UNILAB CORP /DE/
8-K, 1999-08-13
MEDICAL LABORATORIES
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<PAGE>


                       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): July 8, 1999
                                                  ------------



                               UNILAB CORPORATION
                               ------------------
             (Exact name of registrant as specified in its charter)



          Delaware                      33-77286                95-4415490
          --------                      --------                ----------
(State or other jurisdiction        (Commission File           (IRS Employer
     of incorporation)                   Number)             Identification No.)



18448 Oxnard Street
Tarzana, CA                                                          91356
- -----------                                                          -----
(Address of principal executive offices)                           (Zip Code)



Registrant's telephone number, including area code: (818) 758-6607
                                                    --------------



<PAGE>


Item 5. Other Events
        ------------

     As disclosed on its Form 8-K, dated May 27, 1999, Unilab Corporation, a
Delaware corporation (the "Company"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") with UC Acquisition Sub, Inc., a Delaware
corporation ("Newco"), on May 24, 1999. The Merger Agreement contemplates the
merger (the "Merger") of Newco with and into the Company.

     The Company and Newco entered into a letter agreement, attached hereto as
Exhibit 2.1 and incorporated herein by reference, on July 8, 1999 extending the
time period within which Newco had to elect to convert the Merger into an all
cash transaction from 45 days after the signing of the Merger Agreement to 60
days after the signing of the Merger Agreement.

     On July 30, 1999, the Company and Newco entered into a letter agreement,
attached hereto as Exhibit 2.2 and incorporated herein by reference, regarding
the completion of the subordinated debt financing to fund the Merger prior to
the consummation of the Merger.

     On August 10, 1999, the Company and Newco entered into a letter agreement,
attached hereto as Exhibit 2.3 and incorporated herein by reference, providing
for, among other things, (i) at the election of Newco, some or all the shares of
the Company's common stock, $.01 par value ("Common Stock") held by certain
institutional stockholders and certain members of the Company's senior
management designated by Newco to remain outstanding following the completion of
the Merger or additional cash equity to be contributed by other additional
investors and (ii) in the event that Newco so elects, the shares of all other
holders of Common Stock to be converted into the right to receive cash in the
Merger. In the event that Newco makes the foregoing election, the shares of the
designated institutional stockholders and management members that will remain
outstanding will not exceed in the aggregate 15% of the Common Stock outstanding
prior to the Merger.

Item 7. Financial Statements and Exhibits
        ---------------------------------

(a)  Financial Statements of business acquired: None

(b)  Pro Forma Financial Information:           None

(c)  Exhibits:

     2.1  Letter agreement, dated July 8, 1999, between the Company and Newco.

     2.2  Letter agreement, dated July 30, 1999, between the Company and Newco.

     2.3  Letter agreement, dated August 10, 1999, between the Company and
          Newco.


                                       -2-

<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.



                                        Unilab Corporation


Dated:  August 13, 1999                 By: /s/ Mark Bibi
                                            ------------------------------
                                            Name:  Mark Bibi
                                            Title: General Counsel


                                      -3-

<PAGE>


                                  EXHIBIT INDEX

Exhibit No.                Description
- -----------                -----------

     2.1                   Letter agreement, dated as of July 8, 1999, between
                           Unilab Corporation and UC Acquisition Sub, Inc.

     2.2                   Letter agreement, dated as of July 30, 1999, between
                           Unilab Corporation and UC Acquisition Sub, Inc.

     2.3                   Letter agreement, dated as of August 10, 1999,
                           between Unilab Corporation and UC Acquisition Sub,
                           Inc.


                                      -4-


<PAGE>


July 8, 1999




Unilab Corporation
18448 Oxnard Street
Tarzana, California  91356

Re:  Merger Agreement
     ----------------

Ladies and Gentlemen:

     Reference is made to the Agreement and Plan of Merger, dated as of May 24,
1998 (the "Merger Agreement"), between Unilab Corporation (the "Company") and UC
Acquisition Sub, Inc. ("Merger Sub"). This letter will confirm the agreement of
the Company and Merger Sub that the time period within which Merger Sub is
obligated under Section 1.7(a) of the Merger Agreement to use its reasonable
efforts to convert the Merger (as defined in the Merger Agreement) into an all
cash merger is hereby extended from 45 days after the date of the Merger
Agreement to 60 days after the date of the Merger Agreement.

     Please confirm your agreement with the foregoing by signing where indicated
below and returning to Merger Sub a copy of this Agreement.

                                        Very truly yours,

                                        UC ACQUISITION SUB, INC.


