UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported): May 10, 1999
Unilab Corporation ("Unilab")
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
33-77286 95-4415490
(Commission File Number) (I.R.S. Employer
Identification Number)
18448 Oxnard Street, Tarzana, California 91356
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 996-7300
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or disposition of Assets
(a) Acquisition
Pursuant to an Asset Purchase Agreement, dated as of April 5,
1999 (the "Asset Purchase Agreement"), by and between Physicians Clinical
Laboratory, Inc. d/b/a Bio-Cypher Laboratories, a Delaware corporation ("BCL")
and Unilab Corporation, a Delaware corporation ("Unilab" or the "Company"),
effective May 10, 1999, the Company has acquired substantially all of the assets
of BCL (the "BCL Acquisition"). The purchase price for the BCL Acquisition
consisted of one million shares of Unilab common stock (the "Share Issuance"),
approximately $8.5 million cash, and a $25 million Note (the "Note"). The Note
bears a 7.5% interest rate, and has $10 million annual principal payments. In
addition to the customer list, Unilab acquired approximately $12 million of
assets, the majority of which are trade accounts receivable, and assumed
liabilities of approximately $4 million. In connection with the Closing, BCL
repaid its trade receivables financing facility and delivered its receivables
free and clear.
The shares of Unilab common issued or issuable in the BCL
Acquisition are subject to a Registration Rights Agreement, dated the Closing
Date. Certain funds affiliated with Oaktree Capital Management, Inc., which
owned a majority of the outstanding debt and equity of BCL, have guaranteed
certain obligations of BCL under the Asset Purchase Agreement (the "Oaktree
Guaranty").
The Asset Purchase Agreement is attached as Exhibit 2.1, the
Note is attached as Exhibit 2.2, the Registration Rights Agreement is attached
as Exhibit 2.3 and the Oaktree Guaranty is attached as Exhibit 2.4. Each such
agreement is incorporated by reference in its entirety herein and the
description of each such Agreement contained herein is qualified in its entirety
by reference to such agreement.
(a) Source of Funds
The consideration for the BCL Acquisition consisted of (i) the
Share Issuance, (ii) approximately $8.5 million in cash, from cash on hand and
(iii) the Note, plus the incurrence of certain monthly payments to the United
States owed by BCL and assumed by Unilab. Unilab intends to make these monthly
payments from cash on hand. Unilab believes its cash flows will be sufficient to
make such payments on a timely basis.
(b) Equipment or Other Physical Property
Certain of the assets of BCL acquired by the Company
constitute equipment or other physical property. Such assets were used by
BCL in conjunction with its clinical laboratory testing business. The
Company intends to continue substantially the same use for such acquired assets.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(c) Exhibits.
2.1 Asset Purchase Agreement
2.2 Note
2.3 Registration Rights Agreement
2.4 Oaktree Guaranty
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act 1934,
Unilab Corporation has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 1999 UNILAB CORPORATION
By: /s/ Mark L. Bibi
Name: Mark L. Bibi
Title: Executive Vice President,
Secretary and General Counsel
<PAGE>
INDEX OF EXHIBITS
Exhibits Page
Asset Purchase Agreement 2.1
Convertible Note 2.2
Registration Rights Agreement 2.3
Oaktree Guaranty 2.4
ASSET PURCHASE AGREEMENT
dated as of
April 5, 1999
between
UNILAB CORPORATION
and
PHYSICIANS CLINICAL LABORATORY, INC.
D/B/A BIO-CYPHER LABORATORIES
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS
SECTION1.01. Definitions.....................................................1
ARTICLE 2 PURCHASE AND SALE
SECTION2.01. Purchase and Sale...............................................7
SECTION2.02. Excluded Assets.................................................9
SECTION2.03. Assumed Liabilities............................................10
SECTION2.04. Excluded Liabilities...........................................11
SECTION2.05. Assignment of Contracts and Rights.............................13
SECTION2.06. Purchase Price; Allocation of Purchase Price...................14
SECTION2.07. Closing........................................................15
SECTION2.08. Purchase Price Adjustment.......................................15
SECTION2.09. Remittance Obligation..........................................15
SECTION2.10. Prorations and Reimbursements; Security and Utility Deposits...15
SECTION2.11. Patient Refunds................................................16
SECTION2.12. Second Cash Payment............................................17
SECTION2.13. Adjustment Disputes............................................17
SECTION2.14. Transition Leases..............................................17
SECTION2.15. Payments in Cash...............................................18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION3.01. Corporate Existence and Power..................................18
SECTION3.02. Corporate Authorization........................................18
SECTION3.03. Governmental Authorization.....................................19
SECTION3.04. Noncontravention...............................................19
SECTION3.05. Material Consents..............................................19
SECTION3.06. Financial Statements...........................................19
SECTION3.07. Absence of Certain Changes.....................................20
SECTION3.08. No Undisclosed Material Liabilities............................21
SECTION3.09. Material Contracts.............................................22
SECTION3.10. Litigation.....................................................23
SECTION3.11. Compliance with Laws and Court Orders..........................23
SECTION3.12. Properties.....................................................23
SECTION3.13. Sufficiency of and Title to the Purchased Assets...............24
SECTION3.14. Intellectual Property..........................................25
SECTION3.15. Insurance Coverage.............................................25
SECTION3.16. Permits........................................................26
SECTION3.17. Receivables....................................................26
SECTION3.18. Selling Documents..............................................26
SECTION3.19. Finders'Fees...................................................26
SECTION3.20. Employees......................................................27
SECTION3.21. Environmental Compliance.......................................27
SECTION3.22. Investment Representations.....................................28
SECTION3.23. Subsidiary.....................................................30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION4.01. Corporate Existence and Power..................................31
SECTION4.02. Corporate Authorization........................................31
SECTION4.03. Governmental Authorization.....................................31
SECTION4.04. Noncontravention...............................................32
SECTION4.05. Consents.......................................................32
SECTION4.06. Financing......................................................32
SECTION4.07. Litigation.....................................................32
SECTION4.08. Finders'Fees...................................................32
SECTION4.09. Issuance of Consideration Shares and Consideration Note........32
SECTION4.10. SEC Documents; Financial Statements; Disclosures...............33
SECTION4.11. No Integrated Offering.........................................34
SECTION4.12. Capitalization.................................................34
SECTION4.13. Absence of Certain Changes.....................................34
SECTION4.14. Title..........................................................34
SECTION4.15. Insurance......................................................35
SECTION4.16. Permits........................................................35
SECTION4.17. Compliance with Laws and Court Orders..........................35
SECTION4.18. Patient Refund Policy..........................................35
ARTICLE 5 COVENANTS OF SELLER
SECTION5.01. Conduct of the Business........................................35
SECTION5.02. Access to Information; Confidentiality.........................36
SECTION5.03. Permits........................................................37
SECTION5.04. Notices of Certain Events......................................37
SECTION5.05. No Shopping or Disclosure......................................37
SECTION5.06. Tail Insurance.................................................38
SECTION5.07. Customer List..................................................38
SECTION5.08. Audited Financial Statements...................................38
SECTION5.09. HSR Act........................................................39
SECTION5.10. Patient Refund Policy..........................................39
SECTION5.11. Resignations....................................................39
ARTICLE 6 COVENANTS OF BUYER
SECTION6.01. Representations and Warranties.................................39
SECTION6.02. Confidentiality................................................40
SECTION6.03. Access.........................................................40
SECTION6.04. Reservation of Shares..........................................40
SECTION6.05. Financial Information..........................................40
SECTION6.06. HSR Act........................................................41
SECTION6.07. Notices of Certain Events......................................41
SECTION6.08. American Stock Exchange........................................41
ARTICLE 7 COVENANTS OF SELLER AND BUYER
SECTION7.01. Efforts; Further Assurances....................................42
SECTION7.02. Certain Filings................................................43
SECTION7.03. Public Announcements...........................................43
SECTION7.04. No Solicitation of Employees...................................43
SECTION7.05. No Solicitation of Customers...................................44
SECTION7.06. Provider Numbers...............................................44
SECTION7.07. Phlebotomy Locations...........................................44
ARTICLE 8 TAX MATTERS
SECTION8.01. Tax Definitions................................................44
SECTION8.02. Tax Matters....................................................45
SECTION8.03. Tax Cooperation; Allocation of Taxes...........................45
ARTICLE 9 EMPLOYEE BENEFITS
SECTION9.01. Employee Benefits Definitions..................................47
SECTION9.02. ERISA Representations..........................................47
SECTION9.03. Employees and Offers of Employment.............................48
SECTION9.04. Seller's Employee Benefit Plans................................49
ARTICLE 10 CONDITIONS TO CLOSING
SECTION10.01. Conditions to Obligations of Buyer and Seller.................50
SECTION10.02. Conditions to Obligation of Buyer.............................50
SECTION10.03. Conditions to Obligation of Seller............................52
ARTICLE 11 SURVIVAL; INDEMNIFICATION
SECTION11.01. Survival......................................................53
SECTION11.02. Indemnification...............................................54
SECTION11.03. Procedures....................................................54
SECTION11.04. Limitations...................................................55
ARTICLE 12 TERMINATION
SECTION12.01. Grounds for Termination......................................56
SECTION12.02. Effect of Termination........................................56
ARTICLE 13 MISCELLANEOUS
SECTION13.01. Notices......................................................57
SECTION13.02. Amendments and Waivers.......................................58
SECTION13.03. Expenses.....................................................59
SECTION13.04. Successors and Assigns.......................................59
SECTION13.05. Governing Law................................................59
SECTION13.06. Jurisdiction.................................................59
SECTION13.07. WAIVER OF JURY TRIAL.........................................59
SECTION13.08. Counterparts; Third Party Beneficiaries......................60
SECTION13.09. Entire Agreement.............................................60
SECTION13.10. Bulk Sales Laws..............................................60
SECTION13.11. Captions.....................................................60
SECTION13.12. Schedules and Exhibits.......................................60
<PAGE>
EXHIBITS
Exhibit A Note
Exhibit B Oaktree Guaranty
Exhibit C Registration Rights Agreement
SCHEDULES
Schedule 1.01 Oaktree Funds
Schedule 2.01(j) Transferred Permits
Schedule 2.02(h) Excluded Contracts
Schedule 2.02(i) Excluded Real Property
Schedule 2.02(j) Excluded Personal Property
Schedule 2.02(k) Autos
Schedule 2.08 Purchase Price Adjustments
Schedule 2.11 Patient Refund Policy of Buyer
Schedule 2.14 Transition Leases
Schedule 3.05 Material Consents
Schedule 3.07 Seller Changes Since Balance Sheet Date
Schedule 3.08(a) Undisclosed Liabilities
Schedule 3.08(b) Settlement Agreement Payments
Schedule 3.09(a) Material Contracts
Schedule 3.09(b) Exceptions to Contracts
Schedule 3.09(c) Capitated Managed Care Contracts
Schedule 3.10 Litigation
Schedule 3.11 Legal Violations and Investigations of Seller
Schedule 3.12(a) Real Property
Schedule 3.12(b) Personal Property
Schedule 3.12(e) Exceptions to Leases
Schedule 3.12(g)(iii) Purchase Money Security Interests
Schedule 3.12(g)(v) Non-Permitted Liens
Schedule 3.14 Intellectual Property Rights
Schedule 3.15 Insurance
Schedule 3.16 Permits
Schedule 3.17 Receivables
Schedule 3.20(a) Employees
Schedule 3.20(b) Employee Resignations or Retirement
Schedule 3.21 Environmental Matters
Schedule 3.23 Liens on Subsidiary Shares
Schedule 4.05 Buyer Consents
Schedule 4.10 Buyer SEC Reports
Schedule 4.12 Capitalization of Buyer
<PAGE>
Schedule 4.13 Buyer Changes
Schedule 4.14 Buyer Exceptions to Title
Schedule 4.17 Legal Violations and Investigations of Buyer
Schedule 7.07 Phlebotomy Locations
Schedule 8.02 Taxes
Schedule 9.02(a) Employee Benefit Plans
Schedule 9.02(c) Other Employee Benefits
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT dated as of April 5, 1999 by and between Unilab Corporation,
a Delaware corporation ("Buyer") and PHYSICIANS CLINICAL LABORATORY, INC., a
Delaware corporation doing business as BIO-CYPHER LABORATORIES ("Seller").
W I T N E S S E T H :
WHEREAS, Seller conducts a business of providing clinical laboratory
testing services (the "Business");
WHEREAS, Bio-Cypher Funding Corp., a Delaware corporation and
wholly-owned subsidiary of Seller ("Subsidiary") purchases accounts receivable
from Seller;
WHEREAS, prior to or concurrently with the closing of this transaction
Subsidiary will merge with and into Seller;
WHEREAS, the parties have agreed that on the Closing Date all
outstanding loans made pursuant to, and all other amounts payable under, the
Daiwa Loan Agreements (as defined herein) will be paid by Seller;
WHEREAS, Buyer desires to purchase substantially all of the assets of
Seller, including all of the assets that were owned by Subsidiary immediately
prior to the merger into Seller, to the extent transferable and Seller desires
to sell such assets to Buyer, and in connection therewith Buyer is willing to
assume certain liabilities of Seller relating to the Business, all upon the
terms and subject to the conditions hereinafter set forth;
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions.
(a) The following terms, as used in this Agreement, have the following
meanings:
"Active Employees" means, at any time, all employees of Seller who are
not on leave at such time pursuant to the terms of one of Seller's disability
plans.
<PAGE>
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such other Person.
"Balance Sheet" means the unaudited consolidated balance sheet of
Seller and Subsidiary as of the Balance Sheet Date.
"Balance Sheet Date" means November 30, 1998.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Buyer Material Adverse Effect" means a material and adverse effect on
(i) Buyer's ability to consummate the transactions contemplated by this
Agreement, (ii) Buyer's ability to perform any of its other obligations under
this Agreement, the Registration Rights Agreement, the Notes or the Oaktree
Guaranty or (iii) the business, financial condition, assets or results of
operations of Buyer prior to the Closing Date.
"Buyer Non-Disclosure Agreement" means the Non-Disclosure Agreement
dated March 17, 1999 among Buyer, Seller and Oaktree.
"Cash Amount" means (i) $10,575,000,
(ii) minus the sum of the amount of Payroll Liabilities (as estimated
in good faith by Buyer and Seller for purposes of the Closing) and $500,000,
(iii) either (A) minus the amount by which the aggregate remaining
payment obligations of Seller under the Settlement Agreement as of the Closing
Date, as set forth on Schedule 3.08(b), exceed $1,425,000 or (B) plus the amount
by which such payment obligations are less than $1,425,000,
(iv) minus the sum of the Purchase Price Adjustments.
"Closing Date" means the date of the Closing.
"Common Stock" means the common stock, par value $.01 per share, of Buyer.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of all or a portion of any Note.
<PAGE>
"Daiwa Loan Agreements" means (i) the Loan and Security Agreement dated
as of September 30, 1997, as amended, between Subsidiary and Daiwa Healthco-2
LLC, (ii) the Depository Agreement dated as of September 30, 1997, among Seller,
Subsidiary, Daiwa Healthco-2 LLC, and Union Bank of California, N.A. and (iii)
the Assignment of Healthcare Receivables Purchase and Transfer Agreement as
Collateral Security.
"Employee Liabilities" means any payments, liabilities costs, expenses,
claims, obligations or commitments for wages or compensation, and payments or
liabilities relating to or arising under severance, bonus, retirement, pension,
insurance, medical, disability, profit-sharing or deferred compensation plans or
agreements, employee vacation or health benefits, paid time off, state and
federal civil rights or employment laws, including, without limitation, the Age
Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of
1964, and the Americans with Disability Act of 1991, any employee pension,
benefit or welfare plan, as defined in ERISA, or any other severance, bonus,
stock option, stock appreciation, stock purchase, retirement, insurance,
pension, profit-sharing, deferred compensation or other similar plan, agreement
or arrangement, including without limitation the Benefit Arrangements and
Employee Plans.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, permit, governmental
restriction, regulation, rule, judicial decision, judgment, order, decree or
injunction, or any agreement between Seller or Subsidiary on the one hand and a
Governmental Authority and/or other third party on the other hand, whether now
or hereafter in effect, relating to the environment, human health and safety or
to Hazardous Substances.
"Environmental Liabilities" means any and all liabilities arising in
connection with or in any way relating to Seller or Subsidiary (or any
predecessor of Seller or Subsidiary or any prior owner of all or part of its
business and assets), any property now or previously owned, leased or operated
by Seller or Subsidiary, the Business (as currently or previously conducted),
the Purchased Assets or any activities or operations occurring or conducted at
the Real Property (including, without limitation, offsite disposal), whether
accrued, contingent, absolute, determined, determinable or otherwise, that (i)
arise under or result from any Environmental Law and (ii) result from actions
occurring or conditions existing on or prior to the Closing Date (including,
without limitation, any matter disclosed or required to be disclosed in Schedule
3.21).
"Governmental Authority" means any court, any governmental body,
department, agency of instrumentality, or any other regulatory or administrative
agency or commission, domestic or foreign.
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable corrosive, reactive or otherwise
hazardous substance, waste or material or any substance, waste or material
having any constituent elements displaying any of the foregoing characteristics
including, without limitation, petroleum, its derivatives, by-products and other
hydrocarbons, and any other substance, waste or material regulated under any
Environmental Law.
<PAGE>
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Note" means the Consideration Note substantially in the form of
Exhibit A hereto, and each other Note of Buyer issuable in respect of interest
on any Note in accordance with the terms thereof.
"Nu-Tech" means United Diagnostic, Inc., a Delaware corporation
formerly named Nu-Tech Bio-Med, Inc.
"Oaktree" means the funds and accounts set forth on Schedule 1.01
hereto managed by Oaktree Capital Management, LLC.
"Oaktree Guaranty" means the Guaranty dated as of the Closing Date
between Oaktree and Buyer, substantially in the form of Exhibit B hereto.
"Patient Refunds" means monies owed by Seller to patients as a result
of Seller having been paid prior to the Closing Date more than it was entitled
to receive for the services provided by Seller, including without limitation,
payments received for a specific encounter from both the patient and the
patient's insurance company, and payments made incorrectly by a patient on
multiple invoices for the same encounter.
"Permits" means any licenses, permits, approvals, franchises,
authorizations, variances, waivers or consents from a Governmental Authority.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Real Property" means the real property leased or subleased by Seller
pursuant to the Leases.
<PAGE>
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date between Buyer and Seller, substantially in the form
of Exhibit C hereto.
"Representatives" means, with respect to any Person, the officers,
directors, employees, representatives, accountants, counsel, consultants,
advisors and agents of such Person.
"Restricted Receivables" means all accounts, notes, receivables and
other indebtedness owed to Seller by any Governmental Authority pursuant to the
Medicare, Medicaid or CHAMPUS programs, or any other receivables the assignment,
transfer or sale of which is prohibited by statute or regulation.
"Second Cash Payment Amount" means $500,000, (i) minus the amount by
which the actual Payroll Liabilities (as determined by Buyer and Seller in good
faith 60 days after the Closing) exceeds the amount of Payroll Liabilities as
were estimated as of the Closing Date for purposes of calculating the Cash
Amount, or (ii) plus the amount by which the actual Payroll Liabilities (as
determined by Buyer and Seller in good faith 60 days after the Closing) are less
than the amount of Payroll Liabilities as were estimated as of the Closing Date.
"Securities" means the Consideration Shares, the Notes and the
Conversion Shares.
"Seller Material Adverse Effect" means a material and adverse effect on
(i) the ability of Seller, Subsidiary or any Shareholder to consummate the
transactions contemplated by this Agreement or Oaktree's ability to perform its
obligations under the Oaktree Guaranty, (ii) Seller's ability to use or own the
Purchased Assets, taken as a whole, prior to the Closing Date or (iii) the
business, financial condition, assets or results of operations of Seller and
Subsidiary, taken as a whole, prior to the Closing Date.
"Seller Non-Disclosure Agreement" means the Non-Disclosure Agreement
dated November 5, 1998 between Seller and Buyer.
"Shareholders" means any shareholders of Seller from the date hereof
until the Closing Date, including without limitation Oaktree and Nu-Tech.
"Shareholder Contracts" means all contracts, agreements, leases,
licenses, commitments, sales and purchase orders and other arrangements between
and among Seller or Subsidiary and any Shareholder or any of their respective
Affiliates.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<PAGE>
Term Section
Acquisition Transaction 5.05
Allocation Statement 2.06(b)
Antitrust Division 5.09
Apportioned Obligations 8.03(b)
Assignment and Assumption Agreement 2.07(b)
Assumed Liabilities 2.03
Auto 2.14(b)
Auto Lease 2.14(b)
Benefit Arrangements 9.02(d)
Business Recitals
Buyer DC Plans 9.04(b)(ii)
Claim 11.03
Closing 2.07
Code 8.01
Consideration Note 2.06(a)
Consideration Shares 2.06(a)
Contracts 2.01(d)
Corporate Integrity Agreement 2.04(i)
Customers 2.01(l)
Customer List 2.01(l)
Damages 11.02(a)
Employee Plans 9.02(a)
ERISA 9.01
ERISA Affiliate 9.01
Excluded Assets 2.02
Excluded Liabilities 2.04
FTC 5.09
Indemnified Party 11.01
Indemnifying Party 11.01
Intellectual Property Rights 2.01(i)
Leases 2.01(b)
Material Consents 3.05
Material Contracts 3.09(a)
Multiemployer Plan 9.01
OIG 2.04(i)
Payoff Letter 10.02(i)
Payroll Liabilities 2.03(e)
PBGC 9.01
Permitted Liens 3.12(g)(iv)
Petty Cash 2.01(g)
Post-Closing Tax Period 8.03(b)
Pre-Closing Tax Period 8.01
Prepaid Expenses 2.01(f)
Purchased Assets 2.01
Purchase Price 2.06(a)
Purchase Price Adjustment 2.08
Refund Adjustment 2.11(c)
Refund Adjustment Date 2.11(c)
Records 2.01(k)
Rule 144 3.22(d)
Seller Savings Plans 9.04(b)
SEC Documents 4.10
Second Cash Payment Statement 2.12
Settlement Agreement 2.03(f)
Subsidiary Recitals
Subsidiary Securities 3.23(b)
Tax 8.01
Taxing Authority 8.01
Transfer Taxes 8.03(c)
Transferred Employees 9.03(b)
Transferred Permits 2.01(j)
Transition Lease 2.14
Trustee 3.23(b)
Underground Storage Tank 3.21(a)
WARN Act 2.03(g)
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale. Except as otherwise provided below,
upon the terms and subject to the conditions of this Agreement and subject to
Section 2.05, Buyer agrees to purchase from Seller and Seller agrees to sell,
convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered to Buyer at the Closing, free and clear of
all Liens, other than Permitted Liens, all of Seller's right, title and interest
in, to and under the assets, properties and business, of every kind and
description, wherever located, real, personal or mixed, tangible or intangible,
owned, held or used by Seller (including those by way of merger with Subsidiary)
as the same shall exist on the Closing Date (the "Purchased Assets"), including
without limitation, all right, title and interest of Seller in, to and under:
<PAGE>
(a those leases and subleases of, and other interests in,
real property used or held for use in the conduct of the Business, in
each case together with Seller's interest in any fixtures, leasehold
and other improvements thereon, which are listed on Schedule 3.12(a)
and not listed on Schedule 2.02(i);
(b those leases and subleases of personal property which are
listed on Schedule 3.12(b) and not listed on Schedule 2.02(j) (together
with the leases and subleases included as Purchased Assets pursuant to
Section 2.01(a), the "Leases"), and any other interests in personal
property, including machinery, equipment, furniture, office equipment,
communications equipment, vehicles, storage tanks, spare and
replacement parts, fuel and other tangible property, which are listed
on Schedule 3.12(b) and not listed on Schedule 2.02(j);
(c all raw materials, work-in-process, finished goods,
supplies and other inventories;
(d all rights under and interests in all contracts,
agreements, licenses, commitments, sales and purchase orders,
instruments and clinical testing orders, including without limitation
the Material Contracts (but excluding the Leases and the items
described in Section 2.02(b) or Section 2.02(g) or listed on Schedule
2.02(h)) (collectively, the "Contracts");
(e all accounts, notes and other receivables and any
indebtedness owed to Seller and any security or other collateral
relating thereto and all proceeds thereof, excluding Restricted
Receivables but including any proceeds of Restricted Receivables;
(f except to the extent Seller is entitled to receive or
retain any such amount pursuant to Section 2.10, all rights arising
from advance payments, prepaid expenses, prepaid rents, surety
accounts, security and other deposits and credits (including without
limitation, deposits and credits with landlords, utilities and
suppliers) (collectively, the "Prepaid Expenses")
(g all petty cash located at the operating facilities of
the Business ("Petty Cash");
(h all rights, claims, credits, causes of action or rights of
set-off against third parties relating to the Purchased Assets,
including, without limitation, unliquidated rights under manufacturers'
and vendors warranties, except to the extent such rights, claims,
credits, causes of action or rights of set-off relate to liabilities,
obligations and commitments that are included within the Excluded
Liabilities;
<PAGE>
(i all patents, copyrights, trademarks, trade names, mask
works, servicemarks, service names, technology, know-how, processes,
trade secrets, inventions, proprietary data, licenses from a third
party other than a Governmental Authority, formulae, research and
development data, computer software programs and other intangible
property and any applications for the same, in each case used or held
for use in the Business ("Intellectual Property Rights"), including
without limitation the items listed on Schedule 3.14;
(j to the extent transferable, the Permits that are listed
on Schedule 2.01(j) (the "Transferred Permits");
(k except as set forth in Section 2.02(e), all books,
records, files and papers, whether in hard copy or computer format,
used in the Business, including, without limitation, all medical care
records (including, without limitation, PAP records and slides and
chain of custody records), sales literature, manuals and data,
correspondence, lists of present and former suppliers, invoices,
personnel and employment records, and any information relating to any
Tax imposed on the Purchased Assets ("Records");
(l to the extent included in Records as they exist on the
date hereof, without additional compilation or formatting, a list of
all Persons to whom or to which Seller has provided clinical testing
services at any time on or prior to the Closing Date (individually, a
"Customer" and collectively, the "Customers"), along with related
information as to the date, unit and dollar volume of such sales, the
type of service furnished and other relevant marketing and product
information for each Customer (the "Customer List");
(m all policy rights and proceeds payable under any
insurance policy covering the Purchased Assets, except to the extent
such rights and proceeds reimburse Seller with respect to property that
Seller has repaired or replaced prior to the Closing Date;
(n all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that
Buyer is the successor to the Business;
(o to the extent transferable, all rights and any associated
value derived from or associated with the work force of the Business,
and the business skill and expertise of such work force as of the
Closing Date; and
(p the lockbox arrangements in connection with the Daiwa
Loan Agreements.
<PAGE>
SECTION 2.2. Excluded Assets. Buyer expressly understands and agrees
that the following assets and properties of Seller (the "Excluded Assets")
shall be excluded from the Purchased Assets:
(a except as expressly included in the Purchased Assets
pursuant to Section 2.01(d), (e), (f), (g), (h) or (m), all cash on
hand or on deposit, certificates of deposit, time deposits, commercial
paper, treasury bills, notes and other securities or similar items,
including without limitation any such deposits that are security or
collateral for Seller's obligations to third parties;
(b all Shareholder Contracts;
(c all funds arising from any Prepaid Expense to the
extent that Seller is entitled to receive or retain any
such amount pursuant to Section 2.10;
(d Seller's Medicare provider numbers and any other
Permits that are not transferable as a matter of law;
(e Seller's and Subsidiary's corporate minute books and
stock transfer books and other books and records relating solely to the
Excluded Assets;
(f all net operating losses and other tax attributes of
Seller.
(g all contracts, agreements, licenses, commitments, sales
and purchase orders and clinical testing orders that would be Material
Contracts but for the fact that they are not listed in Schedule
3.09(a), unless Buyer gives notice under Section 7.01(d);
(h all contracts, agreements, licenses, commitments,
sales and purchase orders and clinical testing orders that
are listed in Schedule 2.02(h);
(i all leases and subleases of real property that are
listed in Schedule 2.02(i);
(j all leases and subleases of personal property that
are listed in Schedule 2.02(j);
(k the automobiles listed in Schedule 2.02(k); and
(l all Permits that are not listed in Schedule 2.01(j).
