert B. Green
First Vice President
October 8, 1998
Mr. Alan S. Ker
Vice President Finance and Treasurer
Universal Standard Healthcare, Inc.
26500 Northwestern Highway
4th Floor
Southfield, Michigan 48034-3754
Dear Al:
Enclosed please find the Master Demand Business Loan Note in the amount of
$2,000,000.00 which requires your signature. An amendment to the Revolving
Credit and Loan Agreement dated April 30, 1997, as amended (the "Credit
Agreement"), will be drafted next week to incorporate this new facility. In
brief, availability under this facility will be 1) the lesser of $2,000,000 or
the Borrowing Base (defined initially as the sum of 40% of total net accounts
receivable plus 80% of the appraised forced liquidation value of Universal
Standard Healthcare, Inc. equipment in which NBD Bank has a perfected first
security interest) reduced by the outstanding standby letter of credit in the
amount of $1,016,343.32. The advance rate for net accounts receivable is
reducing as follows: 40% during the months of October, November and December,
1998; 30% during the months of January and February, 1999 and 25% during the
month of March, 1999. Expiration of this facility is March 31, 1999 unless
earlier withdrawn by NBD Bank. All advances under this facility are at the sole
discretion of NBD Bank.
The preceding description of the $2,000,000 facility is provided as an outline
of certain terms of this facility so as to allow for your immediate borrowing
availability today. Complete terms and conditions will be contained in the
previously mentioned amendment which is expected to be completed next week. All
other terms and conditions of the Credit Agreement and related Loan Documents
shall continue in full force and effect. Capitalized terms used but not defined
in this letter shall have the same meanings attributed to them in the Credit
Agreement.
If the foregoing is acceptable, please sign, date and return the original copy
of this letter along with the Master Demand Business Loan Note to my attention.
Along with these items, please remit checks in the amount of 1) $5,000 which
represents a facility fee for set up of this loan and 2) $8,717.92 which
represents the past due amount of the fee owing on the unused portion of the
previous $9,500,000 facility (billing statement attached).
Contact me directly with any questions.
Sincerely,
<PAGE> 2
By: /S/ Robert B. Greene
----------------------------
Robert B. Greene
Its: First Vice President
Accepted and agreed to this 8th day of October, 1998.
UNIVERSAL STANDARD HEALTHCARE, INC.
By: /S/ Alan S. Ker
-----------------------------
Alan S. Ker, Vice President Finance and Treasurer
UNIVERSAL STANDARD HEALTHCARE OF MICHIGAN, INC.
By: /S/ Alan S. Ker
---------------------------
Alan S. Ker, Treasurer
UNIVERSAL STANDARD HEALTHCARE OF OHIO, INC.
By: /S/ Alan S. Ker
--------------------------
Alan S. Ker, Treasurer
UNIVERSAL STANDARD HEALTHCARE OF DELAWARE, INC.
By: /S/ Alan S. Ker
-------------------------
Alan S. Ker, Treasurer
A/R CREDIT, INC.
By: /S/ Alan S. Ker
--------------------------
Alan S. Ker, Treasurer
T.P.A., INC.
By: /S/ Alan S. Ker
----------------------------
Alan S. Ker, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000889187
<NAME> UNIVERSAL STANDARD HEALTHCARE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1,000
<CASH> 1,809
<SECURITIES> 0
<RECEIVABLES> 614
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,826
<PP&E> 14,737
<DEPRECIATION> 7,658
<TOTAL-ASSETS> 22,725
<CURRENT-LIABILITIES> 5,822
<BONDS> 12,554
0
0
<COMMON> 38,497
<OTHER-SE> (34,148)
<TOTAL-LIABILITY-AND-EQUITY> 22,725
<SALES> 20,133
<TOTAL-REVENUES> 20,133
<CGS> 14,832
<TOTAL-COSTS> 14,832
<OTHER-EXPENSES> 4,459
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 764
<INCOME-PRETAX> 136
<INCOME-TAX> 0
<INCOME-CONTINUING> 136
<DISCONTINUED> 7,197
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,061)
<EPS-PRIMARY> (0.82)
<EPS-DILUTED> (0.82)
</TABLE>