                                        By: /s/ David Wahrhaftig
                                            ------------------------------
                                            Name: David Wahrhaftig


Accepted and Agreed
as of the date first
written above:

UNILAB CORPORATION


By: /s/ Mark L. Bibi
    ------------------------------
    Name: Mark L. Bibi



<PAGE>


                            UC ACQUISITION SUB, INC.

                                                                   July 30, 1999

Unilab Corporation
18448 Oxnard Street
Tarzana, CA 91356

Dear Sirs:

     Reference is made to the Agreement and Plan of Merger dated as of May 24,
1999 between Unilab Corporation (the "Company") and UC Acquisition Sub, Inc.
("Merger Sub"), as amended on July 8, 1999 (the "Merger Agreement"). This letter
confirms the parties' agreement that the Merger Agreement is hereby amended and
supplemented, effective as of the date of this letter, as follows:

     (a)  The words "or affiliates thereof" shall be inserted after "Merger Sub"
          in the last sentence of Section 2.5.

     (b)  The following proviso shall be added to the end and as part of the
          second sentence of Section 5.11(a) (after the phrase "....the proceeds
          of the Bridge Financing"): "; provided further that Merger Sub shall
          have no obligation to draw on or obtain for it or the Company the
          proceeds of the Bridge Financing if an Escrow Closing (as defined in
          Section 5.11(c)) has theretofore occurred."

     (c)  Section 5.11(c) shall be added to the Merger Agreement consisting of
          the following:

          "(c) At any time prior to consummation of the Merger, the proceeds of
          the subordinated debt financing in connection with the Merger may be
          closed into escrow such that such proceeds are held by a newly formed
          corporation (the "EscrowCo") formed at the direction of Kelso (such
          closing, an "Escrow Closing"). At or immediately prior to such Escrow
          Closing, the Company shall pay to EscrowCo an amount in dollars (the
          "Breakage Amount") sufficient to cover (i) accrued interest on the
          EscrowCo Debt (as defined below) from the Escrow Closing to and
          including the Termination Date (as defined in Section 7.1(d)), net of
          income earned by EscrowCo from investing the proceeds of the
          subordinated debt financing in Permitted Investments (as defined
          below) to be determined by the Company and Merger Sub prior to the
          deposit of the Breakage Amount with EscrowCo and (ii) any repayment
          premium applicable thereto in the event that this Agreement is
          terminated by the parties in accordance with its terms or the Merger
          is not consummated by the date specified by the terms of the EscrowCo
          Debt. At or immediately prior to the Effective Time and subject to
          consummation of the Merger, (i) the Surviving Corporation shall assume
          the indebtedness of EscrowCo plus any accrued and unpaid interest
          thereon (the "EscrowCo Debt") and receive the proceeds held by
          EscrowCo and (ii) EscrowCo



<PAGE>


          shall be released from all obligations with respect thereto. In the
          event that this Agreement is terminated by the parties in accordance
          with its terms or the Merger is not consummated by the date specified
          by the terms of the EscrowCo Debt, the EscrowCo Debt (plus any
          applicable repayment premium) shall be repaid in full by EscrowCo.
          With respect to any such repayment of the EscrowCo Debt (plus any
          applicable repayment premium), Merger Sub shall promptly reimburse the
          Company for one-half of the excess of the Breakage Amount over any
          portion of such amount returned to the Company by EscrowCo. The
          parties hereto agree that (i) any applicable repayment premium shall
          in no event exceed 1% of the principal amount of the EscrowCo Debt,
          (ii) placement agent fees or discounts or commitments shall be payable
          with respect to the EscrowCo Debt only at the Effective Time and (iii)
          EscrowCo shall invest the proceeds of its borrowings in Permitted
          Investments. In the event that the proceeds of the subordinated debt
          financing are invested in Permitted Investments such that the Breakage
          Amount is less than the amount, which when added to such proceeds, is
          not enough to repay in full the EscrowCo Debt (plus any applicable
          repayment premium), the Company and Merger Sub shall each pay one-half
          of such shortfall to EscrowCo to enable it to pay such amount to the
          applicable debtholders. As used herein, "Permitted Investments" shall
          mean United States treasury securities (without regard to maturity)
          and investments in time deposits, certificates of deposit or money
          market deposits maturing within 90 days of the date of acquisition
          thereof and entitled to U.S. Federal deposit insurance for the full
          amount thereof or issued by a bank or trust company which is organized
          under the laws of the United States or any state thereof having
          capital in excess of $500 million."