<PAGE>
SECTION 2.3. Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees, effective at the time of the
Closing, to assume the following, and only the following, liabilities,
obligations and commitments of Seller subject, in each case to any and all
claims, defenses, offsets and rights of recoupment of Seller (the "Assumed
Liabilities"):
(a the liabilities, obligations and commitments of Seller
under the Leases and Contracts acquired by or assigned to Buyer
pursuant to Section 2.01(a), (b) or (d) to the extent arising on or
after the Closing Date;
(b the liabilities, obligations and commitments of Seller
under the licenses and other Intellectual Property Rights acquired by
or assigned to Buyer pursuant to Section 2.01(i) to the extent arising
on or after the Closing Date;
(c the liabilities, obligations and commitments of Seller
with respect to the repair or replacement (due to events occurring
prior to the Closing Date) of Purchased Assets as to which Buyer is
entitled to insurance proceeds under Section 2.01(m);
(d the liabilities, obligations and commitments of Seller
for the period from and after the Closing Date under
the Transferred Permits;
(e the liabilities of Seller accrued but unpaid as of the
Closing Date for wage income for the current normal pay period, and for
vacation, sick payments, severance or other paid time off only, due to
or with respect to any individual who, as of the Closing Date, is an
Active Employee, in respect of their employment with Seller prior to
the Closing Date (collectively, "Payroll Liabilities");
(f the payment obligations of Seller to the United States of
America or any department, agency or instrumentality thereof under the
Settlement Agreement dated August 29, 1997, by and among Seller, the
United States Department of Justice, the United States Department of
Health and Human Services and various other governmental organizations
and Persons ("Settlement Agreement"); and
(g the liabilities under the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act"), with respect to any
individuals who are Active Employees of Seller on or after the earlier
of (i) the date of this Agreement or (ii) the date which is sixty (60)
days prior to the Closing.
<PAGE>
SECTION 2.4. Excluded Liabilities. Notwithstanding any provision in
this Agreement or any other writing to the contrary, Buyer is assuming only the
Assumed Liabilities and is not assuming any other liability, cost, expense,
claim, obligation or commitment of Seller (or any predecessor of Seller or any
prior owner of all or part of its businesses and assets) of whatever nature,
whether presently in existence or arising hereafter (all such liabilities and
obligations not being assumed being herein referred to as the "Excluded
Liabilities"), and, notwithstanding anything to the contrary in this Section
2.04, none of the following shall be Assumed Liabilities for the purposes of
this Agreement:
(a any liability, cost, expense, claim, obligation or
commitment of Seller relating to or based on events or conditions
occurring or existing prior to the Closing Date, whether or not in
connection with, or arising out of, the Business as operated by Seller,
or the ownership, possession or use of the Purchased Assets by Seller,
other than as expressly specified in Sections 2.03(c), (e), (f), (g) or
(h);
(b except as expressly specified in Sections 2.03(e) or (g),
any Employee Liabilities in respect of employees of Seller arising on
or prior to the Closing Date or with respect to any employee of Seller
who is not a Transferred Employee, or arising in respect of Seller's
failure to employ or continue to employ any employees;
(c any liability, cost, expense, claim, obligation or
commitment with respect to any indebtedness, accounts payable or other
liabilities of Seller or Subsidiary (other than as specifically
provided in Section 2.03), including without limitation any Seller's
obligations in respect of (i) the 15% Senior Secured Notes due 2004 of
Seller, (ii) the Senior Secured Notes due 2004 of Seller, (iii) any
other indebtedness to Oaktree or any other Shareholder and (iv) the
Daiwa Loan Agreements, each as may have been amended;
(d any liability, cost, expense, claim, obligation or
commitment relating to any litigation, legal proceeding or governmental
investigation or regulatory investigation pending on the Closing Date,
or instituted thereafter, to the extent based on events or conditions
occurring or existing in connection with, or arising out of, the
activities of Seller or Seller's ownership, possession or use of any
property, including without limitation the Purchased Assets (other than
as provided in Section 2.03(f));
(e any liability, cost, expense, claim, obligation or
commitment to the extent based on events or conditions occurring or
existing prior to the Closing Date, and relating to any of the
following: (i) disputes arising out of services rendered by Seller
prior to the Closing Date, including without limitation, claims for
refunds or overpayments, returns, personal injury and property damage,
or (ii) compliance or noncompliance by Seller with any laws or
regulations relating to the matters specified in clause (i) of this
Section 2.04(e);
<PAGE>
(f any Environmental Liabilities;
(g any liability, cost, expense, claim, obligation or
commitment for any Taxes; provided that Transfer Taxes incurred in
connection with the transactions contemplated by this Agreement shall
be paid in the manner set forth in Section 8.03(c);
(h any liability, cost, expense, claim, obligation or
commitment to the extent relating to or based on events or conditions
occurring or existing in connection with, or arising out of, the
Excluded Assets;
(i any liability, cost, expense, claim, obligation or
commitment in, to or under the Corporate Integrity Agreement dated
August 27, 1997 between the United States Department of Health and
Human Services, through the Office of the Inspector General ("OIG"),
and Seller (the "Corporate Integrity Agreement"), including any and all
amendments, addenda, exhibits and schedules attached thereto or
incorporated therein by reference (other than as expressly specified in
Section 2.03(f));
(j any liability, cost, expense, claim, obligation or
commitment under the Leases, Contracts, Intellectual Property Rights or
any Transferred Permits, in each case to the extent arising or accrued
before the Closing Date; and
(k the liabilities of Seller for Patient Refunds.
<PAGE>
SECTION 2.5. Assignment of Contracts and Rights. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any property, right or interest of Seller if such
assignment is prohibited by law or, without the consent of a third party
thereto, would constitute a breach or other contravention of such property,
right or interest or in any way adversely affect the rights of Buyer or Seller
in connection therewith, and such property, right or interest will not be a
Purchased Asset under this Agreement. Seller and Buyer will use their reasonable
efforts (but without any payment of money by Seller or Buyer other than payment
by Seller of cure amounts) to obtain the consent of the other parties to any
such property right or interest that would, in the absence of the immediately
preceding sentence, be a Purchased Asset or any property right or interest
arising thereunder for the assignment thereof to Buyer as Buyer may request;
provided that nothing herein is intended, or shall be construed, as a
representation, warranty or guarantee by any Seller that such consents can or
will be obtained prior to the Closing. If such consent is not obtained, or if an
attempted assignment thereof would be ineffective or would adversely affect the
rights of Buyer or Seller thereunder so that Buyer would not in fact receive all
such rights, Seller and Buyer will cooperate in a mutually agreeable arrangement
under which Buyer would, to the greatest extent practicable, obtain the benefits
and assume the obligations thereunder in accordance with this Agreement,
including sub-contracting, sub-licensing, or sub-leasing to Buyer, or under
which the applicable Seller would enforce for the benefit of Buyer, with Buyer
assuming such Seller's obligations, any and all rights of any Seller against a
third party thereto.
SECTION 2.6. Purchase Price; Allocation of Purchase Price. (a The
purchase price for the Purchased Assets (the "Purchase Price") is (i) the Cash
Amount in cash, (ii) 1,000,000 shares of Common Stock (the "Consideration
Shares"), (iii) a note of Buyer in the principal amount equal to $25,000,000,
bearing interest on the outstanding balance thereof at a rate of 7.5% per annum,
and in substantially the form of Exhibit B hereto (the "Consideration Note"),
(iv) the Second Cash Payment Amount in cash, and (v) the Refund Adjustment in
cash. The Purchase Price shall be paid as provided in Section 2.07 and shall be
subject to adjustment as provided in Section 2.08.
(b) As soon as practicable after the date hereof, Buyer shall deliver
to Seller a statement on Form 8594 (the "Allocation Statement") setting forth
the allocation of the Purchase Price (together with the Assumed Liabilities and
plus or minus any adjustments pursuant to Section 2.08) among the Purchased
Assets in accordance with Section 1060 of the Code.
(c) Seller shall have a period of fifteen days after the delivery of
the Allocation Statement to present in writing to Buyer notice of any objections
Seller may have to the allocation set forth in the Allocation Statement. Unless
Seller timely objects, the Allocation Statement shall be binding on the parties
without further adjustment.
(d) If Seller shall raise any objections within the fifteen day
period, Buyer and Seller shall negotiate in good faith and use their respective
best efforts to resolve such dispute. If the parties fail to agree within five
days after the delivery of the notice, then each party may allocate the Purchase
Price as it determines.
(e) If an Allocation Statement is agreed upon, Buyer and Seller shall
(i) report an allocation of such Purchase Price among the Purchased Assets in a
manner entirely consistent with the Allocation Statement, (ii) act, and to cause
their Affiliates to act, in accordance with such Allocation Statement, in the
preparation of financial statements and filing of all tax returns (including,
without limitation, filing Form 8594 with its Federal income tax return for the
taxable year that includes the date of the Closing) and in the course of any tax
audit, tax review, or tax litigation relating thereto and (iii) take no position
and cause their Affiliates to take no position inconsistent with the Allocation
Statement for all tax and accounting purposes.
(f) If an Allocation Statement is not agreed upon, not later than
thirty (30) days prior to the filing of their respective Forms 8594 relating to
this transaction, each party shall deliver to the other party a copy of its Form
8594.
<PAGE>
SECTION 2.7. Closing. The closing (the "Closing") of the purchase and
sale of the Purchased Assets and the assumption of the Assumed Liabilities
hereunder shall take place at the offices of Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York, as soon as practicable and within five
Business Days after the date when any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby shall have expired or been
terminated, provided that the conditions set forth in Article 10 have been
satisfied, or at such other time or place as Buyer and Seller may agree. At the
Closing:
(a) Buyer shall deliver to Seller (i) the Cash Amount, (ii) a stock
certificate representing the Consideration Shares in the name of Seller or its
designee and (iii) the Consideration Note.
(b) Seller and Buyer shall enter into an Assignment and Assumption
Agreement in a form reasonably satisfactory to Seller and Buyer (the "Assignment
and Assumption Agreement"), and Seller shall deliver to Buyer such deeds, bills
of sale, endorsements, consents, assignments and other good and sufficient
instruments of conveyance and assignment as the parties and their respective
counsel shall deem reasonably necessary or appropriate to vest in Buyer all
right, title and interest in, to and under the Purchased Assets.
SECTION 2.8. Purchase Price Adjustment. To the extent any Lease listed
on Schedule 2.08 would, in the absence of the first sentence of Section 2.05, be
a Purchased Asset but cannot be assigned or delivered to Buyer, and to the
extent the benefits therefrom and obligations thereunder have not been provided
by alternate arrangements reasonably satisfactory to Buyer and Seller, the Cash
Amount included in the Purchase Price will be reduced by the amount set forth
opposite such Lease on Schedule 2.08 (each, a "Purchase Price Adjustment").
SECTION 2.9. Remittance Obligation. From and after the Closing Date,
any amount received by Seller with respect to the Purchased Assets or any asset
that would, in the absence of the first sentence of Section 2.05, be a Purchased
Asset including, without limitation, the accounts receivable and proceeds
described in Section 2.01(e) shall be held in trust and remitted by Seller to
Buyer as promptly as practicable. From and after the Closing Date, any amounts
received by Buyer with respect to the Excluded Assets shall be held in trust and
remitted by Buyer to Seller as promptly as practicable. Buyer and Seller shall
each be entitled to request and receive, on reasonable advance notice,
supporting documentation confirming the accuracy of such remitted amounts.
SECTION 2.10. Prorations and Reimbursements; Security and Utility
Deposits.
<PAGE>
(a) The charges, payments and other obligations in respect of the
following items shall be prorated as of the Closing Date between Seller and
Buyer, based on the actual number days of such relevant period before the
Closing Date (which shall be allocated to Seller) and the actual number of days
of such relevant period on or after the Closing Date (which shall be allocated
to the Buyer):
(i) all water, electricity and other utility charges, if any
(other than any utility deposits, which shall be governed by Section
2.10(b) below), applicable to any Seller's place of business to the
extent that final meter readings and billings cannot be arranged; and
(ii) all payments of fees, rents and other obligations, if any
(other than security deposits, which shall be governed by Section
2.10(b) below) in respect of Transferred Permits, Leases and Contracts.
Buyer and Seller shall use their reasonable efforts to calculate and
agree upon all prorations at or prior to the Closing. Upon approval by Buyer and
Seller, such calculations shall be binding and conclusive. The net amount of
such prorations shall, upon such approval, be promptly remitted by Buyer to
Seller if Seller is entitled to a credit therefor, and by Seller to Buyer if
Buyer is entitled to a credit therefor.
(b) All security deposits and utility deposits of Seller that relate
to Leases or Contracts shall be Purchased Assets and Buyer shall be entitled to
receive and retain any and all such deposits; provided that if within 60 days
after the Closing Date, (i) Buyer terminates any such Lease or Contract, or (ii)
there is otherwise (A) an expiration of any such Lease or Contract and (B)
renewal is offered by the other party thereto on substantially similar terms as
the original Lease or Contract and (C) such renewal is rejected by Buyer, then
Buyer shall pay to Seller in cash, within five Business Days after such
termination or expiration, an amount equal to any pre-Closing cure payments made
by Seller in order to transfer such Lease or Contract to Buyer, or in the
absence of any cure payment made by Seller, an amount equal to the security
deposit and utilities deposit returned to Buyer or to which Buyer would
otherwise be entitled.
SECTION 2.11. Patient Refunds. (a) Buyer shall act as agent for Seller
in order to process and pay Patient Refunds. Buyer shall process and pay, as
agent for Seller, all Patient Refunds arising in the six months prior to the
Closing Date, using the same policies and practices which Buyer normally uses in
the management of its own business, as described in Schedule 2.11. For all
liabilities of Seller associated with Patient Refunds arising greater than six
months prior to the Closing Date, Buyer shall process and pay, as agent for
Seller, only those Patient Refunds which (i) Buyer determines based upon
Seller's records are valid Patient Refunds, and (ii) have been specifically
requested by the Patient or their authorized representative.
<PAGE>
(b) If any Person sets off against any receivable assigned to Buyer
any claimed amount of Patient Refund, Buyer shall (i) promptly, upon notice,
provide details to Seller, and (ii) notify such Person, in writing, that such
Patient Refund is a liability of Seller, and cannot be set-off against the
receivable which is payable by such debtor to Buyer.
(c) A Refund Adjustment ("Refund Adjustment") shall be determined
within 180 days of the Closing Date or sooner, if practicable (the "Refund
Adjustment Date"), which shall be equal to $500,000, minus
(i) the aggregate amount of Patient Refunds paid by Buyer as
agent for Seller as provided in Section 2.11(a), and
(ii) the aggregate amount by which any receivables acquired by
Buyer have been reduced or unpaid specifically as a result of a set-off
by any Person against such receivables of any claimed Patient Refund
(that Buyer would not have contested using its customary refund
procedures).
(d) On the first Business Day after the Refund Adjustment Date, Buyer
shall deliver to Seller a statement setting forth Buyer's calculation of the
Refund Adjustment together with payment in cash of such amount owed by Buyer. If
the statement provides that Seller owes money to Buyer under this Section 2.11,
Seller shall make such payment to Buyer in cash within fifteen Business Days
after receipt of Buyer's statement. If Buyer and Seller disagree, they shall
follow the procedures set forth in Section 2.13.
SECTION 2.12. Second Cash Payment. On the first Business Day which is
at least sixty days after the Closing Date, Buyer shall deliver to Seller a
statement (the "Second Cash Payment Statement") setting forth Buyer's
calculation of the Second Cash Payment Amount together with payment in cash of
such amount owed by Buyer. If the statement provides that Seller owes money to
Buyer under this Section 2.12, Seller shall make such payment to Buyer in cash
within fifteen Business Days after receipt of Buyer's statement. If Buyer and
Seller disagree, they shall follow the procedures set forth in Section 2.13.
SECTION 2.13. Adjustment Disputes. Within fifteen Business Days after
Seller receives Buyer's calculation of the Second Cash Payment Amount or the
Refund Adjustment, as applicable, Seller shall notify Buyer that Seller (i)
approves such calculation, or (ii) disputes such calculation. In the event
Seller disputes such calculation, Buyer and Seller shall negotiate in good faith
to determine a mutually acceptable calculation of such amount. Within two
Business Days of resolution, by mutual agreement or by arbitration, the party
owing monies hereunder shall pay such amounts in cash.
<PAGE>
SECTION 2.14. Transition Leases. (a) At the Closing, Buyer and Seller
shall enter into a master sublease for the leases and subleases specified in
Schedule 2.14 (each, a "Transition Lease"). The master sublease will include
following terms:
(i) for the period of the sublease, Buyer shall pay to Seller the
rental payments for each Transition Lease in the amount Seller pays under such
lease and Buyer shall comply with the non-monetary covenants of Seller under
such Transition Lease; and
(ii) indemnity from Buyer to Seller for damages incurred by Seller
solely as a result of (A) the sublease from Seller to Buyer or (B) as a result
of any actions, or use or possession of the premises, by Buyer after the Closing
(including any reduction in the amount of security deposit returned to Seller
because of damages to the leased property during the term of the master
sublease); provided, that to the extent Seller was in default of the Transition
Lease prior to the entry of the master sublease, any damages resulting from any
such default of Seller will be deemed not be incurred as a result of the master
sublease; and provided, further, that Buyer will not indemnify Seller for
damages incurred due to early termination of any Transition Lease.
(b) At the Closing, Buyer and Seller shall enter into a lease (the
"Auto Lease") for the automobiles listed in Schedule 2.02(k) (each, an "Auto").
Such lease will include the following terms:
(i) for the period from the Closing Date to the date that is sixty
days after the Closing Date, Buyer shall pay to Seller rental payments for each
Auto in the amount Seller pays as the deferred purchase price for such Auto for
that period;
(ii) indemnity from Buyer to Seller for damages incurred by Seller as a
result of any actions, or use or possession of the Autos, by Buyer after the
Closing (including any reduction in the amount of security deposit returned to
Seller because of damages to the Autos during the term of the Auto Lease);
provided, that to the extent Seller was in default of the agreement to acquire
the Auto prior to the entry of the Auto Lease, any damages resulting from any
such default of Seller will be deemed not to be incurred as a result of the Auto
Lease; and provided, further, that Buyer will not indemnify Seller for damages
incurred due to the failure to pay the deferred purchase price of the Autos
after the Autos are returned to Seller; and
(iii) Seller makes no representation or warranty on the ability of Buyer
to have possession of the Autos after the Closing Date. Buyer acknowledges that
in the event of acceleration or repossession caused by the Auto Lease, it will
be Buyer's option to either repay the remaining balance of the deferred purchase
price on such Auto or permit repossession by lender and Buyer shall have no
recourse against Seller.
<PAGE>
SECTION 2.15. Payments in Cash. Payments to be made in cash hereunder
shall be made in immediately available funds by wire transfer to an account of
the recipient with a bank in New York City designated by such recipient not
later than two Business Days prior to the date of payment (or if not so
designated, then by certified or official bank check payable in immediately
available funds to the order of the recipient in such amount).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date that:
SECTION 3.1. Corporate Existence and Power. Each of Seller and, prior
to merger with and into Seller, Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted. Each of Seller and, prior to merger with and into
Seller, Subsidiary is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified could not
reasonably be expected, individually or in the aggregate, to have a Seller
Material Adverse Effect. Seller has heretofore delivered to Buyer true and
complete copies of the certificate of incorporation and bylaws of Seller and
Subsidiary as currently in effect.
SECTION 3.2. Corporate Authorization. The execution, delivery and
performance by Seller of this Agreement and the Registration Rights Agreement
and all related documents and agreements and the consummation of the
transactions contemplated hereby and thereby are within Seller's corporate
powers and have been duly authorized by all necessary corporate action on the
part of Seller including any required approval or consent by the Shareholders.
This Agreement constitutes a valid and binding agreement of Seller.
SECTION 3.3. Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement and the Registration Rights Agreement
and all related documents and agreements the consummation of the transactions
contemplated hereby and thereby require no action by or in respect of, or filing
with, any Governmental Authority other than (i) compliance with any applicable
requirements of the HSR Act and (ii) any notice required to be given to the OIG
under the Corporate Integrity Agreement.
<PAGE>
SECTION 3.4. Noncontravention. The execution, delivery and performance
by Seller of this Agreement and the Registration Rights Agreement and all
related documents and agreements (including any documents or agreements related
to the merger of Subsidiary with and into Seller) and the consummation of the
transactions contemplated hereby do not and will not (i) violate the certificate
of incorporation or bylaws of Seller or Subsidiary, (ii) assuming compliance
with the matters referred to in Section 3.03, violate any material applicable
law, rule, regulation, judgment, injunction, order or decree, (iii) assuming the
obtaining of all Material Consents and other consents, constitute a default
under or give rise to any right of termination, cancellation or acceleration of
any right or obligation of Buyer or to a loss of any benefit relating to the
Business to which Seller is entitled under any Lease or Material Contract or
(iv) result in the creation or imposition of any Lien on any Purchased Asset,
other than Permitted Liens.
SECTION 3.5. Material Consents. Schedule 3.05 sets forth each (a)
Material Contract, (b) Lease, or (c) Transferred Permit requiring a consent or
other action by any Person as a result of the execution, delivery and
performance of this Agreement by Seller or Subsidiary or the merger of
Subsidiary with and into Seller. Nothing in this Section 3.05 is intended, or
shall be construed, as a representation, warranty or guarantee by Seller that
such consents can or will be obtained prior to or after the Closing. As of the
Closing Date, all consents or actions have been received or taken except (i) any
consent required under Contracts with Customers or (ii) where failure to receive
such consent or take such action could reasonably be expected, individually or
in the aggregate, to have a Seller Material Adverse Effect (the "Material
Consents").
SECTION 3.6. Financial Statements. The audited balance sheets of Seller
and Subsidiary as of February 29, 1996, February 28, 1997 and February 28, 1998
and the related audited statements of income and cash flows for each of the
years then ended, and the unaudited interim balance sheet of Seller and
Subsidiary as of the Balance Sheet Date and the related unaudited statements of
income and cash flow for the twelve months then ended fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), the financial position
of Seller and Subsidiary as of the dates thereof and their results of operations
and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
SECTION 3.7. Absence of Certain Changes. Except as disclosed on
Schedule 3.07, the Business has been conducted since the Balance Sheet Date in
the ordinary course consistent with past practices and there has not been:
<PAGE>
(a) any event, occurrence, development or state of
circumstances or facts which has had or could reasonably be expected,
individually or in the aggregate, to have a Seller Material Adverse
Effect other than the negotiation, execution and consummation of this
Agreement and related agreements with Buyer; provided that Seller has
advised the Buyer that Seller may commence proceedings under laws for
the relief of debtors after the Closing and Seller makes no
representation or warranty as to the actual or potential effect after
the Closing Date on the Business or the Purchased Assets of slow
payments by or to suppliers, vendors and other contractors, lost or
terminated customer accounts or customer relationships, information or
rumors communicated by or to Seller's or Subsidiary's employees and
competitors, or other potentially adverse effects on the Business or
the Purchased Assets which may arise after the Closing as a result of
the commencement of such proceedings;
(b) any incurrence, assumption or guarantee by Seller or
Subsidiary of any indebtedness for borrowed money other than additional
advances or loans from Oaktree;
(c) any creation or other incurrence of any Lien on any
Purchased Asset other than in the ordinary course of business
consistent with past practices;
(d) any damage, destruction or other casualty loss (whether or
not covered by insurance) which has had or could reasonably be expected
to have, individually or in the aggregate, a Seller Material Adverse
Effect;
(e) any transaction or commitment made, or any contract or
agreement entered into, by Seller or Subsidiary (including the
acquisition or disposition of any assets) or any relinquishment by
Seller or Subsidiary of any material contract or other right other than
transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this
Agreement;
(f) any change in any method of accounting or accounting
practice by Seller or Subsidiary except for any such change after the
date hereof required by reason of a concurrent change in generally
accepted accounting principles;
(g) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any officer or
employee of Seller or Subsidiary (or any amendment to any such existing
agreement), (ii) grant of any severance or termination pay to any
officer or employee of Seller or Subsidiary or (iii) change, other than
in the ordinary course of business consistent with past practice, in
compensation or other benefits payable to any officer or employee of
Seller or Subsidiary pursuant to any severance or retirement plans or
policies thereof;
<PAGE>
(h) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of Seller or
Subsidiary, which employees were not subject to a collective bargaining
agreement at the Balance Sheet Date, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to
employees of Seller or Subsidiary;
(i) any capital expenditure, or commitment for a capital
expenditure, for additions or improvements to property, plant and
equipment, other than any capital expenditures since the Balance Sheet
Date which individually is less than $10,000 and in the aggregate are
less than $100,000; or
(j) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of
Subsidiary, or any repurchase, redemption or other acquisition by
Seller of any outstanding Subsidiary Securities.
SECTION 3.8. No Undisclosed Material Liabilities. (a) There are no
liabilities of Seller of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than:
(i) liabilities arising under this Agreement and related
agreements with Buyer;
(ii) liabilities provided for in the Balance Sheet or disclosed
in the notes thereto;
(iii) (A) undisclosed liabilities which individually are less
than $15,000 and in the aggregate are less than $150,000, (B) purchase
orders in the ordinary course or (C) payables described on Schedule
3.08(a);
(iv) other liabilities disclosed on Schedule 3.08(a); and
(v) liabilities disclosed on Schedule 3.10.
(b) Seller's payment obligations under the Settlement Agreement are in
the amount of, and do not exceed, the amounts set forth on Schedule 3.08(b).
SECTION 3.9. Material Contracts. (a) Schedule 3.09(a) constitutes a
complete and accurate list of all Contracts of the following types to or by
which Seller or Subsidiary is a party or bound, and which except for those
Contracts described in clauses (iii), (iv), (vii) and (viii) below, (A) cannot
be terminated within sixty days without penalty and (B) provide for annual
payments by or to Seller or Subsidiary of at least $100,000 ("Material
Contracts"):
<PAGE>
(i) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets;
(ii) any sales, distribution or other similar agreement
providing for the sale or provision by Seller or Subsidiary of
materials, supplies, goods, services, equipment or other assets,
including without limitation, lab services agreements, phlebotomy
agreements and venipuncture agreements;
(iii) any partnership, joint venture or other similar agreement
or arrangement;
(iv) any agreement relating to the acquisition or disposition
of Seller, Subsidiary or the Business (whether by merger, sale of
stock, sale of assets or otherwise) or any material assets of Seller or
Subsidiary;
(v) any agreement relating to the deferred purchase price of
property whether incurred, assumed, guaranteed or secured by any asset;
(vi) any option or license to provide lab testing services,
franchise of the Business or send out agreement;
(vii) any independent sales representative agreement;
(viii) any agreement that limits the freedom of Seller or
Subsidiary to compete in any line of business or with any Person or in
any area or to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any Purchased Asset or which would so limit the
freedom of Buyer after the Closing Date; or
(ix) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business.
(b) Except as set forth in Schedule 3.09(b), as of Closing, each
Material Contract and each other agreement that is required to be disclosed
pursuant to this Section is a valid and binding agreement of the Seller, subject
to bankruptcy, insolvency or similar laws affecting creditor rights generally,
and is in full force and effect, and neither Seller or, to the knowledge of
Seller, any other party thereto is in default or breach in any material respect
under the terms of any such Contract, and, to the knowledge of Seller, no event
or circumstance has occurred that, with notice or lapse of time or both, would
constitute any event of default thereunder. True and complete copies of each
such Contract have been delivered to Buyer.
(c) Schedule 3.09(c) is a complete and accurate list of all Contracts
that are capitated managed care contracts, with the term and termination
provisions thereof.
<PAGE>
SECTION 3.10. Litigation. Schedule 3.10 lists any action, suit,
investigation or proceeding (or any basis therefor) pending against, or to the
knowledge of Seller, threatened against or affecting, Seller, Subsidiary or any
Purchased Asset before any Governmental Authority or arbitrator. No matter
listed on Schedule 3.10 individually or in the aggregate, if determined or
resolved adversely to Seller or Subsidiary, could reasonably be expected to have
a Seller Material Adverse Effect or in any manner challenges or seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
SECTION 3.11. Compliance with Laws and Court Orders. Except as set
forth in Schedule 3.11, neither Seller nor Subsidiary is in violation of, has
since November 8, 1996 violated, and to the knowledge of Seller neither Seller
nor Subsidiary is under investigation with respect to or has been threatened to
be charged with or given notice of any violation of, any applicable material
law, rule, regulation, judgment, injunction, order or decree.
SECTION 3.12. Properties. (a) Schedule 3.12(a) correctly describes
all real property used or held for use in the Business and which Seller or
Subsidiary leases, operates or subleases, specifying in the case of leases, the
lease term and basic rent. Neither Seller nor Subsidiary owns any real property.
(b) Schedule 3.12(b) correctly describes all items of tangible
personal property used or held for use in the Business, including, without
limitation, machinery, equipment, furniture, vehicles, storage tanks, spare and
replacement parts, fuel and other trade fixtures and fixed assets, which Seller
or Subsidiary owns, leases or subleases, specifying in the case of leases and
subleases the name of the lessor or sublessor, the lease term and basic monthly
rent; provided that no assurances can be given as to the present condition or
existence of items of less than $1,000 in value other than microscopes currently
being used in the Business.
(c) Seller has a valid and subsisting leasehold estate in, and the
right to quiet enjoyment of, the Real Property. Seller has good and defensible
title to all Purchased Assets (whether real, personal, tangible or intangible).
(d) The Real Property includes only such real property as is used or
held for use by Seller in connection with the conduct of the business and
operations of the Business as heretofore conducted by Seller.
<PAGE>
(e) Except as set forth on Schedule 3.12(e), all Leases are valid,
binding and enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency or similar laws affecting creditor rights generally, and
there does not exist under any such Lease any monetary or other material default
or any event which with notice or lapse of time or both would constitute such a
default.
(f) To Seller's knowledge, the equipment included in the Purchased
Assets have no material defects, are in good operating condition and repair and
have been reasonably maintained consistent with standards generally followed in
the industry (giving due account to the age and length of use of same, and
ordinary wear and tear excepted).
(g) No Purchased Asset is subject to any Lien, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been
established on the Balance Sheet and identified in the notes thereto;
(iii) Liens constituting purchase money security interests that
are described on Schedule 3.12(g)(iii);
(iv) Liens which do not materially detract from the value of
such Purchased Asset, or materially interfere with any present use of
such Purchased Asset (clause (i) - (iv) of this Section 3.12(g) are,
collectively, the "Permitted Liens"); or
(v) Liens described on Schedule 3.12(g)(v) which will be
discharged on or prior to the Closing Date.
SECTION 3.13. Sufficiency of and Title to the Purchased Assets. (a) The
Purchased Assets, together with the Excluded Assets, constitute all of the
property and assets used or held for use in the Business and are adequate to
conduct the Business as currently conducted by Seller; provided that Seller
makes no representation or warranty as to whether any of its Intellectual
Property Rights or other Purchased Assets will operate correctly with respect to
date data for dates during and after the Year 2000.
(b) The delivery to Buyer of the instruments of transfer of ownership
contemplated by this Agreement will vest good and defensible title in and to, or
a valid leasehold interest in, each of the Purchased Assets, free and clear of
all Liens, except for Permitted Liens.
<PAGE>
SECTION 3.14. Intellectual Property. (a) Schedule 3.14 contains a list
of all Intellectual Property Rights owned or licensed by Seller, specifying as
to each, as applicable: (i) the nature of such Intellectual Property Right, (ii)
the owner of such Intellectual Property Right, (iii) except for Intellectual
Property Rights arising under licenses granted to Seller by third parties, as to
which Seller makes no such representation or warranty, (A) the jurisdictions by
or in which such Intellectual Property Right is recognized (without regard to
registration), has been issued or registered or in which an application for such
issuance or registration has been filed, (B) the registration or application
numbers and (C) the termination or expiration dates, and (iv) the identity of
any Person to whom Seller has licensed any Intellectual Property Rights.
(b) Since November 8, 1996, except as set forth on Schedule 3.14,
neither Seller nor Subsidiary has been a defendant in any action, suit,
investigation or proceeding relating to, or otherwise has been notified of, any
alleged claim of infringement of any Intellectual Property Right, and Seller has
no knowledge of any other such infringement by either Seller or Subsidiary.
Except for Intellectual Property Rights arising under any license granted to
Seller by third parties, as to which Seller makes no such representation or
warranty, Seller has no outstanding claim or suit for, or has no knowledge of,
any continuing infringement by any other Person of any Intellectual Property
Rights. To Seller's knowledge, no Intellectual Property Right is subject to any
outstanding judgment, injunction, order, decree or agreement restricting the use
thereof by Seller or Subsidiary with respect to the Business or restricting the
licensing thereof by Seller to any Person. No Seller has entered into any
agreement to indemnify any other Person against any charge of infringement of
any Intellectual Property Right.
SECTION 3.15. Insurance Coverage. Schedule 3.15 sets forth a list of,
and true and complete copies of, all insurance policies and fidelity bonds
relating to the Purchased Assets, the business and operations of the Business
and its officers and employees. There is no claim by Seller or Subsidiary
pending under any of such policies or bonds as to which coverage has been denied
or disputed by the underwriters of such policies or bonds or in respect of which
such underwriters have reserved their rights. All premiums payable under all
such policies and bonds have been timely paid and Seller has otherwise complied
fully with the terms and conditions of all such policies and bonds except where
such untimely payment or noncompliance would not have an affect on Buyer's
ability to receive any insurance proceeds due Buyer. Such policies and bonds are
and have been written by insurers of recognized financial responsibility against
such losses and risks and in such amounts as is prudent and customary in the
businesses in which Seller and Subsidiary are engaged. Seller does not know of
any threatened termination of or material alteration of coverage under any of
such policies or bonds. Except as disclosed in Schedule 3.15, after the Closing
Seller shall continue, at its sole cost and expense, to have coverage under such
policies and bonds with respect to events occurring prior to the Closing.
<PAGE>
SECTION 3.16. Permits. Schedule 3.16 sets forth a complete and correct
list of all Permits. Seller has all Permits issued by all appropriate
Governmental Authorities necessary to conduct the Business, as conducted by
Seller, and Seller has not received any notice of proceedings relating to the
revocation or modification of any Transferred Permit. To Seller's knowledge, no
condition, event, occurrence or omission exists that would cause the revocation
or modification of any Transferred Permit, except where such revocation or
modification could not reasonably be expected to have a Seller Material Adverse
Effect or a material adverse effect on the use by Buyer of the Purchased Assets
after the Closing Date.
SECTION 3.17. Receivables. Schedule 3.17 sets forth a list of all
accounts, notes receivable and other receivables of Seller and Subsidiary as of
March 31, 1999. All accounts, notes receivable and other receivables reflected
on Schedule 3.17 (other than receivables collected since March 31, 1999) are,
and all accounts and notes receivable arising from or otherwise relating to the
Business at the Closing Date will be, valid, genuine and legal, subject to
normal and customary trade discounts, less any reserves for doubtful accounts
specified on Schedule 3.17. Upon the consummation of the transactions
contemplated hereby on the Closing Date, all accounts and notes receivable, or
proceeds thereof in the case of any Restricted Receivables arising from or
otherwise relating to the Business after March 31, 1999 shall constitute
Purchased Assets or assets of Subsidiary except to the extent previously
collected by Seller or Subsidiary in the ordinary course.
SECTION 3.18. Selling Documents. None of the representations or
warranties made by Seller herein, nor any other written information provided by
or on behalf of Seller or Subsidiary to Buyer in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they are
or were made, not misleading.
SECTION 3.19. Finders' Fees. Except for Adirondack Capital Advisors,
whose fees will be paid by Seller, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Seller, Subsidiary, any Shareholder or any other Affiliate of Seller,
Subsidiary or any, Shareholder who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.20. Employees. (a) Schedule 3.20(a) sets forth a true and
complete list of (i) the names, titles, annual salaries and other compensation
of all employees of Seller and Subsidiary (ii) the wage rates for non-salaried
employees of Seller and Subsidiary (by classification) and (iii) commission
plans for sales, service and marketing employees as of the date of this
Agreement.
<PAGE>
(b) Except as disclosed in Schedule 3.20(b), as of the date of this
Agreement no officer, senior management executive or sales personnel has given
notice to the CEO of Seller of an actual resignation or retirement, or any
intended date of resignation or retirement, and the CEO of Seller, after due
inquiry, has determined that Seller's sales manager has not received any such
notice.
(c) There is no liability to James Murray Pitton for any payment,
obligation or commitment for any bonus, profit-sharing or similar payment by
Seller.
(d) Notwithstanding the foregoing, Seller shall have no obligation and
makes no representation, warranty or guaranty regarding its ability to maintain
and preserve the work force of the Business after the date hereof.
SECTION 3.21. Environmental Compliance. (a) Except as disclosed on
Schedule 3.21, the following is true and correct:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no penalty has been
assessed, no complaint has been filed and served on Seller, and to
Seller's knowledge no complaint has been filed and no investigation,
action, claim, suit, proceeding or review is pending or threatened by
any Governmental Authority or other Person with respect to any matters
relating to Seller and Subsidiary and relating to or arising out of any
Environmental Law;
(ii) to Seller's knowledge, there are no Environmental
Liabilities, and there are no facts, events, conditions, situations or
set of circumstances which could reasonably be expected to result in or
be the basis for any Environmental Liabilities;
(iii) to Seller's knowledge, no Hazardous Substance has been
discharged, disposed of, dumped, injected, pumped, deposited, spilled,
leaked, emitted or released at, on or under any Real Property or any
other real property now or previously owned, leased or operated by
Seller or Subsidiary other than in accordance with applicable
Environmental Laws;
(iv) to Seller's knowledge, there currently are no, and since
the date Seller took possession of any premises subject to a Lease,
there has not been any, Underground Storage Tanks (as defined below)
located upon and/or serving the premises subject to the Leases of
Seller or Subsidiary. "Underground Storage Tank" for the purposes of
this Agreement shall mean any one or combination of tanks, including
appurtenant pipes, lines, fixtures and other related equipment, used to
contain an accumulation of Hazardous Substances, the volume of which,
including the volume of the appurtenant pipes, lines, fixtures and
other related equipment, is ten percent (10%) or more below the ground;
and
<PAGE>
(v) to Seller's knowledge, Seller and Subsidiary are in
compliance with all Environmental Laws.
(b) To Seller's knowledge, there has been no environmental
investigation, study, audit, test, review or other analysis conducted in
relation to any Purchased Asset or any other real property now or previously
owned or leased by Seller or Subsidiary which has not been delivered to Buyer at
least five days prior to the date hereof.
(c) None of the Real Property is located in New Jersey or Connecticut.
(d) For purposes of this Section, the term "Seller" shall not include
any entity which is, in whole or in part, a predecessor of Seller.
SECTION 3.22. Investment Representations. Seller (i) is acquiring the
Consideration Shares and the Consideration Note and (ii) upon receipt of any
additional Notes or Conversion Shares in accordance with the terms of any Note,
will acquire such Notes and Conversion Shares for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, Seller does not
agree to hold any Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act. Without
limiting the foregoing, Buyer acknowledges that Seller is required to pledge the
Consideration Shares and the Consideration Note and any additional Notes or
Conversion Shares pursuant to the terms of the Security Agreement dated as of
June 12, 1998 between Seller and Oaktree, as amended.
(a) Seller is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D as promulgated by the SEC under the 1933 Act.
(b) Seller understands that the Securities are being issued to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that Buyer is relying in part upon
the truth and accuracy of, and Seller's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire the Securities.
(c) Seller understands that no United States federal or state agency
or any other Government Authority has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of an investment in
the Securities nor have such authorities passed upon or endorsed the merits of
the issuance of the Securities.
<PAGE>
(d) Seller understands that except as provided in the Registration
Rights Agreement (i) the Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) the Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
such Securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule 144"); (ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither Buyer nor any other person is under any obligation to register
such securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
(e) Seller understands that the certificates or other instruments
representing the Securities shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
certificates):
[NEITHER THIS NOTE, THE NOTES ISSUABLE IN RESPECT OF INTEREST HEREUNDER
NOR THE] [THESE] SHARES OF THE ISSUER'S COMMON STOCK [ISSUABLE UPON
CONVERSION HEREOF] HAVE [NOT] BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. [THIS NOTE HAS BEEN (AND ANY SUCH OTHER NOTES AND SHARES WILL
BE)] [THESE SHARES HAVE BEEN] ACQUIRED FOR THE ACCOUNT OF THE SELLER
AND NOT WITH A VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH, A PUBLIC
OFFERING AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION
FROM SUCH REGISTRATION OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT.
<PAGE>
The legend set forth above shall be removed and Buyer shall issue a
certificate without such legend to the holder of any Securities upon which it is
stamped, if (i) upon a resale, any such Securities are registered for sale under
the 1933 Act, (ii) in connection with a sale transaction, upon advice of the
counsel of the holder of such security, reasonably acceptable to Buyer, such
sale, assignment or transfer of any of the Securities may be made without
registration under the 1933 Act, or (iii) any of the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold. Seller
acknowledges, covenants and agrees to sell any of the Securities represented by
a certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) a sale that is
exempt from registration required by Section 5 of the 1933 Act. In the event the
above legend is removed from any of the Securities, Buyer may, upon reasonable
advance notice to the holder, require that the above legend be placed on any of
the Securities that cannot then be sold pursuant to an effective registration
statement or Rule 144(k) under the 1933 Act (or any successor rule thereto).
SECTION 3.23. Subsidiary. (a) Seller does not, directly or indirectly,
own any stock of, or any other interest in, any Person other than Subsidiary.
(b) Except as set forth on Schedule 3.23, and the pledge to Oaktree
and to U.S. Bank Trust National Association (f/k/a First Trust National
Association) ("Trustee"), all of the outstanding capital stock or other voting
securities of Subsidiary is owned by Seller, directly or indirectly, free and
clear of any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other voting securities). There are no outstanding (i) securities of
Seller or Subsidiary convertible into or exchangeable for shares of capital
stock or voting securities of Subsidiary or (ii) options or other rights to
acquire from Seller or Subsidiary, or other obligation of Seller or Subsidiary
to issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Subsidiary (the items in
clauses 3.23(b)(i) and 3.23(b)(ii) being referred to collectively as the
"Subsidiary Securities"). Seller has no right to repurchase, redeem or otherwise
acquire any outstanding Subsidiary Security.
(c) The pledge to Oaktree and to Trustee of the capital stock of
Subsidiary will be discharged on or prior to the Closing Date.
(d) Upon payment by Seller of the amount specified in the Payoff
Letter:
(i) all the commitments under the Daiwa Loan Agreements and
related agreements and all outstanding loans (together with interest
thereon) and all other amounts payable by Seller or Subsidiary under
the Daiwa Loan Agreement and related agreements shall be paid in full;
and
(ii) Immediately prior to its merger with and into Seller,
Subsidiary will have no actual or contingent liabilities (other than
payments owed to Seller), and will have no assets other than accounts
receivable purchased from Seller or the proceeds thereof.
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date that:
SECTION 4.1. Corporate Existence and Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted. Buyer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified could not reasonably be expected, individually or in the
aggregate, to have a Buyer Material Adverse Effect. Buyer has heretofore
delivered to Seller true and complete copies of its certificate of incorporation
and bylaws as currently in effect.
SECTION 4.2. Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement and the Registration Rights Agreement,
the Notes and all related documents and agreements and the consummation of the
transactions contemplated hereby and thereby are within the corporate powers of
Buyer and have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement constitutes a valid and binding agreement of
Buyer.
SECTION 4.3. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement and the Registration Rights Agreement,
the Notes and all related documents and agreements and the consummation of the
transactions contemplated hereby and thereby require no action by or in respect
of, or filing with, any Governmental Authority other than (i) compliance with
any applicable requirements of the HSR Act and (ii) compliance with any
applicable requirements of the 1933 Act and 1934 Act or any state securities
laws.
SECTION 4.4. Noncontravention. The execution, delivery and performance
by Buyer of this Agreement and the Registration Rights Agreement, the Notes and
all related documents and agreements and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) violate the certificate
of incorporation or bylaws of Buyer or (ii) assuming compliance with the matters
referred to in Section 4.03, violate any material applicable law, rule,
regulation, judgment, injunction, order or decree, (iii) assuming the obtaining
of all consents necessary, constitute a default under or give rise to any right
of termination, cancellation or acceleration of, any material agreement,
indenture, security agreement, mortgage, lease or other contract or instrument
to which Buyer is a party.
<PAGE>
SECTION 4.5. Consents. Schedule 4.05 lists each agreement, contract,
lease or other instrument binding upon Buyer and any Permit requiring a consent
or other action by any Person as a result of the execution, delivery and
performance of this Agreement by Buyer, except such consents or actions as could
not reasonably be expected, individually or in the aggregate, to have a Buyer
Material Adverse Effect if not received or taken by the Closing Date; provided
that nothing herein is intended, or shall be construed, as a representation,
warranty or guarantee by Buyer that such consents can or will be obtained prior
to the Closing.
SECTION 4.6. Financing. Buyer has, or will have immediately prior to
the Closing, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make payment of the Cash Amount, the
Second Cash Payment Amount and any other amounts to be paid by it hereunder.
SECTION 4.7. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any Governmental Authority or arbitrator which,
individually or in the aggregate, if determined or resolved adversely to Buyer,
could reasonably be expected to have a Buyer Material Adverse Effect, or which
otherwise challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
SECTION 4.8. Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee or commission from Buyer,
Seller, Shareholders or any other Affiliate of Buyer or Seller or any
Shareholder upon consummation of the transactions contemplated by this
Agreement.
SECTION 4.9. Issuance of Consideration Shares and Consideration Note .
(a) The issuance of the Consideration Shares at the Closing has been duly
authorized on behalf of Buyer and such Consideration Shares, when issued
pursuant to this Agreement, will be validly issued, fully paid and nonassessable
and will not give rise to any rights of any third party to purchase shares of
capital stock of Buyer pursuant to any preemptive rights.
(b) The Consideration Note is duly authorized and, when issued
pursuant to this Agreement, will be the legal, valid and binding obligation of
the Buyer, enforceable in accordance with its terms, subject to bankruptcy,
insolvency or similar laws affecting creditor rights generally. Upon conversion
of all or any portion of any Note in accordance with the terms of such Note, the
Conversion Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens, claims, and charges with respect to the issue thereof,
with the holder being entitled to all rights accorded to a holder of Common
Stock.
<PAGE>
(c) No approval of Buyer's stockholders (other than approvals that
will be obtained prior to issuance) is required for the issuance of any of the
Securities under any applicable laws or the rules or regulations of any exchange
on which Securities of Buyer are listed.
SECTION 4.10. SEC Documents; Financial Statements; Disclosures. Except
as set forth in Schedule 4.10, since December 31, 1996, Buyer has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the 1934 Act
(all of the foregoing filed prior to the Closing and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of Buyer
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, and the financial statements fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), the financial position
of Buyer as of the dates thereof and its results of operations and cash flows
for the periods then ended (subject to normal year-end adjustments in the case
of any unaudited interim financial statements). No representations or warranties
made by Buyer herein, nor any other written information provided by or on behalf
of Buyer to Seller which is not included in the SEC Documents, contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they are or were made, not misleading.
SECTION 4.11. No Integrated Offering. Neither Buyer nor any Person
acting on its behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any of the Securities, under
circumstances that would require registration of the Securities under the 1933
Act or cause the issuance of the Securities to be integrated with prior
offerings by Buyer for purposes of the 1933 Act or any applicable stockholder
approval provisions.
<PAGE>
SECTION 4.12. Capitalization. As of the date hereof, the authorized
capital stock of Buyer consists of (i) 100,000,000 shares of Common Stock, of
which as of December 31, 1998, 40,707,673 shares were issued and outstanding and
(ii) 20,000,000 shares of convertible preferred stock, of which 364,000 shares
of convertible preferred stock were issued and outstanding as of the date
hereof. All of such outstanding shares have been validly issued and are fully
paid and nonassessable. Except as disclosed in Schedule 4.12, no shares of
Common Stock or preferred stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by Buyer.
Except as disclosed in Schedule 4.12, as of the date hereof, there are no
outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of Buyer, or contracts,
commitments, understandings or arrangements by which Buyer is or may become
bound to issue additional shares of capital stock of Buyer or options, warrants,
scrip, rights to subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into any shares of capital
stock of Buyer.
SECTION 4.13. Absence of Certain Changes. As of the Closing Date,
except as disclosed in the SEC Documents filed prior to the date of this
Agreement or expressly set forth in Schedule 4.13, since December 31, 1997,
there has been no event, occurrence, or omission that has resulted in or could
reasonably be expected to result in a Buyer Material Adverse Effect. Buyer has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy or other law, statute or judicial or other
proceeding providing for the relief of debtors, nor does Buyer have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
SECTION 4.14. Title. Except as disclosed in its SEC Documents, Buyer
has good and defensible title to all real and personal property owned by it
which is material to the business of Buyer, free and clear of all Liens except
(a) such as are described in Schedule 4.14, (b) such as are for taxes not yet
due or being contested in good faith (and for which adequate accruals or
reserves have been established on the balance sheet included in the most recent
SEC Documents filed prior to the date of this Agreement and identified in the
notes thereto), or (c) such as do not materially detract from the value of such
property. Any real property and facilities held under lease by Buyer are held
under valid, subsisting and enforceable leases with such exceptions as are not
material.
SECTION 4.15. Insurance. Buyer is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as is
prudent and customary in the businesses in which Buyer is engaged. Buyer has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
could not reasonably be expected to have a Buyer Material Adverse Effect.
<PAGE>
SECTION 4.16. Permits. Buyer possesses all Permits issued by the
appropriate Governmental Authorities necessary to conduct its business, and
Buyer has not received any notice of proceedings relating to the revocation or
modification of any material such Permit. To Buyer's knowledge, no condition,
event, occurrence or omission exists that would cause the revocation or
modification of any such Permit, except where such revocation or modification
could not reasonably be expected to have a Buyer Material Adverse Effect.
SECTION 4.17. Compliance with Laws and Court Orders. Except as set
forth in Schedule 4.17, 4.18 or disclosed in the SEC Documents filed prior to
the date of this Agreement, Buyer is not in violation of, has not since November
8, 1996 violated, and to the knowledge of Buyer is not under investigation with
respect to and has not been threatened to be charged with or given notice of any
violation of, any applicable material law, rule, regulation, judgment,
injunction, order or decree.
SECTION 4.18. Patient Refund Policy. The patient refund policy set
forth on Schedule 2.11 accurately describes in all material respects the
patient refund policy of Buyer.
ARTICLE 5
COVENANTS OF SELLER
Seller agrees that:
SECTION 5.1. Conduct of the Business. From the date hereof until the
Closing Date, Seller and Subsidiary shall conduct the Business in the ordinary
course consistent with past practice and shall use their respective best efforts
to preserve intact the business organizations and relationships with third
parties and to keep available the services of the present employees of the
Business. Without limiting the effect of the foregoing, Buyer acknowledges that
the Seller has advised the Buyer that Seller may commence proceedings under laws
for the relief of debtors. Without limiting the generality of the foregoing,
from the date hereof until the Closing Date, neither Seller nor Subsidiary will:
(a) acquire a material amount of assets from any other Person,
except that the Subsidiary may acquire accounts receivable from Seller
in the ordinary course consistent with past practice and Seller may
receive additional advances or loans from Oaktree;
(b) sell, lease, license or otherwise dispose of any assets or
properties except (i) pursuant to existing contracts or commitments and
(ii) in the ordinary course consistent with past practice;
(c) agree or commit to do any of the foregoing; or
<PAGE>
(d) (i) take or agree or commit to take any action that would
make any representation or warranty of Seller hereunder inaccurate in
any material respect at, or as of any time prior to, the Closing Date
or (ii) omit or agree or commit to omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in
any material respect at any such time; provided that Seller's receipt
of additional advances or loans from Oaktree shall not be deemed to
constitute a violation of this Section 5.01(d).
SECTION 5.2. Access to Information; Confidentiality. (a) From the date
hereof until the Closing Date other than as provided in Section 5.07, Seller and
Subsidiary will (i) give Buyer and its authorized Representatives reasonable
access to the offices, properties, books and records of Seller and Subsidiary
relating to the Business, (ii) furnish to Buyer and its authorized
Representatives such financial and operating data and other information relating
to the Business as any such Person may reasonably request and (iii) instruct the
employees, counsel and financial advisors of Seller and Subsidiary to cooperate
with Buyer in its investigation of the Business. Any investigation pursuant to
this Section shall be conducted in such manner as not to interfere unreasonably
with the conduct of the business of Seller and Subsidiary. No investigation by
Buyer or other information received by Buyer shall operate as a waiver or
otherwise affect any representation, warranty or agreement given or made by
Seller hereunder.
(b) After the Closing, Seller will hold, will cause Subsidiary to hold
and will use its best efforts to cause their respective Representatives to hold,
in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Business, except to the extent that such information
can be shown to have been (i) in the public domain through no fault of Seller or
Subsidiary or (ii) later lawfully acquired by Seller from sources other than
those related to its prior ownership of the Business. The obligation of Seller
to hold any such information in confidence shall be satisfied if it exercises
the same care with respect to such information as it would take to preserve the
confidentiality of its own similar information.
(c) On and after the Closing Date, Seller will afford to Buyer and its
agents reasonable access to its books of account, financial and other records
(including, without limitation, accountant's work papers), information,
employees and auditors to the extent necessary or useful for Buyer in connection
with any audit, investigation, dispute or litigation or any other reasonable
business purpose relating to the Business. Buyer shall bear all of the
out-of-pocket costs and expenses (including, without limitation, attorneys'
fees, but excluding reimbursement for general overhead, salaries and employee
benefits) reasonably incurred in connection with the foregoing.
(d) Seller shall, and cause its representatives to, continue to abide
by the terms of the Buyer Non-Disclosure Agreement.
<PAGE>
SECTION 5.3. Permits. If the Transferred Permits, if any, cannot be
transferred by Seller to Buyer without the approval of or other action by a
Governmental Authority, Seller shall file such notices and applications as Buyer
shall reasonably request to effectuate the transfer of such Permits to, or
reissuance of such Permits in the name of, the Buyer and shall otherwise
cooperate with Buyer to secure such transfer or reissuance; provided that
nothing herein is intended, or shall be construed, as a representation, warranty
or guarantee by Seller that such transfers or reissuances shall be approved or
effected by any Governmental Authority prior to or after the Closing.
SECTION 5.4. Notices of Certain Events. Seller shall promptly notify
Buyer of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or
involving or otherwise affecting Seller, Subsidiary or the Business
that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.10 or that relate
to the consummation of the transactions contemplated by this Agreement;
and
(d) the damage or destruction by fire or other casualty of any
Purchased Asset or part thereof.
<PAGE>
SECTION 5.5. No Shopping or Disclosure. From the date hereof through
and until the earlier to occur of the date that is eighty days after the date
hereof and the date of termination of this Agreement pursuant to Section 12.01,
(a) Seller shall not, Seller shall not permit Subsidiary to, and Seller shall
use its best efforts to cause their respective Representatives to not, directly
or indirectly, (i) solicit, initiate or encourage any inquiries, proposals, or
offers from any Person relating to any acquisition, directly or indirectly, of
the Purchased Assets, the Business or any material asset that is intended to be
a Purchased Asset, or any securities of, or any merger, consolidation or
business combination with Seller or Subsidiary (any such potential transaction
other than with Buyer, an "Acquisition Transaction"), (ii) provide any
confidential information or data to any Person relating to any Acquisition
Transaction or (iii) have any discussions or engage in any negotiations with any
Person relating to any Acquisition Transaction; and (b) if Seller shall receive
any inquiry, proposal or offer of the type described above or any request for
any such confidential information, discussions or negotiations (x) Seller shall
promptly provide Buyer with written notification of such inquiry, proposal,
offer or request, which notification shall include the terms and conditions of
any such offer or proposal and any other information relevant thereto, including
any written or other material available to Seller in connection therewith, and
(y) Seller shall advise the Person contacting Seller that it has no interest at
this time in discussing or responding to any such inquiry, proposal, offer or
request. Upon the effectiveness of this Agreement, this Section 5.05 supercedes
the Exclusivity Agreement and the Exclusivity Agreement is terminated as
provided in Section 13.09.
SECTION 5.6. Tail Insurance. Seller shall, at its sole cost and
expense, obtain and keep in full force and effect tail insurance that complies
with the representations contained in Section 3.15 covering errors and omissions
including, without limitation, malpractice claims, directors and officers
insurance and other professional claims, relating to the conduct by Seller or
Subsidiary of the Business prior to the Closing and provide evidence of such
insurance to Buyer.
SECTION 5.7. Customer List. No later than one Business Day after the
date when any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated, Seller
shall provide Buyer with the Customer List.
SECTION 5.8. Audited Financial Statements. If the Closing Date occurs
at any time on or after May 18, 1999, Seller shall deliver, as soon as it is
able and in any event no later than the date which is sixty days after the
Closing Date, audited financial statements for the fiscal year ended February
28, 1999, certified by Grant Thornton, LLP or other nationally recognized
accounting firm reasonably acceptable to Buyer. If the Closing Date occurs at
any time prior to May 18, 1999, Seller shall deliver, as soon as it is able and
in any event no later than the date which is sixty days after the Closing Date,
unaudited financial statements for the nine months ended November 30, 1998, in a
consistent format with the audited financials of the prior year.
<PAGE>
SECTION 5.9. HSR Act. Seller shall use its best efforts to timely and
promptly make all filings which are required to be made by it under the HSR Act,
including making the initial filing within two Business Days after the date
hereof. Seller shall furnish to Buyer such necessary information and reasonable
assistance as Buyer may reasonably request in connection with the Buyer's
preparation of any filings necessary under the provisions of the HSR Act. Seller
shall supply Buyer with copies of, and Buyer shall have the right to review and
comment on the form and substance of, all correspondence, filings or
communications (or memoranda setting forth the substance thereof) between Seller
or its counsel, on the one hand, and the Federal Trade Commission (the "FTC"),
the Antitrust Division of the United States Department of Justice (the
"Antitrust Division") or any other Governmental Authority or members of their
respective staffs, on the other hand, with respect to this Agreement and the
transactions contemplated hereby; provided that Seller may refrain from
providing such information to Buyer if it in good faith determines that sharing
such confidential business information (e.g. business plans or valuation
methods) would be detrimental to Seller. Seller shall respond to any requests
from the FTC or Antitrust Division as promptly as practicable.