     (d)  The word "provisos" shall replace the word "proviso" as the second to
          last word of Section 6.3(c) (without giving effect to the remainder of
          this sentence) and the following shall be added to the end of Section
          6.3(c): "; and provided further that if an Escrow Closing has occurred
          with respect to an amount as great as that set forth in the Bridge
          Financing Letter (or such lesser amount as necessary to provide, when
          taken together with the Debt Financing under the Commitment Letters,
          $310,000,000) and if the Surviving Corporation shall have assumed the
          EscrowCo Debt and received the proceeds held by EscrowCo and EscrowCo
          shall


                                       2

<PAGE>


          have been released therefrom in accordance with the terms thereof, the
          condition set forth in clause (ii) shall be deemed satisfied."



                                        Very truly yours,

                                        UC Acquisition Sub, Inc.



                                        By: /s/ James J. Connors, II
                                            ------------------------------
                                            Name:  James J. Connors, II
                                            Title: Vice President

Agreed to as of the date written above:

Unilab Corporation

By: /s/ Mark L. Bibi
    ------------------------------
    Name:  Mark L. Bibi
    Title: Executive Vice President



<PAGE>


                            UC ACQUISITION SUB, INC.

                                                                 August 10, 1999

Unilab Corporation
18448 Oxnard Street
Tarzana, CA 91356

Dear Sirs:

     Reference is made to the Agreement and Plan of Merger dated as of May 24,
1999 between UC Acquisition Sub, Inc. ("Merger Sub") and Unilab Corporation (the
"Company"), as amended on July 8, 1999 and July 30, 1999 (the "Merger
Agreement"). This letter is to confirm the parties' agreement that the Merger
Agreement shall be amended and supplemented, effective as of the date of this
letter, as follows:

1.   Roll-Over Shareholders

     a)   Section 1.7(a) shall be amended and restated in its entirety as
          follows:

          (a) Each holder who, on or prior to the Election Date referred to in
          Section 1.7(c) below, is a record holder of shares of Company Common
          Stock will be entitled, with respect to all or any portion of its
          shares, to make an unconditional election (a "Retention Election") on
          or prior to the Election Date (as defined in Section 1.7(c)) to retain
          Retained Shares (subject to Section 1.8), on the basis hereinafter set
          forth, provided that, on or prior to August 31, 1999, Merger Sub shall
          use reasonable best efforts to convert the Merger into a merger
          pursuant to which all shares of Company Common Stock, other than
          Roll-Over Shares (as defined in Section 1.7(f)), if any, will be
          converted only into the right to receive the Cash Election Price in
          cash in the Merger (a "Conversion Decision"); provided that the
          foregoing shall not require Merger Sub or Parent or any of their
          affiliated entities to agree to any terms or provisions in connection
          therewith which it or they find unacceptable or which it or they
          believe, based on conversations with the SEC (as defined in Section
          2.8), jeopardize the availability of recapitalization accounting
          treatment for the Merger. Upon making a Conversion Decision, Merger
          Sub shall promptly provide written notice thereof to the Company. In
          connection with such Conversion Decision, Parent and Persons
          affiliated or related to Parent shall continue to hold in the
          aggregate at least a sufficient number of shares of the capital stock
          of Merger Sub so that immediately following the consummation of the
          Merger Parent and such Persons will own at least 75% of the
          outstanding shares of Common Stock of the Surviving Corporation
          calculated on a primary basis. So long as such 75% test is satisfied,
          and regardless of whether a Conversion Decision is made, a portion of
          the equity financing to be provided by Parent for cash can, at Merger
          Sub's option, instead be provided by one or more third parties other
          than Parent for cash, in the form of either purchases of Merger Sub
          capital stock immediately prior to the Effective Time or purchases of



<PAGE>


          Company Common Stock at the Effective Time, so long as the price paid
          is equivalent to the Cash Election Price per share of Company Common
          Stock. In the event that Merger Sub makes a Conversion Decision,
          Sections 1.6(c)(i), 1.7(c), 1.7(d), 1.7(e), 1.8 (provided that the
          defined term "Retention Election Number" contained therein and the
          number represented thereby shall remain operative for purposes of this
          Agreement), 1.9(c) and 1.9(e) hereof and all references herein to the
          Form S-4 (as defined in Section 2.8) (except to the extent the SEC (as
          defined in Section 2.8) requires that a Form S-4 must be used because
          of the existence of Roll-Over Shares) and any obligations in
          connection therewith shall be deemed eliminated and have no effect,
          and there shall be no Form of Election and no Retained Shares. In the
          event of a Conversion Decision, this Agreement shall be deemed amended
          such that the words (i) "or Roll-Over Shares, if any," shall be
          inserted immediately after the phrase "other than Excluded Shares or
          Dissenting Shares (as defined in Section 1.6(e))" in the fourth line
          of Section 1.6(c) hereof and before the words "shall be converted" and
          (ii) "or Roll-Over Shares, if any" shall be inserted immediately after
          the words "Retained Shares" inside the parenthetical in subparagraph
          1.6(c)(ii)."