SECTION 5.10. Patient Refund Policy. Between the date of this Agreement
and the Closing Date, Seller shall continue its stated practice of promptly
processing and paying all valid Patient Refunds when such requests are brought
to Seller's attention. Further, Seller shall process and pay any and all other
requests for refunds in a manner that will preclude any reduction or offset on
any receivable or the proceeds of any receivable.
SECTION 5.11. Resignations. Seller shall notify Buyer within one
Business Day in the event that an officer, senior management executive or sales
personnel has given notice to the CEO of Seller of an actual resignation or
retirement, or any intended date of resignation or retirement. The CEO of Seller
shall make a weekly inquiry in order to determine whether Seller's sales manager
has received any such notice.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.1. Representations and Warranties. From the date hereof until
the Closing Date, Buyer will not take or agree or commit to take any action that
would make any representation or warranty of Buyer hereunder inaccurate in any
material respect at, or as of any time prior to, the Closing Date or omit or
agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time.
<PAGE>
SECTION 6.2. Confidentiality. Prior to the Closing Date and after any
termination of this Agreement, subject to the requirements of applicable law,
Buyer shall, and shall cause its Representatives to, continue to abide by the
terms of the Seller Non-Disclosure Agreement; provided that Seller acknowledges,
and paragraph 2 of the Seller Non-Disclosure Agreement is hereby amended to
provide, that from and after the date hereof, Buyer and its Representatives may
use the Evaluation Materials (as defined therein) in connection with the
consummation of the transactions contemplated by this Agreement and its internal
preparation for its ownership and operation of the Purchased Assets and the
Business and its assumption of the Assumed Liabilities from and after the
Closing Date. On and after the Closing Date, the Seller Non-Disclosure Agreement
shall remain in full force and effect in accordance with and subject to its
terms solely with respect to Evaluation Materials that do not relate to the
Purchased Assets, the Assumed Liabilities or the Business, and the Seller
Non-Disclosure Agreement shall otherwise be terminated on the Closing Date.
SECTION 6.3. Access. On and after the Closing Date, Buyer will afford
Seller and its authorized Representatives reasonable access to its officers,
properties, books, records, employees and auditors to the extent relating to the
Business and necessary to permit Seller to determine any matter relating to
their respective rights and obligations hereunder or to any period ending on or
before the Closing Date, and instruct its Representatives to cooperate with
Seller in connection therewith; provided that any such access shall not
unreasonably interfere with the conduct of the Business of Buyer. Seller shall
bear all of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for general overhead, salaries and
employee benefits) reasonably incurred in connection with the foregoing. Seller
will hold, and will use its best efforts to cause its Representatives to hold,
in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information provided to it pursuant to this Section.
SECTION 6.4. Reservation of Shares. Buyer shall take all action
necessary at all times to have authorized, and reserved for the purpose of
issuance, no less than the number of shares of Common Stock needed to provide
for the issuance of the Conversion Shares upon such conversion.
SECTION 6.5. Financial Information. Buyer agrees to send to Seller
during the period that Seller holds any Note: (i) within five days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K, and any
registration statements or amendments filed pursuant to the 1933 Act; (ii)
within one (1) day after release thereof, copies of all press releases issued by
Buyer; (iii) copies of any notices and other information made available or given
to the stockholders of Buyer generally, contemporaneously with the making
available of or giving thereof to the stockholders.
<PAGE>
SECTION 6.6. HSR Act. (a) Buyer shall use its best efforts to timely
and promptly make all filings which are required to be made by it under the HSR
Act, including making the initial filing within two Business Days of the date
hereof. Buyer shall furnish to Seller such necessary information and reasonable
assistance as Seller may reasonably request in connection with Seller's
preparation of any filings necessary under the provisions of the HSR Act. Buyer
shall supply Seller with copies of all correspondence, filings or communications
(or memoranda setting forth the substance thereof) between Buyer or its counsel,
on the one hand, and the FTC, the Antitrust Division or any other Governmental
Authority or members of their respective staffs, on the other hand, with respect
to this Agreement and the transactions contemplated hereby; provided that Buyer
may refrain from providing such information to Seller if it in good faith
determines that sharing such confidential business information (e.g. business
plans or valuation methods) would be detrimental to Buyer. Buyer shall respond
to any requests from the FTC or Antitrust Division as promptly as practicable.
(b) Buyer shall pay the filing fee payable under the HSR Act.
SECTION 6.7. Notices of Certain Events. Buyer shall promptly notify
Seller of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving or
otherwise affecting Buyer that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.07 or that
relate to the consummation of the transactions contemplated by this Agreement.
SECTION 6.8. American Stock Exchange. As of the Closing Date, Buyer
shall have made all filings, if any, required to be made by it under the
American Stock Exchange rules.
ARTICLE 7
COVENANTS OF SELLER AND BUYER
Seller and Buyer agree that:
<PAGE>
SECTION 7.1. Efforts; Further Assurances. (a) Subject to the terms and
conditions of this Agreement, Buyer and Seller each agrees to use its best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Buyer and Seller
each agrees to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement and to vest in Buyer good and defensible title to
the Purchased Assets, in form and substance reasonably acceptable to Buyer and
Seller. Buyer and Seller each agrees to use its best efforts to cause the
conditions set forth in Section 10.01 to be satisfied, Seller agrees to use its
best efforts to cause the conditions set forth in Section 10.02 to be satisfied,
and Buyer agrees to use its best efforts to cause the conditions set forth in
Section 10.03 to be satisfied, in each case within five Business Days after the
date when any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
(b) Subject to the terms and conditions of this Agreement, Buyer and
Seller each agrees to use its best efforts to cooperate in ensuring a smooth
transition in ownership of the Purchased Assets and the Business, including
without limitation jointly holding employee meetings, preparing to integrate
computer systems, increasing Buyer's familiarity with Seller's facilities and
practices and jointly providing communications with employees, suppliers and,
subject to Seller's prior approval which shall not be unreasonably withheld,
customers.
(c) Seller hereby constitutes and appoints, effective as of the
Closing Date, Buyer and its successors and assigns as the true and lawful
attorney of Seller with full power of substitution in the name of Buyer, or in
the name of Seller but for the benefit of Buyer, (i) to collect for the account
of Buyer any items of Purchased Assets and (ii) to institute and prosecute all
proceedings which Buyer may in its sole discretion deem proper in order to
assert or enforce any right, title or interest in, to or under the Purchased
Assets, and to defend or compromise any and all actions, suits or proceedings in
respect of the Purchased Assets. Buyer shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing powers, including any
amounts payable as interest in respect thereof.
(d) If Seller becomes aware of any assets of Seller that should have
been transferred to Buyer under Section 2.01 but were not transferred because
such assets were omitted from any of the Schedules described under Section 3.09,
3.12(a) or 3.12(b), Seller shall promptly notify Buyer of the existence of such
asset which should have been transferred to Buyer. If Buyer notifies Seller
within sixty days of the Closing Date of any asset that had Seller disclosed the
existence of such asset, such asset would have been a Purchased Asset, then
Seller shall use its best efforts to promptly deliver such asset to Buyer,
without requiring any additional consideration therefor. Buyer and Seller
acknowledge and agree that any such assets are intended to be and shall
constitute Purchased Assets hereunder, and the Purchase Price paid hereunder
constitutes good and sufficient consideration for all Purchased Assets,
including any such assets delivered after the Closing Date. Until so delivered,
the same shall be held in trust by Seller as property of Buyer.
<PAGE>
SECTION 7.2. Certain Filings. Seller and Buyer shall reasonably
cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any Governmental Authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any Leases and Material Contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
SECTION 7.3. Public Announcements. The parties agree to provide each
other with any press release relating to this Agreement or the transactions
contemplated hereby prior to issuance and to consult with each other in good
faith before issuing any such press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to utilizing their respective best efforts to have such
consultation.
SECTION 7.4. No Solicitation of Employees. Buyer and Seller each agree
that, (a) during the period from and after the date hereof until the earlier of
the Closing Date and the date that this Agreement is terminated in accordance
with Section 12.01, unless it obtains the consent of the other party, it will
not offer to employ or employ any officer or senior management executive of the
other party, so long as any such officer or executive is employed by the other
party, (b) during the period from and after the date hereof until the earlier of
the Closing Date and the date that is six months after the date when this
Agreement is terminated in accordance with Section 12.01, unless it obtains the
consent of the other party, none of its officers, senior management executives
or managers will directly or indirectly solicit to employ any employees of the
other party. The term "solicit to employ" does not include general solicitations
of employment not specifically directed toward employees of the other party.
<PAGE>
SECTION 7.5. No Solicitation of Customers. During the period commencing
on the date hereof until the earlier of the Closing Date and the date that is
(A) if Buyer has not received the Customer List, three months or (B) if Buyer
has received the Customer List, or with respect to any Customer with whom sales
personnel of Buyer and Seller have made a joint sales call, six months after the
date when this Agreement is terminated for any reason in accordance with Section
12.01, unless it obtains the prior consent of Seller, neither Buyer nor its
Representatives shall, directly or indirectly, in any manner whatsoever,
including without limitation by the use of the Customer List or any information
contained therein, (a) initiate communications of any kind with any Person who
is identified with specificity on the Customer List (if Buyer has received the
Customer List), or (b) solicit, persuade, entice, encourage, or induce any
Person who is then a customer of Seller to become a customer of Buyer or to
terminate such Person's relationship with Seller with respect to such Person's
purchase of medical laboratory services, or (c) assist any Person to do any of
the foregoing; provided that Buyer and Seller shall cooperate in advising
Seller's clients of the transaction and in preparing customers for an effective
and efficient transition unless and until this Agreement is terminated for any
reason in accordance with Section 12.01; and provided further that a response by
Buyer to a general request for proposal or bid by a customer shall not be deemed
to be an initiation of communication or a solicitation, persuasion, enticement,
encouragement of inducement of such customer to become a customer of Buyer, so
long as such response is consistent with Section 6.02.
SECTION 7.6. Provider Numbers. Buyer and Seller shall take all
actions and timely file all notices as may be necessary in order for Buyer to
reject acceptance of Seller's Medicare provider numbers.
SECTION 7.7. Phlebotomy Locations. Buyer and Seller shall use their
respective reasonable efforts to obtain prior to the Closing Date an executed
lease and technical services agreement with respect to each of the physician
office locations listed on Schedule 7.07 between the applicable physician or
medical group and Buyer. Each such lease and technical services agreement shall
be effective as of the Closing Date.
ARTICLE 8
TAX MATTERS
SECTION 8.1. Tax Definitions. The following terms, as used herein,
have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Pre-Closing Tax Period" means (i) any Tax period ending on or before
the Closing Date and (ii) with respect to a Tax period that commences before but
ends after the Closing Date, the portion of such period up to and including the
Closing Date.
"Tax" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, registration, recording, documentary, conveyancing,
gains, withholding on amounts paid to or by Seller, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest, penalty, addition
to tax or additional amount imposed by any governmental authority (a "Taxing
Authority") responsible for the imposition of any such tax (domestic or foreign)
or (ii) liability for the payment of any amounts of the type described in (i) as
a result of being party to any agreement or any express or implied obligation to
indemnify any other Person.
SECTION 8.2. Tax Matters. Seller represents and warrants to Buyer that:
<PAGE>
(a) Except as set forth in Schedule 8.02, Seller and
Subsidiary have timely paid all Taxes, and all interest and penalties
due thereon and payable by Seller and Subsidiary for the Pre-Closing
Tax Period which will have been required to be paid on or prior to the
Closing Date, the non-payment of which (including Taxes set forth in
Schedule 8.02) would result in a Lien on any Purchased Asset, would
otherwise adversely affect the Business or would result in Buyer
becoming liable or responsible therefor.
(b) Seller and Subsidiary have established, in accordance with
generally accepted accounting principles applied on a basis consistent
with that of preceding periods, adequate reserves for the payment of,
and will timely pay all Tax liabilities, assessments, interest and
penalties which are incurred in or attributable to the Pre-Closing Tax
Period, the non-payment of which would result in a Lien on any
Purchased Asset, would otherwise adversely affect the Business or would
result in Buyer becoming liable therefor.
(c) Seller is not a "foreign person" as defined in Section
1445 of the Code.
SECTION 8.3. Tax Cooperation; Allocation of Taxes. (a) Buyer and Seller
agree to furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information and assistance relating to the
Business and the Purchased Assets (including, without limitation, access to
books and records) as is reasonably necessary for the filing of all Tax returns,
the making of any election relating to Taxes, the preparation for any audit by
any taxing authority, and the prosecution or defense of any claim, suit or
proceeding relating to any Tax. Buyer and Seller shall retain all books and
records with respect to Taxes pertaining to the Purchased Assets until the
expiration of the applicable statute of limitations. At the end of such period,
each party shall provide the other with at least ten days prior written notice
before destroying any such books and records, during which period the party
receiving such notice can elect to take possession, at its own expense, of such
books and records. Seller and Buyer shall cooperate with each other in the
conduct of any audit or other proceeding relating to Taxes involving the
Purchased Assets or the Business.
<PAGE>
(b) All real property taxes, personal property taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Closing Date (collectively, the
"Apportioned Obligations") shall be apportioned between Seller and Buyer based
on the number of days of such taxable period included in the Pre-Closing Tax
Period and the number of days of such taxable period after the Closing Date
(with respect to any such taxable period, the "Post-Closing Tax Period"). Seller
shall be liable for the proportionate amount of such taxes that is attributable
to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate
amount of such taxes that is attributable to the Post-Closing Tax Period. Upon
receipt of any bill for real or personal property taxes relating to the
Purchased Assets, each of Seller and Buyer shall present a statement to the
other setting forth the amount of reimbursement to which each is entitled under
this Section 8.03(b) together with such supporting evidence as is reasonably
necessary to calculate the proration amount. The proration amount shall be paid
by the party owing it to the other within ten days after delivery of such
statement. In the event that either Seller or Buyer shall make any payment for
which it is entitled to reimbursement under this Section 8.03(b), the other
party shall make such reimbursement promptly but in no event later than ten days
after the presentation of a statement setting forth the amount of reimbursement
to which the presenting party is entitled along with such supporting evidence as
is reasonably necessary to calculate the amount of reimbursement.
(c) All excise, sales, use, value added, registration stamp,
recording, documentary, conveyancing, franchise, transfer, and similar Taxes,
levies, charges and fees (collectively, "Transfer Taxes") incurred in connection
with the transfer to Buyer of the Purchased Assets and Assumed Liabilities as
contemplated by this Agreement shall be borne 50% by the Buyer and 50% by
Seller. Buyer and Seller shall cooperate in providing each other with any
appropriate resale exemption certifications and other similar documentation. The
party that is required by applicable law to make the filings, reports, or
returns with respect to any applicable Transfer Taxes shall do so, and the other
party shall cooperate with respect thereto as necessary.
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.1. Employee Benefits Definitions. The following terms, as
used in, have the following meanings:
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
SECTION 9.2. ERISA Representations. Seller hereby represents and
warrants to Buyer as of the date hereof and the Closing Date that:
<PAGE>
(a) Schedule 9.02(a) lists each "employee benefit plan", as
such term is defined in Section 3(3) of ERISA, which (i) is subject to
any provision of ERISA, (ii) is maintained, administered or contributed
to by Seller or any Affiliate of Seller and (iii) covers any employee
of Seller (hereinafter referred to collectively as the "Employee
Plans"). Subsidiary has no and has not had any Employee Plan. With
respect to each Employee Plan, Seller has made available to Buyer a
true and complete copy of such plan document, the most recently filed
Form 5500 and an accurate summary description of such plan.
(b) No Employee Plan is a Multiemployer Plan, and neither
Seller nor any of Seller's ERISA Affiliates maintains or contributes
to, or has maintained or contributed to, for a period of five years
preceding the date hereof, any employee benefit plan subject to Title
IV of ERISA. Neither Seller nor any of Seller's ERISA Affiliates has
incurred any liability under Title IV of ERISA arising in connection
with the termination of any plan covered or previously covered by Title
IV of ERISA that could become, after the Closing Date, an obligation of
Buyer or any of its Affiliates.
(c) Schedule 9.02(c) includes a list of each employment,
severance or other similar contract, arrangement or policy (written or
oral) and each plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or other
forms of incentive compensation or post-retirement insurance,
compensation or benefits which (i) is not an Employee Plan, (ii) is
entered into, maintained or contributed to, as the case may be, by
Seller or any Affiliate of Seller and (iii) covers any employee of
Seller. Such contracts, plans and arrangements as are described above,
copies or descriptions of all of which have been made available or
furnished previously to Buyer are hereinafter referred to collectively
as the "Benefit Arrangements." Subsidiary has no and has not had any
Benefit Arrangements. Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which
are applicable to such Benefit Arrangement.
(d) The Purchased Assets are not now nor will they after the
passage of time be subject to any Lien imposed under Code Section
412(n) by reason of the failure of Seller or any Affiliate of Seller to
make timely installments or other payments required by Code Section
412.
<PAGE>
(e) No Transferred Employee will become entitled to any
retirement, severance or similar benefit or enhanced benefit solely as
a result of the transactions contemplated hereby.
SECTION 9.3. Employees and Offers of Employment.
(a) The parties acknowledge that Buyer shall have no
liability or obligation whatsoever with respect to Employee Liabilities, nor
shall Buyer have any obligation to provide any employee benefits to any
employees other than as set forth in Sections 2.03(e), 2.03(g) and 9.03(b);
and provided that Buyer shall have the liabilities and be responsible for
Employee Liabilities with respect to Transferred Employees incurred by Buyer
after the Closing Date.
(b) Buyer intends to offer employment to certain employees of Seller
effective as of the Closing, on such terms and conditions (including length of
employment) as Buyer may, in its sole discretion, determine (any such employees
who accept Buyer's offer of employment and actually commence employment with
Buyer are referred to herein as "Transferred Employees"), but Buyer shall not be
under any obligation to hire any or all employees or any particular employees
under this Agreement or for any other reason. Buyer shall assume responsibility
for any Transferred Employee as of the Closing. For a period of one year
following the Closing, Buyer will provide compensation and benefits to
Transferred Employees no less favorable in the aggregate than those provided to
similarly situated employees of Buyer. Prior to the Closing, upon reasonable
prior notice to Seller, Buyer may make joint communications with Seller with any
of the employees currently employed in the Business.
(c) Subject to applicable legal restrictions, prior to the Closing,
Seller shall provide to Buyer, in a timely manner, any applicable personnel
records and information which Buyer may reasonably request with respect to any
employee of Seller. Seller shall not in any way participate in Buyer's decision
to hire or not to hire any employee of Seller.
SECTION 9.4. Seller's Employee Benefit Plans. (a) General. Seller shall
retain all obligations and liabilities under the Employee Plans and Benefit
Arrangements or otherwise in respect of each employee or former employee
(including any beneficiary thereof) who is not a Transferred Employee. Except as
expressly set forth herein, Seller or its designated Affiliates shall retain all
liabilities and obligations in respect of benefits accrued as of the Closing
Date by Transferred Employees under the Employee Plans and Benefit Arrangements
and any other employment-related liability related to employees of Seller
resulting from actions arising prior to or on the Closing Date, and neither
Buyer nor any of its Affiliates shall have any liability with respect thereto.
Except as expressly set forth herein, no assets of any Employee Plan or Benefit
Arrangement shall be transferred to Buyer or any of its Affiliates or to any
plan of Buyer or any of its Affiliates.
<PAGE>
(b) Seller's Defined Contribution Plans. (i) Effective as of the
Closing Date, Seller shall amend each of the defined contribution plans in which
Transferred Employees participate (the "Seller Savings Plans") to cause the
account balances of each Transferred Employee thereunder to become 100% vested
as of the Closing Date.
(ii) Seller shall take any steps necessary to permit the Transferred
Employees to receive a distribution of their accrued benefits from each of the
Seller Savings Plans as a result of the transactions contemplated by this
Agreement; provided the terms of those plans and applicable provisions of the
Code would permit such a distribution. On or following the Closing Date, the
savings plan of Buyer or one of its Affiliates (the "Buyer DC Plans") shall (if
elected by Transferred Employees) accept individual rollovers in cash of
Transferred Employees' distributions from the Seller Savings Plans, subject to
the terms and conditions of the Buyer DC Plans and applicable law. Buyer's
obligations under this subsection 9.04(b) are contingent upon receipt by Buyer
of a favorable determination letter or Seller' certificate to Buyer, in a manner
reasonably acceptable to Buyer, that the Seller Savings Plans are qualified
under the applicable provisions of the Code.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.1. Conditions to Obligations of Buyer and Seller. The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been
terminated.
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree of any Governmental Authority
having competent jurisdiction, shall prohibit the consummation of the
Closing.
(c) All actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the
Closing shall have been taken, made or obtained.
(d) Seller and Buyer shall have entered into a master sublease
pursuant to the terms of Section 2.14 and otherwise reasonably
satisfactory to each of Seller and Buyer
<PAGE>
SECTION 10.2. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Seller shall have performed in all material respects
all of its obligations hereunder required to be performed by it on or
prior to the Closing Date, (ii) the representations and warranties of
Seller contained in this Agreement, of Oaktree contained in the Oaktree
Guarantee or of Seller or Oaktree in any certificate or other writing
delivered by Seller or Oaktree pursuant hereto or in connection
herewith, disregarding all qualifications and exceptions contained
therein relating to materiality or Seller Material Adverse Effect,
shall be true at and as of the Closing Date, as if made at and as of
such date with only such exceptions as could not in the aggregate
reasonably be expected to have a Seller Material Adverse Effect and
(iii) Buyer shall have received a certificate signed by the Chief
Executive Officer of Seller and a senior officer of Oaktree to the
foregoing effect.
(b) There shall not be threatened (to the knowledge of Buyer
or Seller), instituted or pending any action or proceeding by any
Person before any Governmental Authority (i) seeking to restrain,
prohibit or otherwise interfere with the ownership or operation by
Buyer or any of its Affiliates of all or any material portion of the
Purchased Assets or the business or assets of Buyer or any of its
Affiliates or to compel Buyer or any of its Affiliates to dispose of
all or any material portion of the Purchased Assets or assets of Buyer
or any of its Affiliates or (ii) seeking to require divestiture by
Buyer or any of its Affiliates of any Purchased Assets.
(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree, enacted, enforced,
promulgated, issued or deemed applicable to the purchase of the
Purchased Assets, by any Governmental Authority, other than the
application of the waiting period provisions of the HSR Act to the
purchase of the Purchased Assets, that could, directly or indirectly,
result in any of the consequences referred to in clauses 10.02(b)(i)
and 10.02(b)(ii) above.
<PAGE>
(d) Buyer shall have received an opinion of Latham & Watkins,
counsel to Seller, an opinion of Milbank, Tweed, Hadley & McCloy LLP,
counsel to Oaktree, an opinion of Kenneth Liang, general counsel to
Oaktree and an opinion of Morris, Nichols, Arsht and Tunnell, each such
opinion dated the Closing Date and to be reasonably acceptable to
Buyer. In rendering such opinion, such counsel may rely upon
certificates of public officers, as to matters governed by the laws of
jurisdictions other than New York or the federal laws of the United
States of America, upon opinions of counsel reasonably satisfactory to
Buyer, and, as to matters of fact, upon certificates of officers of
Seller, copies of which opinions and certificates shall be
contemporaneously delivered to Buyer.
(e) Seller shall have executed and delivered to Buyer the
Assignment and Assumption Agreement and such other deeds, bills of
sale, endorsements, assignments and other good and sufficient
instruments of conveyance and assignment as the parties and their
respective counsel shall deem reasonably necessary or appropriate to
vest in Buyer all right, title and interest in, to and under the
Purchased Assets; Seller shall have executed and delivered to Buyer the
Registration Rights Agreement; Oaktree shall have executed and
delivered to Buyer the Oaktree Guarantee and any other document
required to consummate the transactions contemplated hereby.
(f) Seller shall have received all Material Consents, other
than any consent required under Contracts with Customers, and all
consents, authorizations or approvals from the Governmental Authorities
referred to in Section 3.03 or 3.21, in each case in form and substance
reasonably satisfactory to Buyer, and no such consent, authorization or
approval shall have been revoked.
(g) Buyer shall have received all documents it may reasonably
request relating to the existence and good standing in its jurisdiction
of incorporation of Seller, Subsidiary and Oaktree and the authority of
Seller and Oaktree to execute, deliver and perform this Agreement, the
Oaktree Guarantee and the other documents, agreements and instruments
referred to herein or therein to which Seller or Oaktree is a party,
all in form and substance reasonably satisfactory to Buyer.
(h) Seller shall have made arrangements reasonably
satisfactory to Buyer (including monthly rental payments by Buyer of no
greater than $36,180.56) for Buyer's possession and use of the facility
at 3301 C Street, Sacramento, CA 95817 from the Closing Date through
October 31, 1999.
(i) Seller shall have received a payoff letter in form and
substance satisfactory to Buyer, including an undertaking to release
all Liens on any asset of Seller or Subsidiary created under or in
connection with the Daiwa Loan Agreements or related documents upon
full payment of the amount listed in the payoff letter, executed by
each holder of such Lien along with an undertaking to file all
documents necessary to evidence and record the release of all Liens
created under the Daiwa Loan Agreements and related documents ("Payoff
Letter").
(j) Subsidiary shall have merged with and into Seller pursuant
to documentation reasonably satisfactory to Buyer.
<PAGE>
SECTION 10.3. Conditions to Obligation of Seller. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) Buyer shall have performed in all material respects
all of its obligations hereunder required to be performed by it on or
prior to the Closing Date, (ii) the representations and warranties of
Buyer contained in this Agreement and in any certificate or other
writing delivered by Buyer pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality
or Buyer Material Adverse Effect, shall be true at and as of the
Closing Date, as if made at and as of such date with only such
exceptions as could not in the aggregate reasonably be expected to have
a Buyer Material Adverse Effect and (iii) Seller shall have received a
certificate signed by the Chief Executive Officer or any Executive Vice
President of Buyer to the foregoing effect.
(b) There shall not be threatened (to the knowledge of Buyer
or Seller), instituted or pending any action or proceeding by any
Person before any Governmental Authority seeking to restrain, prohibit
or otherwise interfere with the transfer of the Purchased Assets or a
material portion thereof by Seller to Buyer.
(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree enacted, enforced, promulgated,
issued or deemed applicable to the transfer of the Purchased Assets, by
any Governmental Authority, other than the application of the waiting
period provisions of the HSR Act to the transfer of the Purchased
Assets that could, directly or indirectly, result in any of the
consequences referred to in Section 10.03(b) above.
(d) Seller shall have received an opinion of Davis Polk &
Wardwell, counsel to Buyer, dated the Closing Date, and an opinion of
Mark L. Bibi, Executive Vice President, Secretary and General Counsel
of the Buyer, dated the Closing Date, each as reasonably acceptable to
Seller. In rendering such opinion, such counsel may rely upon
certificates of public officers, as to matters governed by the laws of
jurisdictions other than New York or the federal laws of the United
States of America, upon opinions of counsel reasonably satisfactory to
Seller, and, as to matters of fact, upon certificates of officers of
Buyer, copies of which opinions and certificates shall be
contemporaneously delivered to Seller.
(e) Buyer shall have executed and delivered to Seller the
Consideration Note, a certificate evidencing the Consideration Shares,
the Registration Rights Agreement and any other documents required to
consummate the transactions contemplated hereby.
<PAGE>
(f) Buyer shall have received all required consents under each
agreement, contract, instrument or Permit listed on Schedule 4.05 and
all other consents, authorizations or approvals from Governmental
Authorities referred to in Section 4.03, in each case in form and
substance reasonably satisfactory to Seller, and no such consent,
authorization or approval shall have been revoked.
(g) Seller shall have received all documents it may reasonably
request relating to the existence and good standing in Delaware of
Buyer and the authority of Buyer to execute, deliver and perform this
Agreement and the other documents, agreements and instruments referred
to herein to which Buyer is a party, all in form and substance
reasonably satisfactory to Seller.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.1. Survival. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until the second anniversary of the Closing Date; provided that the
representations and warranties contained in Article 8 or 9 shall survive until
the expiration of the statute of limitations applicable to the matters covered
thereby (giving effect to any waiver, mitigation or extension thereof), if
later. Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if the party seeking indemnification under Section 11.02 (the "Indemnified
Party") delivers written notice of the inaccuracy thereof giving rise to such
right of indemnity to the party against whom indemnity is sought (the
"Indemnifying Party") within the applicable survival period.
SECTION 11.2. Indemnification. (a) Seller hereby indemnifies Buyer
against and agrees to hold Buyer harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by Buyer arising
out of:
(i) any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by Seller pursuant to this Agreement;
or
(ii) any Excluded Liability.
<PAGE>
(b) Buyer hereby indemnifies Seller against and agrees to hold Seller
harmless from any and all Damages incurred or suffered by Seller arising out of:
(i) any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by Buyer pursuant to this Agreement;
or
(ii) any Assumed Liability.
SECTION 11.3. Procedures. (a) The Indemnified Party shall give prompt
notice to the Indemnifying Party of the assertion of any claim, or the
commencement of any suit, action or proceeding in respect of which indemnity may
be sought under Section 11.02. The Indemnifying Party shall have the right at
any time to assume and thereafter conduct the defense of any such claim, suit,
action or proceeding ("Claim") with counsel of its choice reasonably
satisfactory to the Indemnified Party. Upon such assumption of the defense of
any Claim hereunder, the Indemnified Party and its Affiliates shall (i) provide
the Indemnifying Party and its counsel with reasonable access to its officers
and employees, the Purchased Assets, the Excluded Assets and any books or
records pertaining thereto as the Indemnifying Party or its counsel shall deem
necessary in investigating the defense of such claim, and (ii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Claim without the prior written consent of the Indemnified
Party (which consent shall not be withheld or denied unreasonably). Unless and
until an Indemnifying Party assumes the defense of the Claim as provided in the
foregoing sentence, however, the Indemnified Party may defend against the Claim
in any manner it reasonably may deem appropriate; provided that in no event will
the Indemnified Party consent to the entry of any judgment or enter into any
settlement with respect to such Claim without the prior written consent of the
Indemnifying Party (which consent shall not be withheld or denied unreasonably)
and; provided further that in no event shall the Indemnifying Party be required
to pay the fees or disbursements of more than one firm of attorneys for the
Indemnified Parties with respect to any such Claim.
(b) Buyer shall be entitled to set-off and recoup any principal,
interest or other amounts payable by it under the Notes (regardless of the
identity of the holder or holders of the Notes and whether or not any such
amount is then due and payable) by the amount of damages to Buyer under Section
5.08 which shall not be less than $2,000,000 or greater than the principal
amount of the Notes. If Buyer (i) sets-off or recoups against the Notes pursuant
to this Section 11.03(b), Buyer shall not be entitled to claim any
indemnification under Section 11.02(i) with respect to the breach of Section
5.08 hereof or (ii) makes any claim for indemnification under Section 11.02(i)
with respect to the breach of Section 5.08, Buyer shall not be entitled to
set-off against the Notes pursuant to this Section 11.03(b). Buyer shall
promptly notify Seller of any offset or recoupment taken pursuant to this
Section 11.03(b).
<PAGE>
SECTION 11.4. Limitations.
(a) Seller shall not be liable for any Damages under Section
11.02(a)(i) until the aggregate amount of Damages with respect to all matters
referred to in Section 11.02(a)(i) exceeds $1,000,000 and then only to the
extent of such excess. Seller's maximum aggregate liability for Damages under
Section 11.02(a)(i) shall not exceed (i) $15,000,000 for Damages for claims as
to which notice has been provided to Seller prior to the first anniversary of
the Closing Date plus (ii) the lesser of (A) $10,000,000 or (B) the amount by
which $15,000,000 exceeds the Damages paid pursuant to clause (i) above, as to
which notice has been provided to Seller between the date commencing one day
after the first anniversary date of Closing and ending on the second anniversary
date of Closing.
(b) Buyer shall not be liable for any damages under Section
11.02(b)(i) until the aggregate amount of Damages with respect to all matters
referred to in Section 11.02(b)(i) exceeds $1,000,000 and then only to the
extent of such excess. Buyer's maximum aggregate liability for Damages under
Section 11.02(b)(i) shall not exceed (i) $15,000,000 for Damages for claims as
to which notice has been provided to Buyer prior to the first anniversary of the
Closing Date plus (ii) the lesser of (A) $10,000,000 or (B) the amount by which
$15,000,000 exceeds the Damages paid pursuant to clause (i) above, as to which
notice has been provided to Buyer between the date commencing one day after the
first anniversary date of Closing and ending on the second anniversary date of
Closing.
ARTICLE 12
TERMINATION
SECTION 12.1. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer;
(b) by Seller or Buyer if the Closing shall not have been
consummated on or before the date that is eighty days after the date
hereof;
(c) by Seller or Buyer if there shall be any law or regulation
that makes consummation of the transactions contemplated hereby illegal
or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree
or judgment of any Governmental Authority having competent jurisdiction
which cannot be cured within 10 Business Days.
<PAGE>
The party desiring to terminate this Agreement pursuant to clauses
12.01(b) or 12.01(c) shall give notice of such termination to the other party.
SECTION 12.2. Effect of Termination. If this Agreement is terminated as
permitted by Section 12.01, such termination shall be without liability of
either party (or any stockholder or Representative of such party) to any other
party to this Agreement; provided that if such termination shall result from the
(i) willful failure of either party to fulfill a condition to the performance of
the obligations of the other party, (ii) failure to perform a covenant of this
Agreement or (iii) breach by either party hereto of any representation or
warranty or agreement contained herein, such party shall be fully liable for any
and all Damages incurred or suffered by the other party as a result of such
failure or breach. The provisions of Sections 5.02(d), 6.02, 7.04(b), 7.05,
13.03, 13.05, 13.06 and 13.07 shall survive any termination hereof pursuant to
Section 12.01.
ARTICLE 13
MISCELLANEOUS
SECTION 13.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Buyer, to:
Unilab Corporation
401 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: Mark L. Bibi
Fax: (201) 525-1331
and
Unilab Corporation
18448 Oxnard Street
Tarzana, CA 91356
Attention: Brian Urban
Fax: (818) 757-3809
<PAGE>
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Donald S. Bernstein
Fax: (212) 450-4800
if to Seller or the Subsidiary, to:
Bio-Cypher Laboratories
c/o J. Marvin Feigenbaum
Westwood Marquis
930 Hillgard Avenue
Los Angeles, CA 90024
Fax: (310) 824-0355
with a copy to:
Latham & Watkins
505 Montgomery St. Suite 1900
San Francisco, CA 94111
Attention: Paul DeMuro
Fax: (415) 395-8095
and to:
Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
Attention: Kenneth Liang
Fax: (213) 830-8522
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
601 South Figueroa Street
Los Angeles, CA 90017
Attention: Robert Jay Moore
Fax: (213) 629-5063
<PAGE>
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 13.2. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 13.3. Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense.
SECTION 13.4. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement,
without the consent of each other party hereto, except that (i) Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
Affiliates, the right to purchase all or a portion of the Purchased Assets, but
no such transfer or assignment will relieve Buyer of its obligations hereunder
or impose any additional obligation on Seller and (ii) Seller may transfer or
assign, in whole or from time to time in part, to one or more of its Affiliates,
any of its rights under this Agreement, but no such transfer or assignment will
relieve Seller of its obligations hereunder or impose any additional obligation
on Buyer.
SECTION 13.5. Governing Law. Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard
to the conflicts of law rules of such state.
<PAGE>
SECTION 13.6. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Southern District of New
York or any other New York court sitting in Manhattan, and each of the parties
hereby consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section 13.01 shall be deemed effective service of
process on such party.
SECTION 13.7. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 13.8. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
SECTION 13.9. Entire Agreement. This Agreement, together with all
exhibits and schedules hereto, and the Buyer Non-Disclosure Agreement, the
Seller Non-Disclosure Agreement constitute the entire agreement between the
parties with respect to the subject matter of this Agreement and supersede all
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter of this Agreement. The parties hereto agree
that upon the effectiveness of this Agreement, the Exclusivity Agreement dated
as of January 17, 1999 among Buyer, Seller, Oaktree and Nu-Tech is hereby
terminated.
SECTION 13.10. Bulk Sales Laws. Buyer and Seller each hereby waive
compliance by Seller with the provisions of the "bulk sales", "bulk transfer"
or similar laws of any state.
SECTION 13.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
<PAGE>
SECTION 13.12. Schedules and Exhibits. The Schedules and Exhibits
attached to this Agreement are incorporated herein and shall be part of this
Agreement for all purposes; provided however, that Seller and Buyer each shall
have the right to update and/or supplement any or all of the Schedules (other
than Schedules 1.01 and 2.08) by providing the other party with such updated
and/or supplemented schedules no later than one Business Day after the date when
any applicable waiting period under the HSR Act relating to the transactions
contemplated hereby shall have expired or been terminated. The recipient party
shall have the right to review the revised Schedules for a period of two
Business Days after receipt thereof. At any time within the two Business Days
time period Buyer shall have the right to request an adjustment to the Cash
Amount or to terminate this Agreement by notice to Seller if the revised
information would reasonably be likely to have a material adverse effect on the
business of Buyer. This notice, if given, shall specify the information forming
the basis for the decision to request an adjustment to the Cash Amount or to
terminate. Seller shall have two Business Days after receipt of the notice to
review with Buyer the information forming the basis for the decisions and to
attempt to agree on corrective measure, if any. If the parties cannot agree on
corrective measures within such two Business Day period, then parties will use
their respective best efforts to agree on a methodology to determine the
adjustment, if any, to the Cash Amount or if no methodology is agreed to then
the parties will enter into binding alternative dispute resolution. If the
Agreement is not terminated as permitted by this Section, Buyer shall be deemed
to have accepted such revisions, and the Schedules attached to this Agreement as
of the date hereof shall be deemed to be superseded by the revised Schedules,
but Buyer shall have a claim against Seller for any diminished value of the
Purchased Assets.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
UNILAB CORPORATION
By:
Name: Richard A. Michaelson
Title: Director
PHYSICIANS CLINICAL LABORATORY, INC.
D/B/A BIO-CYPHER LABORATORIES
By:
Name: J. Marvin Feigenbaum
Title: Chief Executive Officer
<PAGE>
Schedule 1.01
OCM Opportunities Fund, L.P.
OCM Opportunities Fund II, L.P.
Oaktree Capital Management, LLC as investment manger of the Columbia/HCA Master
Retirement Trust (Separate Account I)
Oaktree Capital Management, LLC as investment manger of the Columbia/HCA Master
Retirement Trust (Separate Account II)
<PAGE>
CROSS-REFERENCE TARGET LIST
NOTE: Due to the number of targets some target names may not appear
in the target pull-down list.
(This list is for the use of the wordprocessor only, is not a part of this
document and may be discarded.)
ARTICLE/SECTION TARGET NAME
1.........................def.art
1.01..........................def
1.01(a)..................term.def
1.01(b).................term.list
2..................purch.sale.art
2.01................pur.and.sales
2.01(a).............real.property
2.01(b).............real.prop.int
2.01(c)...................raw.mat
2.01(d).........all.rts.contracts
2.01(e)..................all.acct
2.01(f)...........all.prepaid.exp
2.01(g)................petty.cash
2.01(h)............rt.3rd.parties
2.01(i)............patents.cpyrts
2.01(j).........trans.lic.permits
2.01(k)............all.bk.records
2.01(m).....................2.01m
2.01(n)..............all.goodwill
2.02....................ex.assets
2.02(a)..................ex.ass.a
?........................ex.ass.b
2.02(b), 2.02(d).........ex.ass.c
2.02(c)..................ex.ass.d
2.02(e)..................ex.ass.e
2.02(f), 2.02(g).........ex.ass.f
2.03.....................ass.liab
2.03(a)...........all.liabilities
2.03(b)...........liab.oblig.comm
2.03(c)..................the.liab
?.............liab.oblig.ins.proc
2.03(d)........liab.oblig.permits
2.03(e).the.liabilities.of.seller
2.03(g)liabilities.under.worker.adjt
2.04..................exclud.liab
2.04(a)...........liability.taxes
2.04(b).............emp.bene.liab
2.04(c)..........any.environ.liab
2.04(d).............liab.ex.asset
2.04(i)..............liab.exp.ass
2.05.............assign.contracts
2.06............pur.prc.all.purch
2.06(a)...............purch.price
2.06(b)..........purch.price.allo
2.06(c).........sell.buy.bnd.allo
2.06(d)............copy.form.8592
2.07......................closing
2.08..........adjt.purchase.price
2.09........remittance.obligation
?.........terms.assign.assump.agt
?..............................07
?............................2.08
2.10.............pros.reimbs.deps
2.10(a).......sell.buy.bond.alloc
2.10(a)(i)............applic.chgs
2.10(a)(ii).....liens.not.detract
2.10(b).........sell.by.bnd.alloc
2.11..............patient.refunds
2.11(a)...................2.11(a)
2.11(c).............refund.adjust
2.11(d).......refund.payment.date
2.12..............second.cash.pay
2.13...............adjmt.disputes
3....................rep.war.sell
3.01..................corp.exist.
3.02..............sell.corp.autho
3.03..................gov't.auth.
3.04..............noncontravent.
3.05.................req.consent
3.05............required.consent
3.06.............financial stmts
3.07...............abs.cert.chgs
3.07(a)............any.event.adv
3.07(c).........any.lien.mat.adv
3.07(d)...............any.damage
3.07(e)..........any.transaction
3.07(f).............any.chg.acct
3.07(g)..............any.emp.agt
3.07(h)........any.labor.dispute
3.07(i)...........any.cap.expend
3.08..............no.undisclosed
3.08(a).......................02
3.08(b).......................01
3.09...............mat.contracts
3.09(a).........except.contracts
3.09(b)........each.contract.dis
3.09(c)..................3.09(c)
3.10....................sell.lit
3.11........................3.11
3.12..................properties
3.12(a)...........sell.real.prop
3.12(b)...........sell.pers.prop
3.12(c)...........sell.has.title
3.12(d).......all.real.prop.used
3.12(e).......all.leases.good.st
3.12(f)..........bldg.no.mat.def
3.12(g)..................3.12(g)
3.13.................sufficiency
3.13(a)...........purch.all.prop
3.13(b)............buy.acq.title
3.14..................intel.prop
3.14(a)......list.intel.prop.rts
3.14(b)......sell.not.def.intell
3.15.....................ins.cov
3.16.............license.permits
3.17.................receivables
3.18.............selling.documnt
3.19................finders.fees
3.20..............sell.employees
3.21..............environ.compl.
3.21(a)..........except.as.discl
3.21(b)........no.environ.invest
3.21(c)................not.nj.ct
3.21(d)..............seller.term
?............arrange.shareholder
3.22(d)............understanding
3.23..................subsidiary
3.23(b)(i)...........no.out.secs
3.23(b)(ii)..........no.out.opts
?.................sell.represent
4....................rep.war.buy
4.01..............org.and.exist.
4.02..............buy.corp.autho
4.03...............buy.gov.autho
4.04..........sec.noncontravent.
4.05....................consents
4.06...................buy.finan
4.07..............buy.litigation
4.08............buy.finders.fees
4.09.........................001
4.10.....................sec.doc
4.12........................4.12
4.13........................4.13
4.14........................4.14
5...................cov.sell.art
5.01................sell.cond.busi
5.01(a)...............buy.not.acqu
5.01(b)............buy.sell.assets
5.01(c)..............buy.not.agree
5.01(d).............buy.not.commit
5.02....................acc.inform
5.02(a)...........full.access.info
5.02(b)............hold.confid.doc
5.02(c), 5.02(d)...access.to.books
5.03...................cep.filings
5.04.............not.of.cer.events
5.04(a).............person.conesnt
5.04(b)...........gov.regul.agency
5.04(c).........actions.threatened
5.04(d).............damage.by.fire
5.05...............no.shopping.dis
5.07.................customer.list
5.08.................aud.fin.stmts
6......................cov.buy.art
6.01.................reps.warrants
6.02................confientiality
6.03........................access
7.....................cov.buy.sell
7.01............best.efforts.furth
7.01(a)................cause.to.do
7.01(d).......seller.becomes.aware
7.01(c), 7.01(d).buy.true.law.atty
7.02..................cert.filings
7.03...............public.announce
7.04..................no.solic.emp
7.04(b)........no.solic.emp.during
7.05............no.solic.customers
7.06.................provider.nums
8..........................tax.def
8.01...................tax.mat.def
8.02.......................tax.mat
8.02(a)..........seller.paid.taxes
8.02(b), 8.02(c).seller.estab.acct
?..............tax.mat.subsidieary
8.03.........tax.coop;alloc.of.tax
8.03(a)..........furn.info.nec.tax
8.03(b).............all.real.propr
8.03(c).............transfer.taxes
9.....................emp.bene.art
9.01................employ.ben.def
9.02(a)...............emp.ben.plan
9.02....................erisa.reps
.........................emp.plans
9.02(b)...........no.multiemp.plan
?...............emp.plan.qualified
9.02(c).............list.emp.sever
?.................exc.as.set.forth
9.02(d)........no.fail.time.instal
9.02(e)..........no.trans.employee
9.02(e)...........no.trans.emp.ent
9.03....................employ.ben
9.03(a)............active.employee
9.03(b)...........sell.sec.emp.agt
9.04.............sell.emp.bene.pln
9.04(a)..........sell.retain.oblig
10...................cond.to.clos.
10.01...................cond.oblig
10.01(a).........cond.hsr.wait.exp
10.01(b)...........no.law.prohibit
10.01(c), 10.01(d)all.action.taken
10.02...............cond.oblig.buy
10.02(a)..........sell.perf.oblig
10.02(b)...........no.pending.act
10.02(c)..........no.gov.act.take
10.02(d)...........opin.coun.sell
10.02(e)........exe.del.other.agt
10.02(f)........rec.all.recq.cons
10.03.............cond.oblig.sell
10.03(a).......buy.perf.all.oblig
10.03(b).....buy.perf.all.oblig.b
10.03(c).....buy.perf.all.oblig.c
10.03(e)...........exec.del.other
10.03(f)........buy.rec.all.conse
10.03(g)........sell.rec.all.docs
11.................surv.indem.art
11.01....................survival
11.02.............indemnification
11.02(a).......................04
11.02(a)(i)...........brch.warrty
11.02(b)(i)................misrep
11.03..................procedures
11.03(b).......................05
11.04.................limitations
11.04(a)............sell.not.liab
11.04(b).............buy.not.liab
12.......................term.art
12.01................grounds.term
12.01(a)...............mutual.agt
12.01(b)..........clos.not.consum
?...................trans.illegal
12.02.................effect.term
13.......................misc.art
13.01.....................notices
13.02.................amend.waive
13.02(a)...........any.prov.amend
13.02(b)...........no.delay.waive
13.03....................expenses
13.04................succ.assigns
13.05...............governing.law
13.06................jurisdiction
13.07...........waiver.jury.trial
13.08................counterparts
13.09..................entire.agt
13.10.............bulk.sales.laws
13.11....................captions
<PAGE>
NEITHER THIS NOTE, THE SECONDARY NOTES ISSUABLE IN RESPECT OF INTEREST HEREUNDER
NOR THE SHARES OF THE ISSUER'S COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN (AND ANY SUCH OTHER
NOTES AND SHARES WILL BE) ACQUIRED FOR THE ACCOUNT OF THE HOLDER AND NOT WITH A
VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH A PUBLIC OFFERING AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES
LAW, OR AN EXEMPTION FROM SUCH REGISTRATION OR UNLESS SOLD PURSUANT TO RULE 144
UNDER THE SECURITIES ACT.
No. ___ $[ ]
UNILAB CORPORATION
7.50% NOTE
UNILAB CORPORATION, a Delaware corporation (together with its
successors, the "Issuer"), for value received, hereby promises to pay to
PHYSICIANS CLINICAL LABORATORIES, INC., a Delaware corporation doing business as
Bio-Cypher Laboratories (the "Holder"), and its successors, transferees and
permitted assigns the principal sum of TWENTY FIVE MILLION DOLLARS AND 00/100
CENTS ($25,000,000) in accordance with the terms and conditions hereof, plus
interest from and after the date hereof as provided herein.
The unpaid principal amount of this Note outstanding from time to time
shall bear interest at the rate of 7.50% per annum, subject to any limitations
on the rate of interest imposed by applicable law, which interest shall be
computed on the basis of the actual number of days elapsed over a year of 365
days, and shall be payable semiannually in arrears on each [ ] and [ ] after the
date hereof until such principal amount is paid in full as provided herein.
Subject to Section 6, the Issuer may pay interest on this Note either in cash or
through the issuance of additional Notes, at the Issuer's option, which
additional Notes (the "Secondary Notes") shall be dated the applicable interest
payment date, shall have the same terms and restrictions as this Note and shall
be in an aggregate principal amount equal to the amount of interest payable with
respect to this Note if such interest were paid in cash. The issuance of any
such Secondary Note to the Holder hereof will be considered payment of interest
on this Note on the applicable interest payment date. Each Secondary Note shall
bear a legend in a form substantially the same as the legend which appears on
the face hereof.
<PAGE>
Any cash payments made to the Holder hereunder shall be made in United
States Dollars by wire transfer of immediately available funds to an account
designated by the Holder by notice to the Issuer (or, if no such notice is
received by the Issuer, by check delivered to such Holder's address as the same
appears on the Register (defined below)) in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
This Note is a duly authorized Note of the Issuer referred to in the
Asset Purchase Agreement (the "Asset Purchase Agreement") dated as of April
[___], 1999 between the Issuer and Physicians Clinical Laboratories, Inc.
("Seller").
This Note may be transferred or assigned in whole and in part, but any
partial assignment must be in a minimum aggregate amount of $1,000,000; provided
that the initial holder of the Note issued on the Closing Date under the Asset
Purchase Agreement may assign partial interests in its Note of less than
$1,000,000 to no more than three persons. The Issuer agrees to issue to the
Holder or any permitted transferee of the Holder from time to time a replacement
Note or Notes in the form hereof, provided that the transfer or assignment is
made in compliance with applicable securities laws, and evidence of the transfer
or assignment reasonably satisfactory to the Issuer, together with the original
Note, are delivered to the Issuer. References to "Note" shall include the Note
or Notes issued following a permitted transfer or assignment of this Note in
whole or in part to a permitted transferee or transferees and shall also include
all Secondary Notes. In addition, after delivery of an indemnity in form and
substance satisfactory to the Issuer in its reasonable discretion, the Issuer
also agrees to issue a replacement Note if this Note has been lost, stolen,
mutilated or destroyed.
The Issuer agrees to record this Note on the Register referred to
below. A Note recorded on the Register ("Registered Note") may not be evidenced
by a note other than a Registered Note and, upon the registration of the Note,
any promissory note (other than a Registered Note) evidencing the same shall be
null and void and shall be returned to the Issuer. The Note, once recorded on
the Register, may not be removed from the Register so long as it remains
outstanding and a Registered Note may not be exchanged for a note that is not a
Registered Note.
<PAGE>
The Issuer shall maintain, or cause to be maintained, a register (the
"Register") on which it enters the name of the Holder as the registered owner of
this Note and the outstanding principal amount of such Note. A Registered Note
may be assigned or sold in whole or in part, in a minimum aggregate amount of
$1,000,000 (or such lesser amount as explicitly provided in the paragraph two
paragraphs above), only by registration of such assignment or sale on the
Register (and each Registered Note shall expressly so provide). Any assignment
or sale of all or part of such Registered Note may be affected only by
registration of such assignment or sale on the Register, together with the
surrender of the Registered Note, if any, evidencing the same duly endorsed by
(or accompanied by a written instrument of assignment or sale duly executed by)
the holder of such Registered Note(s), whereupon, at the request of the
designated assignee(s) or transferee(s), one or more new Registered Note in the
same aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s). Prior to the registration of assignment or sale of any Registered
Note, the Issuer shall treat the person in whose name such Registered Note is
registered as the owner thereof for the purpose of receiving all payments
thereon and for all other purposes.
In the event that the Holder sells participations in any Registered
Note, each in a minimum aggregate amount of $1,000,000, the Holder shall
maintain a register on which it enters the name of all participants in such
Registered Note (the "Participant Register"). A Registered Note may be
participated in whole or in part only by registration of such participation on
the Participant Register (and each Registered Note shall expressly so provide).
Any participation of such Registered Note may be effected only by the
registration of such participation on the Participant Register. No participant
will have any independent rights under this Note and any rights must be
exercised through the Holder.
Any foreign person who purchases or is assigned or participates in any
portion of any Registered Note shall provide the Issuer (in the case of a
purchase or assignment) or the Holder (in the case of a participation) with a
completed Internal Revenue Service Form W-8 (Certificate of Foreign Status) or a
substantially similar form for such purchaser, participant or any other
affiliate who is a holder of beneficial interests in any Registered Note.
SECTION 1. Certain Terms Defined. For all purposes of this Note, terms
defined in this Note shall have the meaning set forth herein. The following
terms shall have the respective meanings specified below. Terms defined in this
Note include the plural as well as the singular.
"Average Closing Price" means, for any date, the (i) sum of the Closing
Price of the Common Stock multiplied by the volume of Common Stock traded on
such day for the 20 consecutive Trading Days immediately preceding such date
divided by (ii) the aggregate volume of Common Stock traded during such 20
Consecutive Trading Days.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Cash Premium" means, for any Sinking Fund Payment Date, (i) if the
Average Closing Price of the Common Stock for such Sinking Fund Payment Date
exceeds the Conversion Price, one plus the amount obtained by dividing the
amount of such excess by the Conversion Price, or (ii) otherwise, one.
"Closing Date" means the Closing Date under the Asset Purchase Agreement.
<PAGE>
"Closing Price" of the Common Stock on a given Trading Day means the
average of the high and low price of the Common Stock for such Trading Day, as
reported on the AMEX, or if the Common Stock is not then listed on the AMEX, as
reported by the principal securities exchange or inter-dealer quotation system
or OTC Bulletin Board on which the Common Stock is then traded. If the Common
Stock is not reported in any manner described above, the Buyer and holders of
50% or more of the Notes shall agree on the fair market value of a share of
Common Stock (determined without giving effect to any discount for a minority
interest or any lack of liquidity of the Common Stock due to the fact that there
may be no public market for the Common Stock). If the parties fail to agree but
their calculation of the fair market value of a share of Common Stock differs by
less than 10%, the Closing Price shall be the average of the parties
calculations; otherwise the parties will select an arbitrator who will determine
the Closing Price by choosing the value presented by a party which most closely
resembles the fair market value of a share of Common Stock.
"Common Stock" means the Common Stock, par value $.01 per share,
of the Issuer.
"Conversion Price" means [$3.00] per share of Common Stock, subject to
certain adjustments as described in Section 5(g).
"Debt" of any Person means at any date, without duplication, (i) all
obligations, including accrued and unpaid interest and premium, of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit, bankers' acceptance or other similar
instruments (or reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred purchase price of property or
services, except Trade Payables, (v) all obligations of such Person as lessee
which are capitalized in accordance with generally accepted accounting
principles, (vi) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, and (vii) all Debt
of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt for the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Indenture" means the Indenture dated as of March 14, 1996 between
Issuer and Marine Midland Bank, as trustee.
<PAGE>
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Note, the Issuer shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capitalized lease or
other title retention agreement relating to such asset.
"Market Disruption Event" means, with respect to the Common Stock (1) a
suspension, absence or material limitation of trading of the Common Stock on the
primary market for the Common Stock for more than two hours of trading or during
the one-half hour period preceding the close of trading in such market; (2) a
suspension or material limitation on the primary market for trading in options
contracts related to the Common Stock, if available, during the one-half hour
period preceding the close of trading in the applicable market; or (3) any
limitation pursuant to the rules of the American Stock Exchange, Section 3, Rule
117 (or any applicable rule or regulation enacted or promulgated by the AMEX,
any other self-regulatory organization or the Securities and Exchange Commission
of similar scope) on trading during significant market fluctuations. For
purposes of determining whether a Market Disruption Event has occurred: (1) a
limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange; and (2) a decision to permanently
discontinue trading in the relevant options contract will not constitute a
Market Disruption Event.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Prepayment Date" means the date on which the Issuer makes any
prepayment on the Notes.
"Prepayment Price" means, for any Note on any Prepayment Date, an
amount in cash equal to the sum of (i) the product of (a) the principal amount
of such Note or portion thereof being prepaid on such Prepayment Date and (b)
one plus (1) if the Prepayment Date is on or prior to the first anniversary of
the Closing Date, 15%, or (2) if the Prepayment Date is after the first
anniversary of the Closing Date the greater of (x) 0.1 and (y) the product of
75% and a fraction, the numerator of which is the Average Closing Price of the
Common Stock on such Prepayment Notice Date minus the Conversion Price and the
denominator of which is the Conversion Price, plus (ii) all accrued but unpaid
interest on the principal amount of such Note or portion thereof being prepaid
on such Prepayment Date.
"Pro Rata Share" means the percentage that the outstanding principal
amount of this Note bears to the aggregate outstanding principal amount of all
Notes.