     b)   Section 1.7(f) shall be added to the Merger Agreement consisting of
          the following:

          "(f) In the event that Merger Sub makes a Conversion Decision, Merger
          Sub shall deliver or cause to be delivered to the Company concurrently
          therewith or at the time of any change in the number or identity of
          Roll-Over Shares (i) agreements or undertakings between stockholders
          of the Company designated by Merger Sub (the "Roll-Over Stockholders")
          whose shares of Company Common Stock shall remain outstanding
          following the Effective Time and Parent, Kelso (as defined in Section
          8.8), Merger Sub or the Company to the effect that such Roll-Over
          Stockholders have agreed that all or a specified portion of their
          shares of Company Common Stock (such designated shares, "Roll-Over
          Shares") shall remain outstanding pursuant to the Merger in lieu of
          being converted into the right to receive what the Common Stock Merger
          Consideration would otherwise consist of, in an aggregate number of
          shares sufficient to provide that the number of Roll-Over Shares shall
          be not less than the Retention Election Number (as defined in Section
          1.8(a)) or (ii) in the event that there are no Roll-Over Shares or
          that the number of Roll-Over Shares is less than the Retention
          Election Number, commitment letters for equity financing from one or
          more third parties in a form reasonably satisfactory to the Company
          (it being agreed that the form of the Kelso Equity Letter (as defined
          in Section 2.5) is reasonably satisfactory to the Company) for an
          aggregate amount (the "Shortfall Amount") equal to the product of (x)
          the excess, if positive, of the Retention Election Number over the
          number of Roll-Over Shares, if any, and (y) the Cash Election Price;
          provided that Merger Sub in its discretion may replace any stockholder
          theretofore designated as a Roll-Over Stockholder or any shares of
          Company Common Stock theretofore designated as Roll-Over Shares with
          another stockholder and/or other shares prior to the Effective Time;
          and provided further that Merger Sub in its discretion may, prior to
          the Effective Time, eliminate from the category of Roll-Over Shares
          (and


                                       2

<PAGE>


          not replace as Roll-Over Shares) any shares that had been theretofore
          designated as Roll-Over Shares. In the event that at any time on or
          after a Conversion Decision is made the number of Roll-Over Shares is
          less than the Retention Election Number, then the amount of "Equity
          Financing" (as defined in Section 2.5) shall be increased as provided
          for in such definition. If a Conversion Decision is made, each
          Roll-Over Share shall remain outstanding as one fully paid and
          nonassessable share of Common Stock of the Surviving Corporation (such
          consideration, the "Roll-Over Consideration") and references to
          "Merger Consideration" in this Agreement shall include the Roll-Over
          Consideration unless the context indicates otherwise. In the event
          that no Conversion Decision is made, there shall be no Shortfall
          Amount and no Roll-Over Shares. Notwithstanding anything to the
          contrary contained herein, (i) the number of Roll-Over Shares, other
          than Roll-Over Shares held by employees of the Company, shall not
          exceed ten percent (10%) of the number of shares of Company Common
          Stock outstanding on the date hereof, (ii) the number of Roll-Over
          Shares owned by affiliates of the Company shall not exceed five
          percent (5%) of the number of shares Company Common Stock outstanding
          on the date hereof, (iii) all Roll-Over Stockholders, other than not
          more than thirty-five (35) employees and Persons deemed to be excluded
          purchasers pursuant to Rule 501(e) under the Securities Act (as
          defined in Section 2.4(b)) by virtue of their relationship with any of
          such employees, shall be "Accredited Investors" under the Securities
          Act and the rules and regulations thereunder and (iv) no more than six
          Roll-Over Stockholders will consist of Persons who are not employees
          of the Company; provided that, for purposes of the foregoing clause
          (iv), affiliates and associates of any Person shall not be counted
          separately from such Person."

     c)   A new Section 1.9(k) shall be added to the Merger Agreement consisting
          of the following:

          "(k) Notwithstanding anything to the contrary contained in this
          Agreement (including the penultimate sentence of Section 1.9(b)),
          certificates representing Roll-Over Shares shall not be delivered or
          surrendered to the Exchange Agent upon consummation of the Merger and
          shall remain outstanding and represent shares of Common Stock of the
          Surviving Corporation subject to all rights, powers, privileges and
          preferences of such shares."