"Registration Rights Agreement" means the Registration Rights Agreement
made as of the date hereof between Issuer and Seller.
<PAGE>
"Senior Debt" means (a) any Debt incurred by the Issuer pursuant to the
Healthcare Receivables Purchase Agreement dated as of July 31, 1996 between the
Issuer and Daiwa Healthco. - 2 L.L.C., as amended from time to time and any
refinancing or replacement thereof or additions thereto and (b) all other Debt
of the Issuer owed to any banking institution, other than the Senior Notes
issued pursuant to the Indenture.
"Sinking Fund Payment Amount" means, for any Sinking Fund Payment Date,
the lesser of (i) $10,000,000 and (ii) the aggregate principal amount of the
Notes then outstanding.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Issuer.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed by the Issuer or any
Subsidiary of the Issuer in the ordinary course of business in connection with
the obtaining of materials or services.
"Trading Day" means a day which is also a Business Day, on which
trading is generally conducted (i) on the American Stock Exchange, Inc. and (ii)
on any successor exchange on which the Common Stock is listed, and on which a
Market Disruption Event has not occurred.
SECTION 2. Events of Default and Remedies.
(a) Event of Default Defined; Acceleration of Maturity; Waiver of
Default. In case one or more of the following events ("Events of Default")
(whatever the reason for such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(i) default in payment when due of principal or premium on any
Note in accordance with the terms hereof; or
(ii) default in the payment when due of interest on any Note in
accordance with the terms hereof, which default continues for a period
of 10 calendar days after the due date of such payment; or
(iii) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Issuer in an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Issuer or for any substantial part of the property of the Issuer or
ordering the winding up or liquidation of the affairs of the Issuer,
and such decree or order shall remain unstayed and in effect for a
period of 60 days; or
<PAGE>
(iv) the Issuer shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Issuer or for any
substantial part of the property of the Issuer, or the Issuer shall
make any general assignment for the benefit of creditors; or
(v) an event of default occurs under any Senior Debt, which
results in the acceleration of such indebtedness prior to its express
maturity, and the principal amount of any such indebtedness, together
with the principal amount of any other indebtedness of which the
maturity has been so accelerated, aggregates to $5.0 million or more;
or
(vi) the Issuer shall fail to perform its obligations under the
Registration Rights Agreement and such failure continues for the lesser
of (i) 30 calendar days or (ii) 5 days after a registration statement
is to be filed by Issuer or the effective date of a registration
statement, as applicable, in either case after notice thereof by
holders of a majority in principal amount of the Notes;
then, and in each and every such case, the holders of a majority in principal
amount of the Notes, by notice in writing to the Issuer, may declare
the aggregate outstanding principal amount of the Notes, together with
accrued interest thereon, to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable.
In such event, the Issuer shall pay each holder of a Note the
Prepayment Price for such Note, together with accrued interest thereon,
and the Prepayment Notice Date for purposes of calculating the
Prepayment Price will be deemed to be the date of such notice to
Issuer.
(b) Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default. No right or remedy herein conferred upon or reserved to the Holder is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. No delay or omission of the
holder of any Note to exercise any right or power accruing upon any Default or
Event of Default occurring and continuing as aforesaid shall impair any such
right or power or shall be construed to be a waiver of any such Default or Event
of Default or an acquiescence therein; and every power and remedy given by this
Note or by law to the holder of any Note may be exercised from time to time, and
as often as shall be deemed expedient, by such holder.
<PAGE>
(c) Waiver of Past Defaults. If a Default or Event of Default
hereunder is waived in accordance with Section 9, the Issuer and the holder of
each Note shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon. Upon any such waiver, such Default shall
cease to exist and be deemed to have been cured and not to have occurred, and
any Default or Event of Default arising therefrom shall be deemed to have been
cured, and not to have occurred for every purpose of the Notes; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
SECTION 3. Covenants. The Issuer agrees that, so long as
any amount payable under this Note remains unpaid, the Issuer shall deliver
to the Holder:
(a) within five days after any officer of the Issuer obtains actual
knowledge of any Default, a certificate of the chief financial officer or the
chief accounting officer of the Issuer setting forth the details thereof and the
action which the Issuer is taking or proposes to take with respect thereto;
(b) promptly upon the filing thereof, the quarterly and annual
financial reports that the Issuer is required to file with the Securities and
Exchange Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 or, in the event the Issuer is not required to file such
reports, reports containing substantially the same information as would be
required in such reports (it being understood that the foregoing shall not be
construed to require presentation in the manner required by such Act and the
regulations thereunder so long as the data required thereunder is so provided).
SECTION 4. Prepayments.
(a) Issuer's Option to Prepay. At any time and from time to time, the
Issuer may prepay the outstanding principal amount of the Notes, in whole or in
part, by paying to each holder of a Note the Prepayment Price for such Note on
the Prepayment Date, together with accrued but unpaid interest thereon, upon at
least ten Business Days' prior written notice to the holders of the Notes (such
date being the "Prepayment Notice Date").
(b) Prepayment on Asset Sale. Upon the sale by the Issuer of all or
substantially all of its assets and entry into a definitive plan to distribute
the proceeds of such asset sale to the holders of the Common Stock, the Issuer
shall pay to each holder of a Note prior to the distribution of such proceeds to
the holders of Common Stock, an amount in cash equal to the Prepayment Price for
such Note, together with accrued but unpaid interest thereon. For purposes of
calculating the Prepayment Price, the sum of the value of the proceeds
distributed in respect of each share of Common Stock in such distribution and
the expected value of each share of Common Stock after such distribution (each
as determined by the Issuer's board of directors in consultation with its
independent financial advisors) shall be deemed the Average Closing Price on the
Prepayment Notice Date.
<PAGE>
(c) Prepayment on Tender Offer. Upon the consummation of a tender
offer that would result in the offeror or offerors owning 90% or more of the
Common Stock, the Issuer shall pay to each holder of a Note an amount in cash
equal to the Prepayment Price for such Note, together with accrued but unpaid
interest thereon. For purposes of calculating the Prepayment Price, the value of
the amount being paid in the tender offer for each share of Common Stock (as
determined by the Issuer's independent financial advisors) shall be deemed the
Average Closing Price on the Prepayment Notice Date. The Issuer shall pay each
Holder the Prepayment Price on or prior to the date holders of the Common Stock
receive their consideration for the tender offer.
(d) Notice of Prepayment; Subsequent Rights of Holders.
(i) The notice of prepayment pursuant to Sections 4(a), 4(b)
and 4(c) shall be given by first class mail, postage prepaid, to the
Holder at such Holder's address as the same appears on the Register.
Each such notice shall state: (i) the proposed Prepayment Date, (ii)
the aggregate principal amount of Notes to be prepaid and, if only a
portion of the Notes is to be prepaid, the aggregate principal of the
Notes to be prepaid; (iii) the place or places where the Notes are to
be surrendered for payment of the Prepayment Price; and (iv) that
interest on the portion of the Notes to be prepaid will cease to accrue
on the Prepayment Date.
(ii) Notice having been mailed as aforesaid, from and after the
Prepayment Date (unless default shall be made by the Issuer in
providing money for the payment of the Prepayment Price of the Note or
portion thereof called for prepayment), interest on the Note or portion
thereof so called for prepayment shall cease to accrue, and all rights
of the Holder with respect to the Note or portion thereof called for
prepayment (except the right to receive from the Issuer the Prepayment
Price with respect thereto) shall cease. Upon surrender in accordance
with said notice of the certificate for any Note so prepaid in full
(properly endorsed or assigned for transfer, if the Board of Directors
of the Issuer shall so require and the notice shall so state), such
Note (or portion thereof, as the case may be) shall be prepaid by the
Issuer at the aforesaid Prepayment Price. In case the Note is prepaid
in part, the Holder shall make an appropriate notation to evidence such
prepayment on Schedule A attached hereto.
SECTION 5. Sinking Fund Payments.
(a) Issuer's Obligation to Make Sinking Fund Payments; Conversion
Rights.
<PAGE>
(i) The Issuer shall pay to each holder of any Note on each of
[Anniversary Date], 2000, [Anniversary Date], 2001, [Anniversary Date],
2002 and [Anniversary Date], 2003, if necessary (each a "Sinking Fund
Payment Date") such Note's Pro Rata Share of the Sinking Fund Payment
Amount for such Sinking Fund Payment Date, together with accrued but
unpaid interest thereon. Subject to Section 6, the Issuer may pay the
Sinking Fund Payment Amount on any Sinking Fund Payment Date, at the
Issuer's option, by (x) converting the entire Sinking Fund Payment
Amount into Common Stock as provided in Section 5(a)(ii) below or (y)
either paying cash for the entire Sinking Fund Payment Amount or paying
cash for a portion and converting the remaining portion of such Sinking
Fund Payment Amount into Common Stock, in each case as provided in
Section 5(a)(iii) below. The payment of a Sinking Fund Payment Amount
in accordance with Section 5(a)(ii) or (iii) shall constitute a
repayment of the outstanding principal amount of this Note by the
amount of this Note's Pro Rata Share of such Sinking Fund Payment
Amount, and the outstanding principal amount of this Note shall
thereupon be reduced by such amount.
(ii) If the Issuer elects to pay a Sinking Fund Payment Amount
by converting the entire Sinking Fund Payment Amount into Common Stock,
a portion of this Note equal to 75% of this Note's Pro Rata Share of
such Sinking Fund Payment Amount shall be converted into Common Stock
at a conversion price per share of Common Stock equal to the Conversion
Price and a portion of this Note equal to 25% of this Note's Pro Rata
Share of such Sinking Fund Payment Amount shall be converted into
Common Stock at a conversion price per share of Common Stock equal to
the Average Closing Price on such Sinking Fund Payment Date. The
delivery of such shares to the Holder in accordance with Section
5(b)(iii) shall constitute payment of this Note's Pro Rata Share of
such Sinking Fund Payment Amount on the applicable Sinking Fund Payment
Date.
(iii) If the Issuer elects to pay cash for an entire Sinking
Fund Payment Amount or to pay cash for a portion and to convert the
remaining portion of such Sinking Fund Payment Amount into Common Stock
the following shall apply:
(A) If the Issuer elects to pay cash for 25% or less
of the Sinking Fund Payment Amount, then (x) the Issuer shall
deliver to the Holder on the Sinking Fund Payment Date this
Note's Pro Rata share of such cash; (y) a portion of this Note
equal to this Note's Pro Rata Share of 75% of such Sinking
Fund Payment Amount shall be converted into Common Stock at a
conversion price equal to the Conversion Price per share of
Common Stock; and (z) a portion of this Note equal to its Pro
Rata Share of the remaining portion of such Sinking Fund
Payment Amount (after deducting the cash paid under clause (x)
and 75% of such Sinking Fund Payment Amount) shall be
converted into Common Stock at a conversion price equal to the
Average Closing Price on such Sinking Fund Payment Date.
(B) If the Issuer elects to pay cash for more than
25% of the Sinking Fund Payment Amount, then (x) the Issuer
shall deliver to the Holder on the Sinking Fund Payment Date
cash equal to this Note's Pro Rata Share of (I) 25% of the
Sinking Fund Payment Amount plus (II) the product of the Cash
Premium times the additional portion in excess of 25% of the
Sinking Fund Payment Amount that the Issuer elects to pay in
cash; and (y) a portion of this Note equal to its Pro Rata
Share of the remaining portion of the Sinking Fund Payment
Amount (after deducting the portion of the Sinking Fund
Payment Amount paid in cash under clause (x)) shall be
converted into Common Stock at a conversion price per share of
Common Stock equal to the Conversion Price.
(b) Exercise Procedure.
<PAGE>
(i) The Issuer shall deliver written notice of its election to
convert or pay cash for the Notes in whole or in part pursuant to
Section 5(a)(ii) or (iii) by first class mail, postage prepaid, mailed
on the Sinking Fund Payment Date to the Holder at such Holder's address
as the same appears on the Register. Promptly upon receipt of any such
notice, the Holder shall surrender this Note at the office of the
Issuer if this Note shall thereby be paid in full.
(ii) As promptly as practicable, and in any event within ten
Business Days, after the surrender by the Holder as aforesaid if the
Note is paid in full or delivery of the written notice described in
Section 5(b)(i) above if the Note is paid in part, the Issuer shall
issue and deliver to such Holder (i) a certificate or certificates for
the number of shares of Common Stock issuable upon the conversion of
this Note in accordance with the provisions of this Section 5 and (ii)
cash in accordance with the provisions of this Section 5 and the third
paragraph of this Note. If the Note is not paid in full, the Holder
shall make an appropriate notation to evidence the Note's Pro-Rata
Share of the Sinking Fund Payment on Schedule A attached hereto and
deliver a copy of it to the Issuer.
(iii) Each payment or conversion pursuant to Section 5(a)(ii) or
(iii) and in accordance with this Section 5(b) shall be deemed to have
been effected on the Sinking Fund Payment Date, and the Person in whose
name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have
become the holder of record of the shares of Common Stock represented
thereby at such time on such date and such conversion shall be into the
number of shares of Common Stock determined by dividing the principal
amount of the Note being converted at such time by the applicable
conversion price specified therein (subject to Section 5(f) as it
relates to fractional shares). All shares of Common Stock delivered
upon conversion of this Note will upon delivery be duly and validly
issued and fully paid and non-assessable, free of all Liens and charges
and not subject to any preemptive rights. Upon the conversion of all or
any portion of this Note, the principal amount so converted shall no
longer be deemed to be outstanding and all rights of the Holder with
respect to this Note or portion thereof surrendered for conversion
shall immediately terminate except the right to receive the Common
Stock and other amounts, if any, issuable pursuant to this Section 5.
(c) Effect of Election. If the Issuer delivers a notice of its
election to exercise its right to convert or pay in cash all or any portion of
the Notes, interest shall cease to accrue on the applicable Sinking Fund Payment
Date with respect to the principal amount so converted or paid in cash. From and
after such Sinking Fund Payment Date, the Holder of this Note with respect to
the principal amount so converted shall participate equally and ratably with the
holders of shares of Common Stock in all dividends paid on the Common Stock as
if such principal amount had been converted into shares of Common Stock at such
time.
<PAGE>
(d) Issuance of Shares.
(i) The Issuer covenants that it shall at all times reserve
and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Common Stock as may be required for
the purpose of effecting any conversion hereunder.
(ii) Prior to the delivery of any securities which the Issuer
shall be obligated to deliver upon conversion of this Note, the Issuer
shall comply with respect to the issuance of such securities with all
applicable federal and state laws and regulations which require action
to be taken by the Issuer.
(e) Taxes on Conversion. The Issuer will pay any and all documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on conversion of this Note pursuant hereto;
provided that the Issuer shall not be required to pay any tax which may be
payable in respect of any transfer involving the issue or delivery of shares of
Common Stock in a name other than that of the Holder and no such issue or
delivery of such Common Stock shall be made unless and until the Person
requesting such issue or delivery has paid to the Issuer the amount of any such
tax or has established, to the satisfaction of the Issuer, that such tax has
been paid.
(f) No Fractional Shares. In connection with the conversion of this
Note or a portion hereof, no fractions of shares of Common Stock shall be
issued, but in lieu thereof the Issuer shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fraction of a share
multiplied by the Average Closing Price on the applicable Sinking Fund Payment
Date.
(g) Anti-Dilution. The terms of conversion of all or a portion
of this Note pursuant to this Section 5 shall be subject to the following
adjustments:
<PAGE>
(i) If the Issuer shall (A) declare and pay to the holders of
the Common Stock a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive additional shares of Common
Stock (hereinafter referred to as the "Common Stock Equivalents"), (B)
split or subdivide the outstanding shares of Common Stock into a
greater number of shares of Common Stock, (C) combine the outstanding
shares of Common Stock into a lesser number of shares, or (D) issue by
reclassification of its shares of Common Stock any other shares of the
Issuer, the Conversion Price in effect immediately prior thereto shall
be adjusted by multiplying the Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock and
Common Stock Equivalents outstanding immediately prior to such action,
and the denominator of which shall be the number of shares of Common
Stock and Common Stock Equivalents outstanding immediately following
such action. Such adjustment shall be made whenever any event listed
above shall occur and shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of any split, subdivision,
combination or reclassification.
(ii) If the Issuer shall effect a reorganization, equity
recapitalization, shall merge with or consolidate into another
corporation or entity, or shall sell, transfer or otherwise dispose of
all or substantially all of its property, assets or business and,
pursuant to the terms of such reorganization, equity recapitalization,
merger, consolidation or disposition of assets, shares of stock or
other securities, property or assets of the Issuer, or of its successor
or transferee or an affiliate of any thereof, or cash are to be
received by or distributed to the holders of Common Stock, the holder
of any Note thereafter surrendered for conversion pursuant to Section 5
shall be entitled to receive the number of shares of stock or other
securities, property or assets of the Issuer, or of its successor or
transferee or any affiliate thereof, or cash receivable upon or as a
result of such reorganization, equity recapitalization, merger,
consolidation or disposition of assets or the cash value thereof that
would have been received by a holder of the number of shares of Common
Stock equal to the number of shares the holder of the Note would have
received if the converted portion of such Note had been converted
immediately prior to such event at the applicable conversion price
immediately prior to such event. The provisions of this subparagraph
(ii) shall similarly apply to successive reorganizations, mergers,
consolidations or dispositions of assets and shall be effective
immediately after the effective date of any such event.
(iii) Whenever the terms of conversion shall be adjusted
pursuant to this Section 5(g), the Issuer shall forthwith obtain, and
cause to be delivered to the holders of the Notes, a certificate signed
by the principal financial or accounting officer of the Issuer, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustments were calculated and specifying the new
Conversion Price. In the cases referred to in subparagraph (ii), such a
certificate shall be issued describing the amount and kind of stock,
securities, property or assets or cash which shall be receivable upon
conversion of the Note after giving effect to the provisions of such
subparagraph.
(iv) No adjustment to the Conversion Price or conversion price
shall be required unless such adjustment would require a change of at
least 1% in such rate; provided, however, that any adjustments which by
reason of this paragraph (iv) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
<PAGE>
SECTION 6. Limitation on Potential Issuance of Shares.
Notwithstanding any other provision herein to the contrary, the Issuer
shall not be permitted to pay interest on this Note through the
issuance of additional Notes or to convert all or any portion of a
Sinking Fund Payment Amount into Common Stock, but instead must pay
cash pursuant to the terms hereof, to the extent that any such issuance
or conversion (i) would have the result that the past, present and
potential issuance of Common Stock under the Asset Purchase Agreement
(including the Common Stock and Note issuable thereunder and any
Secondary Notes) could result in there having been, as of the Closing
Date under the Asset Purchase Agreement, a potential increase in
outstanding Common Shares of 20% or more, unless the Issuer shall have
obtained any required approval of its shareholders, or (ii) would
violate any applicable law, rule, regulation, judgment, injunction or
decree.
SECTION 7. Subordination.
(a) Subordination to Senior Debt. The Issuer and the Holder agree for
the benefit of the Senior Debt holders that all indebtedness evidenced by the
Notes, including principal, premium, if any, and interest, and all other amounts
payable to the holder of any Note (including any payment in respect of
prepayment or purchase or other acquisition hereof) shall, in the manner
hereinafter set forth, be subordinate and junior in right of payment to all
Senior Debt of the Issuer. All indebtedness evidenced by the Notes shall rank
pari passu to all Debt of the Issuer other than Senior Debt.
(b) Issuer Not to Make Payments Hereunder in Certain
Circumstances. Without limiting the generality of the foregoing:
(i) Upon the maturity of all or any part of the Senior Debt by
lapse of time, acceleration or otherwise, such Senior Debt shall first
be paid in full, or such payment shall be duly provided for in cash or
in a manner satisfactory to the holders of such Senior Debt, before any
payment by the Issuer or any Subsidiary is made on account of the
principal of or premium, if any, or interest on any Note or to prepay
any Note.
(ii) In the event and during the continuation of any default in
respect of any Senior Debt, including, without limitation, any default
arising from either a default in the payment of principal or interest
in respect of any Senior Debt (each such default being referred to
herein as a "Senior Debt Default"), no payment (other than in Common
Stock) shall be made by the Issuer on or with respect to the principal
of, or, premium, if any, or interest on, any Note or to prepay any Note
unless and until such Senior Debt Default shall have been remedied, nor
shall any such payment be made if after giving effect, as if paid, to
such payment, any Senior Debt Default would exist. In any such event,
no holder of any Note shall demand, accept or receive, any direct or
indirect payment (in cash or property other than Common Stock or by
setoff, exercise of contractual or statutory rights or otherwise) of or
on account of any Note, notwithstanding the terms of the Note or of any
agreement or instrument which governs the Note, and no such payment
shall be due, unless such payment is not prohibited by, and is made in
accordance with the terms of, any covenant or restriction in any
agreement or instrument governing the Senior Debt, and the failure to
make any payment on or with respect to the Notes by reason of any such
covenant or restriction shall not constitute a breach of, or default
under, any provision applicable to any Note.
<PAGE>
(iii) At any time when a Senior Debt Default exists, the Issuer
shall not make, and no holder of any Note shall demand, accept or
receive (in cash or property or by setoff, exercise of contractual or
statutory rights or otherwise), or shall attempt to collect or commence
any legal proceedings to collect, any direct or indirect payment on
account of any Note prior to the date such payment becomes due and
payable pursuant to the terms thereof or, if later, prior to the first
date such amount is not prohibited from being paid pursuant to this
Section 7. Notwithstanding the foregoing, the holder of any Note shall
be entitled to accept and retain any Common Stock issuable upon
conversion of such Note, in whole and in part, pursuant to Section 5
hereof.
(iv) At any time when a Senior Debt Default exists, no holder
of any Note will commence or maintain any action, suit or any other
legal or equitable proceeding against the Issuer, or join with any
creditor in any such proceeding, under any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar law, unless
the holders of Senior Debt shall also join in bringing such proceeding,
provided that this Section 7(b) shall not prohibit a holder of any Note
from filing a proof of claim or otherwise participating in any such
proceeding not commenced by it.
(c) Note Subordinated to Prior Payment of all Senior Debt on
Dissolution, Liquidation or Reorganization of Issuer. In the event of any
insolvency or bankruptcy proceedings, and any receivership, liquidation,
reorganization or other similar proceedings, relative to the Issuer or to its
creditors, in their capacity as creditors of the Issuer, or to substantially all
of its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Issuer, whether or not involving
insolvency or bankruptcy,
(i) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, premium, if any,
interest and all other amounts payable thereon (accruing before and
after the commencement of the proceedings, whether or not allowed or
allowable as a claim in such proceedings) before the holder of the
Notes shall be entitled to receive any payment on account of the
principal of, premium, if any, or interest on the Notes; and
(ii) the Notes shall forthwith (notwithstanding the terms of
Section 7(b)) become due and payable and any payment or distribution of
assets of the Issuer of any kind or character, whether in cash,
property or securities to which the holder of any Note would be
entitled, but for the provisions of this Section 7, shall be paid or
distributed by the liquidating trustee or agent or other person making
such payment or distribution, whether the debtor, a trustee in
bankruptcy, a receiver or liquidating trustee or other trustee or
agent, directly to any representative on behalf of the holders of
Senior Debt, to the extent necessary to make payment in full of all
principal, premium, if any, interest and all other amounts payable on
all Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of the Senior Debt.
(d) Rights of Holders of Senior Debt; Subrogation.
<PAGE>
(i) Should any payment or distribution or security or the
proceeds of any thereof be collected or received by the holder of any
Note in respect of such Note, and such collection or receipt is
prohibited hereunder prior to the payment in full of the Senior Debt,
such holder will forthwith deliver the same to the holders of the
Senior Debt for the equal and ratable benefit of the holders of the
Senior Debt in precisely the form received (except for the endorsement
or the assignment of or by such holder where necessary) for application
to payment of all Senior Debt in full, after giving effect to any
concurrent payment or distribution to the holders of Senior Debt and,
until so delivered, the same shall be held in trust by such holder as
the property of the holders of the Senior Debt.
(ii) No holder of any Note shall be subrogated to the rights of
the holders of the Senior Debt to receive payments or distributions of
assets of the Issuer until all amounts payable with respect to the
Senior Debt shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holder of any Note of
any cash, property or securities to which such holder would be entitled
except for these provisions shall, as between the Issuer, its creditors
other than the holders of the Senior Debt, and such holders of Notes,
be deemed to be a payment by the Issuer to or on account of the Senior
Debt. The provisions of this Section 7 are and are intended solely for
the purpose of defining the relative rights of the holders of the
Notes, on the one hand, and the holders of the Senior Debt, on the
other hand.
(iii) Subject to the payment in full of all Senior Debt, the
holders of the Notes shall be subrogated (equally and ratably with the
holders of all subordinated indebtedness of the Issuer which, by its
terms, is not superior in right of payment to the Notes, and ranks on a
parity with the Notes) to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of
the Issuer applicable to the Senior Debt until all amounts owing on the
Notes shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holder of any Note of cash, property,
securities or other assets by virtue of the subrogation herein provided
which otherwise would have been made to the holders of the Senior Debt
shall, as between the Issuer, its creditors other than the holders of
Senior Debt and the holders of the Notes, be deemed to be a payment to
or on account of the Note. The Holder agrees that, in the event that
all or any part of any payment made on account of the Senior Debt is
recovered from the holders of Senior Debt as a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar
law, any payment or distribution received by the Holder of this Note on
account of the Note at any time after the date of the payment so
recovered, whether pursuant to the right of subrogation provided for in
this Section 7(d)(iii) or otherwise, shall be deemed to have been
received by such Holder in trust as the property of the holders of the
Senior Debt and such Holder shall forthwith deliver the same for the
equal and ratable benefit to the holders of the Senior Debt for
application to payment of all Senior Debt in full.
(e) Renewals, Extensions and Increases of Senior Debt. The holder of
each Note by its acceptance thereof thereby waives any and all notice of
renewal, extension, accrual or increase in the amount of Senior Debt, present or
future, and agrees and consents that without notice to or assent by the holder
of any Note:
<PAGE>
(i) the Issuer shall be permitted to incur Senior Debt,
including, without limitation, Senior Debt not in existence on the date
hereof;
(ii) the obligation and liabilities of the Issuer or any other
party or parties for or upon the Senior Debt (or any promissory note,
security document or guaranty evidencing or securing the same) may,
from time to time, in whole or in part, be renewed, extended,
increased, modified, amended, accelerated, compromised, supplemented,
terminated, sold, exchanged, waived or released;
(iii) any representative acting on behalf of the holders of any
Senior Debt and any holder of the Senior Debt may exercise or refrain
from exercising any right, remedy or power granted by or in connection
with any agreements relating to the Senior Debt; and
(iv) any balance or balances of funds with any holder of the
Senior Debt at any time standing to the credit of the Issuer may, from
time to time, in whole or in part, be surrendered or released;
all as any representative or representatives acting on behalf of any holder of
the Senior Debt and any holder of the Senior Debt may deem advisable and all
without impairing, abridging, diminishing, releasing or affecting the
subordination of the Notes to the Senior Debt provided for herein.
(f) Obligation of Issuer Unconditional. Nothing contained in this
Section 7 or in any other provision of this Note is intended to or shall impair,
as between the Issuer, its creditors other than the holders of the Senior Debt,
and the holders of the Notes, the obligation of the Issuer, which is absolute
and unconditional, to pay to the holders of the Notes the principal of, premium,
if any, and interest on the Note, as and when the same shall become due and
payable (except as to the timing and procedures for payment as provided in this
Section 7), by lapse of time, acceleration or otherwise, in accordance with
their terms, or is intended to or shall affect the relative rights of the
holders of the Notes and other creditors of the Issuer other than the holders of
the Senior Debt, nor shall anything herein or therein prevent the holders of the
Notes (i) from taking all appropriate actions to preserve their rights under the
Notes not inconsistent with the rights of the holders of the Senior Debt under
this Section 7, or (ii) from exercising all remedies otherwise permitted by
applicable law upon default under the Note, subject to the rights, if any, under
this Section 7 of the holders of the Senior Debt in respect of cash, property or
securities of the Issuer otherwise payable or delivered to such holders upon the
exercise of any such remedy.
(g) Miscellaneous.
(i) The holder of each Note by its acceptance thereof thereby
acknowledges and agrees that the holders of the Senior Debt have relied
upon and will continue to rely upon the subordination provided for
herein in entering into the agreements relating to Senior Debt and in
extending credit to the Issuer pursuant thereto.
<PAGE>
(ii) No present or future holder of Senior Debt shall be
prejudiced in its right to enforce the subordination contained herein
in accordance with the terms hereof by any act or failure to act on the
part of the Issuer or the holder of any Note. The subordination
provisions contained herein are for the benefit of the holders of the
Senior Debt from time to time and, so long as Senior Debt is
outstanding under any agreement, may not be rescinded, canceled or
modified in any way without the prior written consent thereto of all
holders of Senior Debt.
(iii) The subordination provisions hereof shall be binding upon
each holder of any Note and upon the heirs, legal representatives,
successors and assigns of each such holder; and, to the extent that the
holder of any Note is either a partnership or a corporation, all
references herein to the holder of any Note shall be deemed to include
any successor or successors, whether immediate or remote, to such
partnership or corporation.
SECTION 8. Representations by Holder. Each holder of a Note
by its acceptance thereof represents and warrants to the Issuer and
the prior holders of such Note as follows:
(a) Investment Purpose. Such holder (i) is acquiring the Note and any
Secondary Notes and (ii) upon conversion of the Note will acquire the Common
Stock then issuable for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under or exempted from the 1933 Act.
(b) Accredited Investor Status. Such holder is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D as promulgated
by the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended ("1933 Act").
(c) Reliance on Exemptions. Such holder understands that the Note, any
Secondary Notes and any Common Stock issuable hereunder is being and shall be
issued to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Issuer is relying in part upon the truth and accuracy of, and such holder's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such holder set forth herein in order to determine the
availability of such exemptions and the eligibility of such holder to acquire
the Note and any Secondary Notes and Common Stock.
<PAGE>
(d) Transfer or Resale. Such holder understands that except as
otherwise provided in the Registration Rights Agreement (i) the Note and the
Secondary Notes and Common Stock issuable hereunder have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) registered
thereunder, (B) the Note and the Secondary Notes and Common Stock to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Note, Secondary Notes and Common
Stock can be sold, assigned or transferred pursuant to Rule 144; (ii) any sale
of the Note, Secondary Notes or Common Stock issuable hereunder made in reliance
on Rule 144 may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Issuer nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
SECTION 9. Setoff in Asset Purchase Agreement. Each holder of
any Note by its acceptance thereof thereby acknowledges and agrees in
the event of a breach of Section 5.08 of the Asset Purchase Agreement,
that the Issuer has certain limited rights under the Asset Purchase
Agreement to set-off and recoup any principal, interest or other
amounts payable by it to the holder of any Note hereunder against any
amounts payable to the Issuer by Seller thereunder or in connection
therewith, whether or not the holder of any Note is the Seller, and
that such right may have the result of decreasing any or all amounts
payable by the Issuer to the holders of the Notes.
SECTION 10. Modification of the Notes. Any provision of this
Note may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Issuer and the holders of a majority
in principal amount of the Notes; provided that no such amendment or
waiver shall, unless signed by each holder: (a) reduce the principal
amount of any Note, the amount of any Sinking Fund Payment Amount or
the interest rate payable under the Notes, (b) postpone any Sinking
Fund Payment Date or any date fixed for any payment of interest
hereunder, (c) modify Section 5(a)(ii) or (iii), Section 5(g) or the
definition of any defined term used therein in such a manner as to be
materially disadvantageous to the holders of the Notes, or (d) modify
this Section 10 or otherwise change the percentage of the principal
amount of the Notes required for taking any action hereunder.
SECTION 11. Payments by Issuer. THE PRINCIPAL AMOUNT OF THIS
NOTE OUTSTANDING MAY BE LESS THAN THE AMOUNT SET FORTH IN SCHEDULE A.
THE ISSUER SHALL ONLY BE LIABLE TO THE HOLDER OF THIS NOTE FOR THE
AMOUNT LISTED ON THE REGISTER ABSENT MATHEMATICAL ERROR. THE HOLDER
ACKNOWLEDGES AND AGREES BY THE ACCEPTANCE OF THIS NOTE THAT THE AMOUNT
SET FORTH ON THE REGISTER SHALL BE THE OUTSTANDING PRINCIPAL AMOUNT OF
THIS NOTE ABSENT MATHEMATICAL ERROR.
SECTION 12. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE.
SECTION 13. Miscellaneous. Each holder of any Note by its
acceptance thereof agrees to be bound by the provisions
of this Note. The Section headings herein are for convenience only
and shall not affect the construction hereof.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument
to be duly executed as of this ____ day of ___________, 1999.
UNILAB CORPORATION
By: _____________________________________
Name:
Title:
18448 Oxnard Street
Tarzana, CA 91356
<PAGE>
SCHEDULE A
Principal Amount of Note Paid Date
TABLE OF CONTENTS
PAGE
ARTICLE 1 REGISTRATION RIGHTS
SECTION1.01. Definitions...........................................1
SECTION1.02. Demand Registration...................................2
SECTION1.03. Piggyback Registration................................4
SECTION1.04. Obligations of the Company and the Holders............5
SECTION1.05. Furnishing of Information.............................8
SECTION1.06. Expenses of Registration..............................8
SECTION1.07. Indemnification.......................................8
SECTION1.08. Reports under 1934 Act...............................12
SECTION1.09. Lock-up Agreements...................................13
SECTION1.10. Effect of Transfer of Registrable Securities.........13
SECTION1.11. Limitations on Subsequent Registration Rights........13
SECTION1.12. Termination..........................................13
ARTICLE 2 MISCELLANEOUS
SECTION2.01. Legend...............................................14
SECTION2.02. Notices..............................................14
SECTION2.03. Entire Agreement.....................................15
SECTION2.04. Amendments, Waivers and Consents.....................15
SECTION2.05. Binding Effect; Assignment...........................16
SECTION2.06. General..............................................16
SECTION2.07. Severability.........................................16
SECTION2.08. Counterparts.........................................16
SECTION2.09. Specific Performance.................................16
<PAGE>
UNILAB CORPORATION
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Agreement") is made as of
__________, 1999 between UNILAB CORPORATION, a Delaware corporation (the
"Company") and PHYSICIANS CLINICAL LABORATORIES, INC., d/b/a BIO-CYPHER
LABORATORIES, a Delaware corporation ("Investor").
WHEREAS, the Company and Investor have entered into an Asset Purchase
Agreement dated as of __________, 1999 ("Asset Purchase Agreement") pursuant to
which the Company has agreed, under the terms and conditions set forth therein,
to issue to Investor 1,000,000 shares of common stock of the Company
("Consideration Shares") and a Convertible Note of the Company (the "Note") that
at the Company's option may be payable by the Company in a number of shares of
common stock ("Conversion Shares" and together with the Consideration Shares,
the "Common Stock") as set forth in the Note;
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Asset Purchase Agreement that the Company and Investor enter
into this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE 1
REGISTRATION RIGHTS
SECTION 1.1. Definitions. For the purposes of this Agreement:
(a) The terms "register," and "registered," and "registration" refer
to a registration effected by preparing and filing with the U.S. Securities and
Exchange Commission ("SEC") a registration statement or similar document in
compliance with the Securities Act of 1933, as amended, and the applicable rules
and regulations thereunder ("1933 Act"), and the automatic effectiveness or the
declaration or ordering by the SEC of effectiveness of such registration
statement or document;
<PAGE>
(b) The term "Registrable Securities" means the Consideration Shares,
the Conversion Shares and any common stock of the Company or any successor in
interest of the Company whether by sale, merger, by operation of law or
otherwise issued as (or issuable upon the conversion or exercise of any warrant,
option, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Common Stock; provided, however, that (i) any shares of common stock of the
Company sold to the general public pursuant to a registered public offering or
pursuant to an exemption from the registration requirements of the 1933 Act
shall cease to be Registrable Securities from and after the time of such sale
and (ii) any shares of common stock of the Company, when eligible for resale
pursuant to Rule 144(k) shall cease to be Registrable Securities;
(c) The term "Holder" means any Person owning any Registrable
Securities on the date hereof and any holder of Registrable Securities to whom
the rights conferred by this Agreement have been transferred in compliance with
Section 1.10 of this Agreement;
(d) The term "Person" means an individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof; and
(e) The terms "Form S-3," "Form S-4" and "Form S-8" mean such
respective forms under the 1933 Act as in effect on the date hereof or any
successor registration forms to Form S-3, Form S-4 and Form S-8, respectively,
under the 1933 Act subsequently adopted by the SEC.
SECTION 1.2. Demand Registration. (a) Beginning 180 days after the date
hereof, if the Company shall receive at any time a written request ("Demand")
from Holders holding in the aggregate in excess of 50% of the Registrable
Securities then outstanding that the Company effect the registration covering
the sale of Registrable Securities then outstanding with a market value on the
date of such Demand of at least $5,000,000 (the Holders making a Demand being
referred to as the "Initiating Holders"), then the Company shall, within five
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of this Section 1.02, use its best efforts
to effect such a registration as soon as practicable and in any event to file
within 120 days of the receipt of such Demand a registration statement under the
1933 Act covering all the Registrable Securities which the Initiating Holders
shall have requested, and all Registrable Securities which the Holders other
than the Initiating Holders shall in writing request within 20 days of receipt
of the notice given by the Company to be included in such registration, and use
its best efforts to have such registration statement become effective as soon as
practicable; provided, however, that the Company shall not be obligated under
this Section 1.02(a) to effect any registration (i) pursuant to a Demand with
respect to an amount of Registrable Securities with a market value on the date
of such Demand of less than $5,000,000, or (ii) after the number of registration
statements pursuant to a Demand as specified in Section 1.02(c) have become
effective.
<PAGE>
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as part of their request made pursuant to paragraph (a), and
the Company shall include such information in the written notice given pursuant
to paragraph (a). In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
1.04(e)) enter into an underwriting agreement in a form that is customary and
otherwise reasonably acceptable to the Initiating Holders and the Company with
the underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders, who shall first consult with and obtain the
consent of the Company's Board of Directors (which shall not be unreasonably
withheld) regarding the selection of an underwriter or underwriters.
Notwithstanding any other provision of this Section 1.02, if, in the case of a
registration requested pursuant to paragraph (a) of this Section 1.02, the
underwriter advises the Initiating Holders and the Company in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities that would otherwise be underwritten pursuant hereto, and the
majority in interest thereof may choose (i) to instruct the Company to terminate
the registration or (ii) to have the number of Registrable Securities that may
be included in the underwriting be allocated pro rata among all Holders thereof
(including the Initiating Holders) desiring to participate in such underwriting
(according to the number of Registrable Securities requested to be sold by each
Holder). No Registrable Securities requested by a Holder to be included in a
registration pursuant to paragraph (a) shall be excluded from the underwriting
unless all securities other than Registrable Securities are first excluded.
(c) The Company shall not be obligated to effect more than (i) if the
Company has issued to the holders of the Notes 300,000 or more shares of Common
Stock in respect of amounts payable under the Notes, three, or (ii) otherwise,
two, registrations pursuant to Demands under clause Section 1.02(a); provided,
that no registration of Registrable Securities shall be deemed to be a
registration for the purpose of paragraphs (a) and (c) of this Section 1.02
unless such registration shall have become and remained effective in accordance
with Section 1.04 and not been terminated pursuant to Section 1.02(b).
Notwithstanding the foregoing, the Company shall not be obligated to effect more
than two registration pursuant to a Demand in a 12 month period.
<PAGE>
(d) Notwithstanding the other provisions of this Section 1.02, the
Company shall not be obligated to effect the filing of a registration statement
pursuant to this Section 1.02: (i) during the period starting on the date which
is 15 days prior to the date which the Company estimates in good faith will be
the date of filing of, and ending on the date 180 days, or such lesser period as
the managing underwriters will permit, following the effective date of, a
registration statement pertaining to an underwritten public offering of
securities for the account of the Company; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective and is responding in writing to any Holder's
reasonable inquiries with respect thereto to the extent permitted by law; (ii)
if the Company has furnished to the Initiating Holders within 30 days after
receipt of their Demand pursuant to Section 1.02(a) an opinion of counsel to the
Company (which counsel and opinion are reasonably satisfactory to the Initiating
Holders) to the effect that the Initiating Holders may effect the public sale
and distribution of the Registrable Securities included in their request without
the registration of such securities under the 1933 Act within 90 days or 60 days
if registration on Form S-3 is available, and that the certificates representing
such Registrable Securities need not bear any restrictive legend; or (iii) if
the Company has furnished to the Initiating Holders within 30 days after receipt
of their Demand pursuant to Section 1.02(a) a certificate signed by an executive
officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for the requested registration to be effected or such
registration would require premature disclosure of material information or a
special audit of the Company, in which event the Company shall have the right to
defer such registration for a period of not more than 100 days after receipt of
the Demand of the Initiating Holders; and provided further, (a) that the Company
shall not defer its obligations in this manner more than twice in any twelve
month period and (b) a stock price depression of 20% or less in the Company's
Common Stock resulting solely from the proposed offering by the Holders
(determined as of the date of receipt of the Demand in the good faith
determination of the Board of Directors in consultation with its independent
financial advisors, if any) shall be deemed not to be seriously detrimental to
the Company and its stockholders for the purpose of this Section 1.02(d).
(e) A registration requested pursuant to paragraph (a) shall be
effected by the filing of a registration statement on Form S-3 (or if such form
is not available, such form as the Company and its counsel deem appropriate,
consistent with SEC rules to effect a public offering of the Registrable
Securities subject to the Demand.)
(f) The Company shall be entitled to rely upon and assume the truth
and accuracy of the statements contained in a Demand, unless the Company has
actual knowledge that any such statement is untrue or unless the Company is
otherwise notified in writing by a party to this Agreement.
<PAGE>
SECTION 1.3. Piggyback Registration. (a) If the Company proposes to
register (including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its common stock or other equity
securities (including any securities convertible into or exchangeable for equity
securities) under the 1933 Act in connection with the public offering of such
securities (other than a registration on Form S-8 or any successor form relating
solely to the sale of securities to participants in a Company stock plan, or a
registration on Form S-4 or any successor form), the Company shall, at such
time, promptly give each Holder written notice of such registration. The Company
shall request that any Holder that wants the registration statement to cover the
sale of any or all of the Registrable Securities owned by such Holder, give
notice within 20 days after the receipt by such Holder of the notice of
registration by the Company which notice shall specify the amount of Registrable
Securities the holder wants to register. The Company shall, subject to the
provisions of paragraph (b), use its best efforts to cause a registration
statement covering the sale of all of the Registrable Securities that each such
Holder has requested to be registered within such 20-day period to become
effective under the 1933 Act. The Company shall have no obligation under this
Section 1.03 to make any offering of its securities or to complete any
registration or any offering of its securities that it proposes to make, and
shall incur no liability to any Holder for its failure to do so. If, after a
request by the Company pursuant to this Section 1.03(a), a Holder does not
request that the registration statement cover its Registrable Securities within
such 20-day period, such Holder waives its piggyback registration rights
pursuant to Section 1.03 of this Agreement with respect to such registration.
(b) In connection with any offering involving an underwriting of
securities being issued by the Company, the Company shall not be required under
this Section 1.03 to include any Holder's securities in such underwriting unless
such Holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity, if
any, as will not, in the reasonable opinion of the underwriters, jeopardize the
success of the offering by the Company. If the managing underwriter for the
offering shall advise the Company in writing that marketing factors require a
limitation of the amount of securities to be underwritten, then the Company
shall so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant this Section 1.03, and the amount of Registrable
Securities that may be included in the underwriting shall be allocated in
accordance with paragraph (c).
(c) If the Company shall, pursuant to paragraph (b), reduce the amount
of securities to be included in an offering, such reduction shall be made as
follows: First, all securities other than those to be included by the Company
for its own account or pursuant to that Registration Rights Agreement dated
November 5, 1998, by and among Unilab Corporation and Meris Laboratories, Inc.
or those sought to be included by the Holders shall be excluded from the
offering to the extent any limitation on the amount of securities included in
the underwriting is required; then, if further limitation on the amount of
securities to be included in the underwriting is required, the amount of
Registrable Securities held by Holders that may be included in the underwriting
shall be reduced pro rata among the selling Holders in accordance with the
amount of Registrable Securities requested to be sold by each such Holder.
SECTION 1.4. Obligations of the Company and the Holders. Whenever
required under this Article 1 to use its best efforts to effect the registration
of any Registrable Securities, the Company shall:
<PAGE>
(a) Use its best efforts to prepare and file as soon as practicable
with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective as soon as practicable and, upon the request of Holders holding
a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of 135 days or until such Holders
have informed the Company in writing that the distribution of their securities
has been completed, whichever first occurs; provided, a shelf registration
statement may be kept effective for a period longer than 135 days upon mutual
agreement between the Company and Holders.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement, and use its best efforts to cause each such amendment to
become effective as soon as practicable, as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement;
(c) Furnish to the selling Holders such reasonable number of copies of
a prospectus, including a preliminary prospectus and any amendments or
supplements thereto, in conformity with the requirements of the 1933 Act, and
such other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities covered by such registration statement
that are owned by them;
(d) Use its best efforts to register or qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such states and jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such state or jurisdiction;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering; provided, further, that
each Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement, including furnishing any opinion of
counsel or entering into a lock-up agreement reasonably requested by the
managing underwriter;
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the 1933 Act,
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, promptly file such amendments and supplements which
may be required pursuant to paragraph (b) on account of such event, and use its
best efforts to cause each such amendment and supplement to become effective;
<PAGE>
(g) Furnish, at the request of any Holder of Registrable Securities
covered by such registration statement, on the date that such Registrable
Securities are delivered to the underwriters for sale in connection with a
registration, if such securities are being sold through underwriters, or, if
such securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion or opinions, dated such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given by company counsel to the underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders of Registrable
Securities covered by such registration statement and (ii) a letter dated such
date, from the independent certified public accountant of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders of Registrable Securities covered by
such registration statement;
(h) Apply for listing and use its best efforts to list the Registrable
Securities being registered on any national securities exchange on which a class
of the Company's equity securities is listed or, if the Company does not have a
class of equity securities listed on a national securities exchange, to the
extent that the securities of the Company would so qualify, apply for
qualification and use its best efforts to qualify the Registrable Securities
being registered for inclusion on the automated quotation system of the National
Association of Securities Dealers, Inc.;
(i) Without in any way limiting the types of registrations to which
this Article 1 shall apply, in the event that the Company shall effect a
registration under Rule 415 under the 1933 Act, take all necessary action,
including without limitation the filing of post-effective amendments, to permit
the Holders to include their Registrable Securities in such registration in
accordance with the terms of this Article 1; and
(j) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 1.04(f)
hereof, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 1.04(f) hereof, and, if so directed
by the Company, such Holder will deliver to the Company all copies, other than
any permanent file copies then in such Holder's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event that the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective (including the period referred to in Section 1.04(a) hereof) by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 1.04(f) hereof to the date when the Company shall
deliver to such Holder or any underwriter engaged in connection with such
transaction a prospectus supplemented or amended to conform with the
requirements of the 1933 Act and Section 1.04(f) hereof.
<PAGE>
SECTION 1.5. Furnishing of Information. The following shall be
conditions precedent to the obligations of the Company to take any action
pursuant to this Article 1 in respect of the Registrable Securities of any
selling Holder that such selling Holder shall have: (i) furnished to the Company
such information as the Company shall reasonably request regarding such selling
Holder, the Registrable Securities held by such selling Holder, and the intended
method of disposition of such securities as shall be required to effect the
registration of such selling Holder's Registrable Securities, and (ii) provided
the Company with such representations and warranties, covenants and opinions as
are customary for a selling stockholder in connection with the registration of a
selling stockholder's securities.
SECTION 1.6. Expenses of Registration. (a) The Company shall bear the
expenses incurred in connection with the registration, filing or qualification,
including all registration, filing and qualification fees, printing and
accounting fees, the reasonable fees and disbursements of counsel for the
Company; provided that if a registration has been terminated pursuant to Section
1.02(b), the Holders that have requested to include any Registrable Securities
in such registration shall reimburse the Company for all of the Company's
out-of-pocket expenses described in this first sentence of Section 1.06(a) with
respect to such registration; provided further that in addition to the Company's
other rights, for so long as the Company has not been reimbursed for an
aggregate amount greater than $25,000, the Holders shall be deemed to have
exercised a Demand. The Holders of any Registrable Securities shall bear and pay
the fees and disbursements of counsel or other advisors, including without
limitation accountants and financial advisors, for the selling Holders.
(b) Underwriting discounts and commissions relating to the Registrable
Securities included in a registration pursuant to this Article 1 shall be borne
and paid ratably by the Holders of such Registrable Securities and, if it
participates, by the Company.
SECTION 1.7. Indemnification. In the event that any Registrable
Securities are included in a registration statement under this Article 1:
<PAGE>
(a) The Company shall indemnify and hold harmless each holder of
Registrable Securities included in such registration ("Selling Holder"), the
officers, directors, partners, agents and employees of each Selling Holder, any
underwriter (as defined in the 1933 Act) for the Selling Holders and each
person, if any, who controls (within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended and the applicable rules and
regulations thereunder ("1934 Act")) a Selling Holder or underwriter against any
losses, claims, damages, or liabilities (joint or several) which they may suffer
or become subject to for violation of the 1933 Act, the 1934 Act or other
federal or state law, and any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
or liability (or action with respect thereto) insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any of the
following statements, omissions or violations (a "Violation"): (i) any untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or deemed to be
part thereof under the 1933 Act or any amendments or supplements thereto, (ii)
the omission to state in such registration statement a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, (iii) any violation by
the Company of the 1933 Act, the 1934 Act, any state securities law or any rule
or regulation promulgated under the 1933 Act, the 1934 Act or any state
securities law in connection with any matter relating to such registration
statement or (iv) any breach of this Agreement; provided, however, that the
Company shall not be liable under this paragraph: (i) for amounts paid in
settlement of any loss, claim, damage, liability, or action if such settlement
is effected without the consent of the Company (which consent shall not be
unreasonably withheld); or (ii) for any loss, claim, damage, liability, or
action (A) to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by or on behalf
of such Holder (including statements contained in a Demand as provided in
Section 1.02(e) that have not been subsequently corrected in written notice to
the Company from such Holder in a timely manner prior to the sale giving rise to
such violation), underwriter or controlling person of a Selling Holder or (B) in
the case of a sale directly by a Selling Holder (including a sale of such
Registrable Securities through any underwriter retained by such Selling Holder
to engage in a distribution solely on behalf of such Selling Holder), to the
extent that it arises out of or is based on an untrue statement or alleged
untrue statement or omission or alleged omission that was contained in a
preliminary prospectus and corrected in a final or amended prospectus, and such
Selling Holder failed to deliver a copy of the final or amended prospectus at or
prior to the confirmation of the sale of the Registrable Securities to the
person asserting any such loss, claim, damage or liability in any case where
such delivery is required by the Securities Act if the Company has provided such
final or amended prospectus to such Selling Holder in a timely manner prior to
such sale.
<PAGE>
(b) The Company may require, as a condition to including the
Registrable Securities held by any Selling Holder in any registration statement
pursuant to this Section 1, that the Company shall have received an undertaking
from such Selling Holder, on a several but not joint and several basis, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the registration statement, each Person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, each agent and
any underwriter for the Company, any other Person selling securities included in
such registration statement, any Person who controls such underwriter or other
Person and each of their respective directors, officers, partners, agents or
employees (collectively the "Company Parties"), against any losses, claims,
damages, or liabilities (joint or several) to which any Company Party may become
subject, under the 1933 Act, the 1934 Act or other federal or state law, and any
legal or other expenses reasonably incurred by the Company Party in connection
with investigating or defending any such loss, claim, damage, or liability (or
action with respect thereto), insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs, (i) in
reliance upon and in conformity with written information furnished by or on
behalf of such Holder expressly for use in connection with such registration or
(ii) as a result of any breach of this Agreement by such Holder in connection
with any offering of Registrable Securities by such Holder pursuant to such
registration statement; provided, however, that no Holder shall be required
under this paragraph to incur any liability (i) in excess of the amount of net
proceeds (after deduction of all underwriters' discounts and commissions)
received by such Holder in the offering giving rise to the Violation; (ii) for
any amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of such Holder (which
consent shall not be unreasonably withheld); or (iii) in the case of a sale
directly by the Company of its securities (including a sale of such securities
through any underwriter retained by the Company to engage in a distribution
solely on behalf of the Company), in any case in which such untrue statement or
omission was contained in a preliminary prospectus or final prospectus and
corrected in a final or amended prospectus, and the Company failed to deliver a
copy of the final or amended prospectus at or prior to the confirmation of the
sale of the securities to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the 1933 Act.
(c) Promptly after receipt by an indemnified party pursuant to this
Section 1.07 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.07,
deliver to the indemnifying party a written notice of the commencement of such
action and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume and control the defense thereof
with counsel mutually satisfactory to the parties; provided, however, that the
indemnified parties shall have the right to retain a separate firm of attorneys
to serve as their own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of the indemnified parties by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests, as reasonably determined by either party, between
any such indemnified parties and any other party represented by such counsel in
such proceeding. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the indemnified parties. The failure to deliver the
written notice required by this paragraph (c) to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.07 to the extent of such
prejudice, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.07.
(d) The obligations of the Company and the Holders under this Section
1.07 shall survive the conversion, if any, of the Notes and the completion of
any offering of Registrable Securities in a registration statement, whether
under this Section 1 or otherwise.
<PAGE>
(e) If the indemnification provided for in this Section 1.07 is
unavailable to a party that would have been an indemnified party under this
Section 1.07 in respect of any losses, claims, damages or liabilities (or
actions or proceedings with respect thereto) referred to herein, then each party
that would have been an indemnifying party thereunder shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) (i) as between the
Company on one hand and the Selling Holders on the other in such proportion as
is appropriate to reflect the relative benefits received from the offering of
the Selling Holders' Registrable Securities and any securities offered for the
benefit of the Company pursuant to such registration statement, or (ii) if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of such indemnifying party on the one hand and such indemnified party on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof). The relative fault of the Company on one hand or the Selling Holders
on the other hand shall be determined by reference to, among other things, the
relative benefits received by the indemnifying party and the indemnified party
from such offering, whether the Violation relates to information supplied by the
Company on one hand and the Selling Holders on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such Violation. The parties agree that it would not be just and
equitable if contribution pursuant to this paragraph (e) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the preceding sentence. The
amount paid or payable by a contributing party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this paragraph (e) shall include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The liability of any Selling Holder in
respect of any contribution obligation of such Selling Holder (after deduction
of all underwriters' discounts and commissions and all other expenses paid by
such Selling Holder in connection with the registration in question) arising
under this paragraph (e) shall not in any event exceed an amount equal to the
net proceeds to such Selling Holder from the disposition of the Registrable
Securities disposed of by such Selling Holder pursuant to such registration.
<PAGE>
SECTION 1.8. Reports under 1934 Act.
(a) Resales Under Rule 144; Form S-3 Registration. With a view to
making available to the Holders the benefits of Rule 144 under the 1933 Act
("Rule 144") and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, and with a view to making it possible for Holders to register the
Registrable Securities pursuant to a registration on Form S-3, the Company
agrees to:
(i) use its best efforts to make and keep public information
available, as those terms are understood as defined in Rule 144;
(ii) take such action, including the voluntary registration of
the Common Stock under Section 12 of the 1934 Act, as is necessary to
enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities;
(iii) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the 1933 Act and the 1934 Act; and
(iv) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (A) a written statement
by the Company as to its compliance with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), or as to its
qualification as a registrant whose securities may be resold pursuant
to Form S-3 (at any time after it so qualifies), (B) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (C) such other information
as may be reasonably requested in availing any Holder of any rule,
regulation or form of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
(b) Resale Under Rule 144A. At all times during which the Company is
neither subject to the reporting requirements of Sections 13 or 15(d) of the
1934 Act nor exempt from reporting pursuant to Rule 12g3-2(b) under the 1934
Act, the Company shall, upon the written request of a Holder, provide in written
form to such Holder and to any prospective purchaser of Registrable Securities
designated by such Holder, all information required by Rule 144A(d)(4)(i) under
the 1933 Act ("144A Information"). With respect to each Holder, the Company's
obligations under this paragraph (b) shall at all times be contingent upon such
Holder's obtaining from a prospective purchaser an agreement to take all
reasonable precautions to safeguard the 144A Information from disclosure to
anyone other than employees, agents of representatives of the prospective
purchaser who require access to the 144A Information for the sole purpose of
evaluating its purchase of the Company's securities.
<PAGE>
SECTION 1.9. Lock-up Agreements. If reasonably requested by the
managing underwriter, the Holders shall enter into lock-up agreements pursuant
to which they agree, for a period of up to 90 days following the effective date
of a registration statement for the public offering of the Company's common
stock or securities exchangeable or convertible into common stock, not to offer,
sell or otherwise dispose of any Registrable Securities except the Registrable
Securities sold pursuant to such registration statement without the prior
consent of the managing underwriter.