2. Options

     a)   The following shall be added at the end and as part of the sentence
          constituting Section 1.10(a): "; provided that, with respect to any
          Option as Merger Sub, Parent or Kelso shall determine prior to the
          Effective Time (and with the applicable optionee's consent), such
          Option shall, in lieu of being cancelled pursuant to the foregoing,
          remain outstanding on such terms (which, subject to the following
          provisos, may vary from optionee to optionee, including as to the
          number of shares of Common Stock of the Surviving Corporation into
          which such Options are exercisable and the exercise price thereof) as
          Merger Sub, Parent or


                                        3

<PAGE>


          Kelso, as the case may be, and the applicable optionee shall decide
          (each such Option, a "Roll-Over Option"); provided further that with
          respect to Roll-Over Options of any particular optionee, the aggregate
          spread of the Cash Election Price over the exercise price of such
          Roll-Over Options, after giving effect to the foregoing proviso, shall
          remain equal to the aggregate spread of the Cash Election Price over
          the exercise price of such Roll-Over Options prior to giving such
          effect; and provided further that in no event shall the exercise price
          of any Roll-Over Option, after giving effect to any amendment thereto,
          be less than 25% of the Cash Election Price."

     b)   Section 2.5 shall be amended and/or supplemented as follows:

          The words "minus the After-Tax Roll-Over Amount (as defined below)
          plus additional cash equity financing from third parties in the amount
          of any Shortfall Amount, if any" shall be inserted after
          "$139,500,000" and before the parenthetical "(the "Equity Financing")"
          in the third line of Section 2.5.

          The following sentences shall be added to the end of Section 2.5 after
          the last sentence thereof: "The "After-Tax Roll-Over Amount" shall
          mean an amount in dollars equal to the sum of (i) the product of (x)
          the excess, if positive, of the number of Roll-Over Shares over the
          Retention Election Number and (y) the Cash Election Price and (ii) the
          product of (x) .58 and (y) the aggregate spread (equal to the excess
          of Cash Election Price over the exercise price) of all Roll-Over
          Options. The Commitment Letter with respect to the equity financing
          delivered by Kelso (the "Kelso Equity Letter") shall be deemed amended
          such that the reference therein to "$139,500,000" shall instead refer
          to such amount in dollars as equals $139,500,000 minus the After-Tax
          Roll-Over Amount.

     c)   Section 6.3(f) shall be deleted and replaced by the following:

          "(f) At the Effective Time, all Options issued and outstanding under
          the Options Plans or otherwise shall either (i) have been cashed out
          and cancelled or (ii) remain outstanding to acquire shares of Common
          Stock of the Surviving Corporation on terms acceptable to Merger Sub,
          in all cases in accordance with Section 1.10(a) hereof."

3. Additional Equity

          Section 5.11(d) shall be added to the Merger Agreement consisting of
          the following:

          "(d) If Kelso or any of its affiliates are required to provide
          additional equity financing to the Company or the Surviving
          Corporation pursuant to the terms of any bank credit agreement or any
          other agreement with other sources of financing or in connection with
          any refinancing of indebtedness of the Surviving Corporation, Kelso or
          any such affiliate or any other persons in connection


                                        4

<PAGE>


          therewith shall be entitled to purchase Common Stock of the Surviving
          Corporation in connection therewith for an amount per share not
          greater than the Cash Election Price, subject to adjustment by reason
          of any stock split, dividend or similar transaction after the
          Effective Time."

4. Survival

          Section 8.1 shall be amended and restated in its entirety as follows:

          "The representations, warranties and agreements in this Agreement
          shall terminate at the Effective Time or the termination of this
          Agreement pursuant to Section 7.1, as the case may be, except that the
          agreements set forth in Article I and Sections 5.8, 5.9 and 8.8 shall
          survive the Effective Time indefinitely and those set forth in
          Sections 5.5(b), 5.5(c), 7.2(b) and 8.3 and in the fifth, sixth and
          seventh sentences of Section 5.11(c) shall survive termination
          indefinitely."



                                        Very truly yours,

                                        UC Acquisition Sub, Inc.



                                        By: /s/ James J. Connors, II
                                            ------------------------------
                                            Name:  James J. Connors, II
                                            Title: Vice President

Agreed to as of the date written above:

Unilab Corporation

By: /s/ Mark L. Bibi
    ------------------------------
    Name:  Mark L. Bibi
    Title: Executive Vice President




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