SECTION 1.10. Effect of Transfer of Registrable Securities. The
transfer by a Holder of any of such Holder's Registrable Securities or rights to
acquire Registrable Securities shall, unless such securities cease to be
Registrable Securities by reason of such transfer, constitute an assignment to
such transferee of the Holder's rights under this Agreement with respect to such
Registrable Securities; provided, however, that no Holder party hereto other
than the Investor shall enjoy any rights as a Holder under this Agreement until
such time as (i) such Holder and its affiliates holds, after such transfer, at
least 25% of the Registrable Securities outstanding as of the date hereof, and
(ii) such Holder delivers to the Company a written instrument by which such
Holder agrees to be bound by the obligations and representations imposed upon
Holders under this agreement to the same extent as if such Holder were a party
hereto.
SECTION 1.11. Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders holding a majority of the Registrable Securities
then outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company relating to registration rights unless such
agreement provides that, to the extent that such agreement would allow such
holder or prospective holder to include such securities in any registration
filed under this Section 1, a provision that such holder or prospective holder
may include such securities in any such registration only to the extent that the
inclusion of its securities will not reduce the amount of the Registrable
Securities of the Holders which would otherwise be included.
SECTION 1.12. Termination. This Agreement, and the respective rights
and obligations of the parties hereto, shall terminate at such time as there are
no longer any Registrable Securities outstanding or issuable upon the conversion
or exercise of any outstanding securities of the Company; provided, however,
that the provisions of Section 1.07 shall not terminate at that time and shall
remain in force.
<PAGE>
ARTICLE 2
MISCELLANEOUS
SECTION 2.1. Legend. Each certificate representing Registrable
Securities shall state thereon:
THESE SHARES OF THE ISSUER'S COMMON STOCK HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THESE SHARES
HAVE BEEN ACQUIRED FOR THE ACCOUNT OF THE HOLDER AND NOT WITH
A VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH A PUBLIC
OFFERING AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS,
OR AN EXEMPTION FROM SUCH REGISTRATION OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER THE SECURITIES ACT.
or shall bear a similar legend indicating the existence of this Agreement and
the restrictions imposed thereby.
Such legend shall be removed once the shares of Common Stock
represented by any such certificate shall no longer constitute Registrable
Securities.
SECTION 2.2. Notices. All notices, requests, consents and demands shall
be in writing and shall be personally delivered, mailed (registered or certified
mail, return receipt requested, postage prepaid), telecopied or sent by
overnight courier service, to the Company at:
Mark Bibi
Unilab Corporation
401 Hackensack Avenue
Hackensack, NJ 07601
Telecopier: (201) 525-1331
with a copy to:
Donald S. Bernstein
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopier: (212) 450-4800
<PAGE>
to Investor at:
J. Marvin Feigenbaum
Bio-Cypher Laboratories
Westwood Marquis
930 Hillgard Avenue
Los Angeles, CA 90024
Telecopier: (310) 824-0355
with a copy to:
Paul DeMuro
Latham & Watkins
505 Montgomery St.
Suite 1900
San Francisco, CA 94111
Telecopier: (415) 395-8095
Ken Liang
Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
Telecopier: (213) 830-8522
or such other addresses as may be furnished in writing to the other parties
hereto. Any Person who becomes a Holder hereafter shall promptly provide its
address and telecopier number to the Company. Unless otherwise provided herein,
all such notices, requests, demands and other communications, when personally
delivered, shall be effective on delivery; when mailed (registered or certified
mail, return receipt requested, postage prepaid), shall be effective four days
after deposit in the mails addressed as aforesaid; when telecopied, shall be
effective upon confirmation of receipt; and, when sent by overnight courier
service guaranteeing next-day delivery, shall be effective the next business day
following timely delivery to the courier.
SECTION 2.3. Entire Agreement. This Agreement, the Asset Purchase
Agreement and the Note, and the other documents and agreements contemplated by
the Asset Purchase Agreement to be in effect after the Closing Date thereunder,
constitute the entire agreement of the parties with respect to the matters
contemplated herein. This Agreement supersedes any and all prior understandings
or agreements as to the subject matter of this Agreement.
<PAGE>
SECTION 2.4. Amendments, Waivers and Consents. Any provision in this
Agreement to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein set
forth may be omitted or waived, if the Company (i) shall obtain consent thereto
in writing from the Holders holding a majority of the Registrable Securities
then outstanding and (ii) shall, in each such case, deliver copies of such
consent in writing to any Holders who did not execute such consent.
Notwithstanding the foregoing, any amendment to this Agreement which materially
adversely affects the rights or substantially increases the obligations of one
or more Holders and which does not also affect all other Holders either to the
same degree or in proportion to the amount of Registrable Securities held by
each of them shall require the consent of the Holders holding a majority of the
Registrable Securities adversely affected.
SECTION 2.5. Binding Effect; Assignment. This Agreement shall, subject
to the provisions of Section 1.10, be binding upon and inure to the benefit of
the personal representatives, successors and assigns of the respective parties
hereto whether by assignment, transfer, merger, by operation of law or
otherwise. The Company shall not have the right to assign its obligations
hereunder or any interest herein without obtaining the prior written consent of
the Holders holding a majority of the Registrable Securities then outstanding,
provided in accordance with Section 2.04. If the Company becomes a wholly owned
subsidiary of a publicly traded corporation and the Holders receive common stock
of such corporation or a note of such corporation convertible into common stock
of such corporation in consideration for the Notes or Registrable Securities,
such corporation shall assume the obligations of the Company hereunder.
SECTION 2.6. General. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural, the singular, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and
construed under the laws of the State of New York.
SECTION 2.7. Severability. If any provisions of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable, the
parties hereby waive such provision to the extent that it is found to be invalid
or unenforceable. Such provision shall, to the maximum extent allowable by law,
be modified by such court so that it becomes enforceable, and, as modified,
shall be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
SECTION 2.8. Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
SECTION 2.9. Specific Performance. The parties hereto recognize that
the rights of the parties under this Agreement are unique, and, accordingly,
each party shall, in addition to such other remedies as may be available to it
at law or in equity, have the right to enforce its rights hereunder by actions
for injunctive relief and specific performance to the extent permitted by law.
This Agreement is not intended to limit or abridge any rights of the parties
hereto which may exist apart from this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first above written.
UNILAB CORPORATION
By:__________________________
Name:
Title:
PHYSICIAN'S CLINICAL LABORATORIES, INC.,
d/b/a BIO-CYPHER LABORATORIES
By:__________________________
Name:
Title:
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this "Agreement"), dated as of May
10, 1999, is made between each of the entities listed on Schedule 1 hereto (each
a "Guarantor" and collectively the "Guarantors"), Unilab Corporation, a Delaware
corporation ("Buyer"), and Physician's Clinical Laboratory, Inc., d/b/a
Bio-Cypher Laboratories, a Delaware corporation (the "Company").
Buyer and the Company are parties to the Asset Purchase
Agreement dated as of April 5, 1999 (the "Purchase Agreement"), pursuant to
which the Company proposes to sell substantially all of its assets to Buyer. To
induce Buyer to enter into the Purchase Agreement and as a condition to the
obligations of Buyer to consummate the transactions contemplated thereunder, the
Guarantors have agreed to guarantee, on a several basis, but not on a joint and
several basis, the indemnification obligations of the Company under the Purchase
Agreement on the terms and subject to the conditions set forth herein.
Accordingly, the Guarantors, Buyer and the Company agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Unless otherwise defined, all
capitalized terms used in this Agreement that are defined in the Purchase
Agreement shall have the respective meanings assigned to them in the Purchase
Agreement.
ARTICLE II
THE GUARANTEE
Section 2.01 Guarantee. Subject to the limitations set forth
in Section 2.04 below and the procedures set forth in Section 2.05 below, each
Guarantor, on a several basis but not on a joint and several basis, hereby
guarantees to Buyer the full and punctual payment and performance of (i) all
obligations of the Company to Buyer that may arise under the Second Cash Payment
Amount and Refund Adjustment under Section 2.11(d) and Section 2.12 of the
Purchase Agreement (ii) all obligations of the Company to Buyer that may arise
under Article 11 of the Purchase Agreement; provided, that if Buyer has
exercised its right of set-off pursuant to Section 11.03 of the Purchase
Agreement, the Guarantors shall have no liability under this Agreement for any
breach of Section 5.08 of the Purchase Agreement, (iii) any and all Damages
incurred or suffered by Buyer in connection with or as a result of any efforts
by any Person to challenge the validity, legality or enforceability of the
transactions provided for in the Purchase Agreement on the basis of the adequacy
of the consideration paid to the Company, (iv) any and all Damages incurred or
suffered by Buyer in any way relating to or arising out of or in respect of any
case or other proceeding seeking the liquidation, reorganization or other relief
with respect to the Company or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of the
Company or any substantial part of its property (any such case or other
proceeding, a "Bankruptcy Proceeding") (excluding for purposes of this clause
(iv) any Damages resulting from any delay or other limitation on Buyer's ability
to realize the full benefits contemplated by Sections 2.05 and 2.08 of the
Purchase Agreement), and (v) any and all Damages incurred or suffered by Buyer
in enforcing or obtaining payment of any amounts payable by any Guarantor
hereunder (clauses (i), (ii), (iii), (iv) and (v) collectively the "Guaranteed
Obligations") at such time as those obligations become due and payable in
accordance with the procedures set forth in Section 2.05 of this Agreement.
Section 2.02 Acknowledgments, Waivers and Consents. (a) Each
Guarantor acknowledges that the obligations undertaken by it under this
Agreement involve the guarantee of obligations of Persons other than itself and
that such obligations are absolute and irrevocable. In full recognition and in
furtherance of the foregoing, each Guarantor agrees that, subject to and except
as provided otherwise in the limitations set forth in Section 2.04 below and the
procedures set forth in Section 2.05 below, and without affecting the
enforceability or effectiveness of this Agreement in accordance with its terms
and without affecting, limiting, reducing, discharging or terminating the
respective liability of any Guarantor, or the rights, remedies, powers and
privileges of Buyer under this Agreement, Buyer may, at any time and from time
to time and without notice or demand of any kind or nature whatsoever:
(i) accept or receive (including from any other Guarantor)
partial payments on the Guaranteed Obligations (whether as a result of the
exercise of any right, remedy, power or privilege or otherwise);
(ii) release any Person (including any other Guarantor) from
any personal liability with respect to all or any part of the Guaranteed
Obligations;
(iii) settle, compromise, release, liquidate or enforce upon
such terms and in such manner as Buyer may determine or as applicable law may
dictate all or any part of the Guaranteed Obligations as to the Company;
(iv) proceed against the Company, any Guarantor (but only as
to its Proportionate Share (as defined below) of the Guaranteed Obligations) or
any other Person for or relative to all or any part of the Guaranteed
Obligations and exercise the rights, remedies, powers and privileges of Buyer
under the Purchase Agreement or otherwise in such order and such manner as Buyer
may in its discretion determine, without any necessity first to proceed against
any other Person or to enforce any right, remedy, power or privilege as to any
other Person before commencing to proceed against or otherwise to enforce this
Agreement as to any Guarantor; and
(v) enter into such other transactions or business dealings
with any other Guarantor, the Company, any subsidiary or affiliate of the
Company or any other Person as Buyer may desire.
(b) The enforceability and effectiveness of this Agreement and the
liability of the Guarantors, and the rights, remedies, powers and privileges of
Buyer, under this Agreement shall not be affected, limited, reduced, discharged
or terminated, and each Guarantor hereby expressly waives to the fullest extent
permitted by law any defense now or in the future arising against the Buyer, by
reason of:
(i) any failure of Buyer to file or enforce a claim in any
bankruptcy or other proceeding with respect to the Company or any other
Guarantor;
(ii) any Bankruptcy Proceeding commenced by or against the
Company or a Guarantor, including any discharge of or ban or stay against
collecting all or any part of its Guaranteed Obligation as a result of such
Bankruptcy Proceeding;
(iii) any action taken by Buyer that is authorized by this
Section 2.02 or otherwise in this Agreement or by any other provision of the
Purchase Agreement;
(iv) any extension, renewal, settlement, compromise, waiver or
release in respect of any Guaranteed Obligation, by operation of law or
otherwise;
(v) any modification or amendment of or supplement to the
Purchase Agreement or any related document or agreement pursuant to the terms
and conditions set forth therein;
(vi) the existence of any claim, defense, set-off or other
rights which any Guarantor may have at any time against the Company, Buyer or
any other Person, whether in connection herewith or any unrelated transactions,
provided that nothing herein shall prevent the assertion of any claim, defense
or other right, remedy, power or privilege that any Guarantor or the Company may
have against Buyer by separate suit or by defense, cross-claim or counterclaim
in an action brought by Buyer under this Agreement or otherwise;
(vii) any change in the partnership or other organizational
existence, structure or ownership of the Company, any Guarantor or any other
Person; or
(viii) the invalidity or unenforceability, in whole or in
part, of the Purchase Agreement or any related document or agreement in
connection with or as a result of any efforts by any Person to challenge the
validity, legality or enforceability of the transactions provided for in the
Purchase Agreement on the basis of the adequacy of the consideration paid to the
Company.
(c) Other than with respect to the procedures provided for in Section
2.05 of this Agreement, each Guarantor expressly waives, for the benefit of
Buyer, all presentments, demands for payment or performance, notices of
nonpayment or nonperformance, protests, notices of protest, notices of dishonor
and all other notices or demands of any kind or nature whatsoever with respect
to the Guaranteed Obligations, and all notices of acceptance of this Agreement
or of the existence, creation or incurring of new or additional Guaranteed
Obligations.
(d) Each Guarantor represents and warrants that it has reviewed the
Purchase Agreement and is fully familiar with the transaction contemplated
thereby. Except as expressly required by the terms hereof, each Guarantor hereby
expressly waives and relinquishes any duty on the part of Buyer (should any such
duty exist) to disclose to any Guarantor any matter of fact or other information
related to the business, operations or condition (financial or otherwise) of the
Company or its properties or to the Purchase Agreement or the transactions
undertaken pursuant thereto or contemplated thereby.
(e) Each Guarantor intends that its rights and obligations shall be
those expressly set forth in this Agreement and that its obligations shall not
be affected, limited, reduced, discharged or terminated by reason of any
principles or provisions of law that conflict with the terms of this Agreement.
(f) The Company and Buyer agree and acknowledge that, in exchange for
the Guarantors' entry into this Agreement, each Guarantor, for itself and on
behalf of the Company, shall have and be entitled to raise and assert, against
Buyer or any other Person that may assert a claim in respect of a Guaranteed
Obligation, any and all rights, remedies, powers, privileges, claims or defenses
(other than set-offs to which there has not been consent by the parties, a
judgment or a final determination in an arbitration) that the Company may have
under the Purchase Agreement or any related document or agreement, and the
Company hereby assigns to the Guarantors any and all such rights, remedies,
powers, privileges, claims and defenses in their entirety.
Section 2.03 Separate Action. Subject to the limitations set
forth in Section 2.04 below and the procedures set forth in Section 2.05 below,
Buyer may bring and prosecute a separate action or actions against any Guarantor
whether or not the Company or any other Guarantor is joined in any such action
or a separate action or actions are brought against the Company or any other
Guarantor for all or any part of the Guaranteed Obligations. The obligations of
each Guarantor under, and the effectiveness of, this Agreement are not
conditioned upon the existence or continuation of any other guarantee of all or
any part of the Guaranteed Obligations.
Section 2.04 Limitation on Guarantee Amount. Notwithstanding
any other provisions of this Agreement, the Guarantors' liability for the
Guaranteed Obligations shall be limited as follows:
(a) (i) the aggregate liability of all of the
Guarantors for payments on account of the Guaranteed Obligations (the
"Aggregate Cap"), shall not exceed for Damages pursuant to claims (A)
as to which notice has been provided to the Company and the Guarantors
prior to the first anniversary of the Closing Date, $15,000,000 minus
an aggregate amount equal to any and all indemnification payments the
Company has paid to, on behalf of or for the benefit of Buyer or any
party indemnified by the Company pursuant to the Purchase Agreement
("Company Payments") on account of such claims and (B) as to which
notice has been provided to the Company and the Guarantors between the
period commencing on the first anniversary of the Closing Date and
ending on the Second Anniversary of the Closing Date, the lesser of (1)
$10,000,000 minus any Company Payments for claims made on or after the
first anniversary of the Closing Date, but prior to the Second
Anniversary of the Closing Date, or (2) $15,000,000 minus the sum of
(x) the aggregate of payments made by the Guarantors and the Company
Payments paid pursuant to clause (A) above and (y) any Company Payments
for claims made on or after the first anniversary of the Closing Date
but prior to the Second Anniversary of the Closing Date, and (ii) the
aggregate liability of each Guarantor on account of Guaranteed
Obligations shall not exceed a total of that Guarantor's Proportionate
Share (as defined in (c) below) of the Aggregate Cap;
(b) the Guarantors shall not be liable for any
Guaranteed Obligations to the extent the aggregate amount of Damages to
which Buyer is entitled (as established pursuant to the procedures set
forth in Section 2.05 below) is less than or equal to $1.0 million (the
"$1.0 million Threshold"); provided, however, that (i) this limitation
shall not apply to any Damages incurred or suffered by the Buyer
arising out of any Excluded Liability or pursuant to Section 2.01(i),
Section 2.01(iii), Section 2.01(iv) or Section 2.01(v) hereof, and (ii)
any Damages paid by any Guarantor pursuant to section (i) of this
proviso shall not be included in the calculation of the $1.0 million
Threshold; and
(c) Each Guarantor's portion of any Guaranteed
Obligations ("Proportionate Share") is set forth as the percentage
listed opposite that Guarantor's name on Schedule I to this Agreement.
(d) No Guarantor shall have any liability with
respect to any claim by Buyer for Damages or any other Guaranteed
Obligation unless it shall have received written notice of such claim
in accordance with the terms hereof prior to the second anniversary of
the Closing Date.
Section 2.05 Procedures. Buyer shall provide each Guarantor
with written notice of all claims for Damages concurrently with and in the same
manner as it provides or is required to provide any such notice to the Company
in accordance with the provisions of Article 11 of the Purchase Agreement,
whereupon the Guarantors will have the same rights as an "Indemnifying Party"
under the Purchase Agreement with respect to such claims. Subject to Section
2.04(d) hereof, failure by Buyer to so notify the Guarantors shall not relieve
any Guarantor from any liability hereunder to the extent such Guarantor is not
prejudiced as a result thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES.
As of the Closing Date, each Guarantor, with respect to
itself, represents and warrants to Buyer that:
Section 3.01 Financial Information. True and complete copies
of the most recent financial statements of such Guarantor, have been delivered
to Buyer and each of same are true, accurate and complete and fairly present in
accordance with GAAP such Guarantor's financial condition as of the dates
thereof and no material and adverse change has occurred in such Guarantor's
financial condition since the respective dates thereof.
Section 3.02 No Violation. Execution, delivery and performance
by such Guarantor of its obligation hereunder, including payment by such
Guarantor of its Proportionate Share of the Guaranteed Obligations will not
constitute a violation of its certificate of incorporation or bylaws or other
constitutive documents, any law, order, regulation, contract or agreement to
which such Guarantor is a party or by which such Guarantor or such Guarantor's
property may be bound.
Section 3.03 No Litigation. There is no litigation now pending
or, to the best of such Guarantor's knowledge threatened in writing, against
such Guarantor which, if adversely decided, would have a material adverse effect
on such Guarantor's financial condition or ability to perform its obligations
under this Agreement.
Section 3.04 Entity Matters. Such Guarantor is duly organized,
validly existing and in good standing under the laws of its state of
organization, has all requisite power and authority to execute and deliver this
Agreement, to conduct its business and to own its property as now conducted or
owned, and is qualified to do business in all jurisdictions where the nature and
extent of its business is such that such qualification is required by law. All
required entity actions and proceedings have been duly taken so as to authorize
the execution, delivery and performance by such Guarantor of this Agreement, and
Oaktree Capital Management, LLC ("OCM") has been duly authorized to execute this
Agreement on behalf of the Guarantor. The execution, delivery and performance by
such Guarantor of this Agreement and the consummation of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
Governmental Authority.
Section 3.05 Valid and Binding. This Agreement constitutes a
legal, valid and binding obligation of the Guarantor, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
Section 3.06 Solvency. After giving effect to its obligations
hereunder, (i) the fair value of the assets of such Guarantor is greater than
the total amount of such Guarantor's liabilities, including without limitation
any and all fixed or contingent, matured or unmatured, disputed and undisputed
liabilities; (ii) such Guarantor is able to pay all of its debts and other
liabilities as the same become due and payable; and (iii) such Guarantor does
not intend to, nor does it believe that it will, incur debts or other
liabilities that would be beyond its ability to pay as such debts and
liabilities become due and payable.
ARTICLE IV
COVENANTS.
So long as this Agreement is in effect and until payment in
full of all of the Guaranteed Obligations, each Guarantor, as to itself, agrees
as follows:
Section 4.01 Notices of Material Events. Such Guarantor will
furnish to Buyer prompt written
notice of the following:
(a) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority
against or affecting the Guarantor that, if adversely determined, could
reasonably be expected to have a material adverse effect on the
Guarantor's financial condition or its ability to perform its
obligations under this Agreement; and
(b) any other development that results in, or could
reasonably be expected to result in, a material adverse effect on the
Guarantor's financial condition or its ability to perform its
obligations under this Agreement.
Section 4.02 Existence; Conduct of Business. Subject to the
terms of its respective constitutive documents, such Guarantor will do or cause
to be done all things reasonably necessary to preserve, renew and keep in full
force and effect its legal existence and any governmental approvals material to
the conduct of its business.
Section 4.03 Payment of Obligations. Such Guarantor will pay
its obligations that, if not paid, could result in a material adverse effect on
the Guarantor's financial condition or ability to perform its obligations under
this Agreement before any such obligation shall become materially delinquent or
in default, except any such obligation (a) the validity or amount of which
obligation is being contested in good faith by appropriate proceedings, or (b)
with respect to which such Guarantor has set aside on its books adequate
reserves. Each Guarantor shall at all times maintain its assets such that the
fair value thereof is greater than such Guarantor's liabilities and such
Guarantor is able to pay all of its debts and other liabilities as the same
become due and payable.
Section 4.04 Maintenance of Properties; Insurance. Such
Guarantor will: (a) keep and maintain all property material to the conduct of
its business in good working order and condition, ordinary wear and tear
excepted, and (b) maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.
Section 4.05 Compliance with Laws. Such Guarantor will comply
with all governmental laws, rules and regulations applicable to it, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a material adverse effect on the Guarantor's financial
condition or ability to perform its obligations under this Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01 Limitations on Recourse. Neither OCM nor any
officer, director, member, employee, shareholder, investment manager, director,
representative, fiduciary or controlling person of OCM or of any Guarantor shall
have any personal obligations or liability to Buyer under or in connection with
this Agreement. With respect to obligations of any Guarantor arising hereunder,
Buyer shall look for payment or satisfaction solely to the assets and property
of such Guarantor and not to OCM, any other affiliate of such Guarantor other
than the other Guarantors or OCM, or any officer, director, member, employee,
shareholder, investment manager, director, representative, fiduciary or
controlling person of or investor in OCM or such Guarantor.
Section 5.02 Notices. All notices, requests and other
communications provided for in this Agreement shall be given or made in writing
and delivered by hand or courier service, mailed by certified or registered mail
or sent by telecopy to the intended recipient as specified below or, as to any
party, at such other address as is designated by that party in a notice to each
other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given or made upon receipt.
To the Guarantors c/o: Oaktree Capital Management, LLC
333 South Grand Ave., 28th Floor
Los Angeles, CA 90071
Telephone: (213) 830-6422
Telecopy: (213) 830-8522
Attention: Kenneth Liang
With a copy to: Milbank, Tweed, Hadley & McCloy LLP
601 S. Figueroa Street, 30th Floor
Los Angeles, CA 90017
Telephone: (213) 892-4000
Telecopy: (213) 629-5063
Attention: Robert Jay Moore/
Thomas R. Kreller
To Buyer: Unilab Corporation
401 Hackensack Avenue
Hackensack, NJ 07601
Telephone:
Telecopy: (201) 525-1331
Attention: Mark L. Bibi
With a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10016
Telephone: (212) 450-4000
Telecopy: (212) 450-4800
Attention: Donald S. Bernstein
To the Company: Bio-Cypher Laboratories
c/o J. Marvin Feigenbaum
Westwood Marquis
930 Hilgard Avenue
Los Angeles, CA 90024
Telecopy: (310) 824-0355
With a copy to: Latham & Watkins
505 Montgomery Street, Ste. 1900
San Francisco, CA 94111
Telephone: (415) 391-0600
Telecopy: (415) 395-8095
Attention: Paul DeMuro
Buyer hereby agrees that it shall provide to each Guarantor copies of all
notices delivered to the Company pursuant to the Purchase Agreement
simultaneously with its delivery of such notices to the Company; provided,
however, that any failure or delay in providing any such notice to any of the
Guarantors shall only relive such Guarantors of their obligations hereunder to
the extent that any such Guarantor is materially prejudiced by such failure or
delay to notify.
Section 5.03 Reinstatement in Certain Circumstances. Subject
to Section 2.04 hereof, each Guarantor's obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been performed
in full. If at any time any Company Payment is required under applicable law or
court order to be rescinded or must be otherwise restored or returned to the
Company by Buyer, whether pursuant to a Bankruptcy Proceeding or otherwise, each
Guarantor's obligations hereunder with respect the Guaranteed Obligations shall
be reinstated at such time to the extent that such Company Payment is so
rescinded or otherwise restored or returned by Buyer.
Section 5.04 Waiver by Guarantors. Subject to the terms of
each of Section 2.02(f) and Section 2.05 hereof to the fullest extent permitted
by law, each Guarantor irrevocably waives any right, whether legal or equitable,
statutory or non-statutory, to require Buyer to proceed against or take any
action against or any remedy with respect to the Company or any other Person or
make presentment or demand for performance or give any notice of nonperformance
before Buyer may enforce its rights hereunder against any Guarantor.
Section 5.05 Subrogation. Upon making payment with respect to
any Guaranteed Obligation hereunder, the applicable Guarantor shall be
subrogated to the rights of the payee against the Company with respect to such
obligation.
Section 5.06 Waiver. Subject to the procedures set forth in
Section 2.05 of this Agreement, no failure or delay by Buyer in exercising, nor
any single or partial exercise of, any remedy, right, power or privilege under
this Agreement or the Purchase Agreement shall operate as a waiver of that
remedy, right, power or privilege, nor shall any single or partial exercise of
that remedy, right, power or privilege preclude any other or further exercise of
that remedy, right, power or privilege or the exercise of any other remedy,
right, power or privilege. The remedies, rights, powers and privileges provided
by this Agreement are cumulative and not exclusive of any remedies, rights,
powers or privileges provided by the Purchase Agreement or by law.
Section 5.07 Amendments, Etc. No provision of this Agreement
may be waived, modified or supplemented except by an instrument in writing
signed by each of the Guarantors and Buyer.
Section 5.08 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of its parties and their respective
successors and assigns. None of the Guarantors may assign or transfer its rights
or obligations under this Agreement without the prior written consent of Buyer.
Section 5.09 Agreements Superseded. This Agreement supersedes
all prior agreements and understandings, written or oral, among the parties with
respect to the subject matter of this Agreement.
Section 5.10 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of that prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable that provision in any other
jurisdiction.
Section 5.11 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties to the Agreement may execute this
Agreement by signing any such counterpart. Delivery of an executed counterpart
of a signature page to this Agreement by hand or by telecopy shall be effective
as the delivery of a fully executed counterpart of this Agreement.
Section 5.12 Governing Law; Submission to Jurisdiction. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW
YORK. EACH PARTY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK
STATE COURT SITTING IN NEW YORK CITY, NEW YORK FOR THE PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR IN THE
FUTURE HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
Section 5.13 Waiver of Jury Trial. EACH OF THE GUARANTORS AND
BUYER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
Section 5.14 No Third Party Beneficiaries. The terms and
provisions of this Agreement are intended solely for the benefit of each party
hereto and their respective successors or permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon any other
Person.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Guarantee Agreement as of the date first above written.
UNILAB CORPORATION,
By:_______________________________
Title:
PHYSICIAN'S CLINICAL LABORATORY, INC.,
By:_______________________________
Title:
GUARANTORS:
OCM OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By:_______________________________
By:_______________________________
OCM OPPORTUNITIES FUND II, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By:_______________________________
By:_______________________________
COLUMBIA/HCA MASTER RETIREMENT TRUST (Separate Account I)
By: Oaktree Capital Management, LLC
Its: Investment Manager
By:_______________________________
By:_______________________________
COLUMBIA/HCA MASTER RETIREMENT TRUST (Separate Account II)
By: Oaktree Capital Management, LLC
Its: Investment Manager
By:_______________________________
By:_______________________________
<PAGE>
Schedule I
Fund or Account Percentage
OCM Opportunities Fund, L.P. 54.0%
Columbia/HCA Master Retirement Trust (Separate Account I) 4.0%
OCM Opportunities Fund II, L.P. 41.0%
Columbia/HCA Master Retirement Trust (Separate Account II) 1.0%
