As filed with the Securities and Exchange Commission on July 9, 2001
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
QUEST DIAGNOSTICS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 8071 16-1387862
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation Classification Code Number) Identification
or organization) Quest Diagnostics Incorporated No.)
One Malcolm Avenue
Teterboro, New Jersey 07608
(201) 393-5000
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
-------------------
Leo C. Farrenkopf, Jr.
Quest Diagnostics Incorporated
Vice President and Secretary
One Malcolm Avenue
Teterboro, New Jersey 07608
(201) 393-5000
(Name, address, including zip code, and telephone
number, including area code, of agent for service
of each registrant))
-------------------
See Table of Additional Registrants
-------------------
With Copies to:
Stephen T. Giove, Esq. Stuart H. Gelfond, Esq.
Shearman & Sterling Fried, Frank, Harris, Shriver & Jacobson
599 Lexington Avenue One New York Plaza
New York, New York 10022 New York, New York 10004
(212) 848-4000 (212) 859-8000
Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. | |
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. | |
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Proposed
Amount to be Maximum Offering Proposed Maximum Amount of
Title of each Class of --------------- price Aggregate registration
Securities to be Registered registered (1) per share (2) Offering Price (2) fee
- -------------------------------------------------------------------------------------------------------------------------
Primary Offering:
Debt securities of Quest Diagnostics (3)(7).....
Preferred stock of Quest Diagnostics (4)(7).....
Common stock of Quest Diagnostics (5)(7)........ (2) (2) (2)
Guarantees of Debt Securities of Quest
Diagnostics (6).................................
- -------------------------------------------------------------------------------------------------------------------------
Total........................................... $600,000,000 100% $600,000,000 $150,000 (8)
- -------------------------------------------------------------------------------------------------------------------------
Secondary Offering:
Common Stock of Quest Diagnostics............... (9) (10)
=========================================================================================================================
(Footnotes on next page)
================================================================================
- ----------
(1) We will determine the proposed maximum offering price per unit from time to
time in connection with issuances of securities registered hereunder. The
proposed maximum aggregate offering price has been estimated solely for the
purpose of calculating the registration fee pursuant to Rule 457 under the
Securities Act.
(2) Not applicable pursuant to General Instruction II.D of Form S-3.
(3) There is being registered hereunder an indeterminate principal amount of
debt securities of our company as may be offered or sold from time to time
by us. If any debt securities are issued at an original issue discount,
then the offering price shall be in such greater principal amount as shall
result in an aggregate initial offering price not to exceed $600,000,000.
(4) There is being registered hereunder an indeterminate number of shares of
our preferred stock as may be sold from time to time by us.
(5) There is being registered hereunder an indeterminate number of shares of
our common stock as may be sold from time to time by us. This includes the
associated rights to purchase our Series A Junior Participating Preferred
Stock. The rights to purchase our Series A Junior Participating Preferred
Stock initially are attached to and trade with the shares of our common
stock being registered hereby.
(6) Registrants listed on the Table of Additional Registrants will fully,
irrevocably and unconditionally guarantee on an unsecured basis our debt
securities. Pursuant to Rule 457(n), no separate fee is required to be paid
in respect of guarantees of our debt securities, that are being registered
concurrently.
(7) Includes such indeterminate amount of debt securities, preferred stock and
common stock of our company as may be issued upon conversion or exchange
for any other securities registered hereunder that provide for conversion
or exchange into debt securities, preferred stock or common stock of our
company.
(8) As described below, $12,500 was previously paid by the registrant as a
registration fee.
(9) The selling shareholder, SmithKline Beecham plc, has previously filed to
register 3 million shares of common stock of our company. This includes the
associated rights to purchase our Series A Junior Participating Preferred
Stock. The rights to purchase our Series A Junior Participating Preferred
Stock initially are attached to and trade with the shares of our common
stock being registered hereby.
(10) As described below, the registration fee of $36,750 was previously paid by
registrant.
Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
prospectus included in this registration statement is a combined prospectus
relating also to $50,000,000 of securities and 3,000,000 shares of common stock
previously registered by us and SmithKline Beecham plc, respectively, under
registration statement no. 333-54310 previously filed by the registrant on Form
S-3 and declared effective on June 1, 2001. The portion of the filing fee
allocable to the $50,000,000 of securities ($12,500), as well as the entire
filing fee allocable to the 3 million shares of common stock ($36,750) were
previously paid. Pursuant to Rule 457 under the Securities Act of 1933, as
amended, such filing fees are offset against the filing fees currently due in
connection with this registration statement. This registration statement, which
is a new registration statement, also constitutes post-effective amendment no. 1
to registration no. 333-54310, and such post-effective amendment no. 1 shall
hereafter become effective concurrently with the effectiveness statement of this
registration statement and in accordance with section 8(c) of the Securities Act
of 1933, as amended.
TABLE OF ADDITIONAL REGISTRANTS
State or Other Primary
Jurisdiction Standard I.R.S.
of Industrial Employer
Incorporation Classification Identification
Name or Organization Code Number Number
- ---- --------------- ----------- ------
Quest Diagnostics Holdings Incorporated.................... DE 8071 23-2324658
Quest Diagnostics Clinical Laboratories, Inc............... DE 8071 38-20-84239
Quest Diagnostics Incorporated............................. CA 8071 95-2701802
Quest Diagnostics Incorporated............................. MD 8071 52-0890739
Quest Diagnostics LLC...................................... IL 8071 36-4257926
Quest Diagnostics Incorporated............................. MI 8071 38-1882750
Quest Diagnostics Incorporated............................. CT 8071 06-1460613
Quest Diagnostics Incorporated............................. MA 8071 04-3248020
Quest Diagnostics of Pennsylvania Inc...................... DE 8071 22-3137283
Quest Diagnostics Incorporated............................. OH 8071 34-0944454
MetWest Inc................................................ DE 8071 33-0363116
Nichols Institute Diagnostics.............................. CA 8071 95-2955451
DPD Holdings, Inc.......................................... DE 8071 93-0988106
Diagnostics Reference Services Inc......................... MD 8071 22-3479439
Laboratory Holdings Incorporated........................... MA 8071 04-2449994
Pathology Building Partnership............................. MD 8071 51-1188454
The Company intends to file a pre-effective amendment to this
registration statement to add Quest Diagnostics Investments Incorporated (a
Delaware corporation with SIC number 8731 and I.R.S. Employer Identification
Number 51-0314231) and Quest Diagnostics Finance Incorporated (a Delaware
corporation with SIC number 8071 and I.R.S. Employer Identification Number
51-0390719).
PROSPECTUS
QUEST DIAGNOSTICS INCORPORATED
Debt Securities
Guarantees of Debt Securities
Preferred Stock
Common Stock
[LOGO]
We may offer and sell, from time to time, in one or more offerings, up
to $650,000,000 of any combination of the debt and equity securities we describe
in this prospectus. If we decide to offer and sell our common stock, SmithKline
Beecham plc may also use this prospectus to offer and sell up to 3 million
shares of our common stock owned by it. We will not receive any proceeds from
the sale of our common stock by SmithKline Beecham plc.
Our debt securities may be fully and unconditionally guaranteed on an
unsecured basis by our subsidiaries as described in "Description of Senior Debt
Securities" and "Description of Subordinated Debt Securities."
We will provide the specific terms of these securities in supplements
to this prospectus. This prospectus may not be used to sell securities unless
accompanied by a prospectus supplement. We urge you to read carefully this
prospectus and the accompanying prospectus supplement, which will describe the
specific terms of the securities offered, before you make your investment
decision.
Our common stock trades on the New York Stock Exchange under the symbol
"DGX."
Investing in our common stock, preferred stock or debt securities
involves risks, see "Risk Factors" beginning on page 1.
--------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the adequacy
or accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
--------------
The date of this prospectus is July 9, 2001
TABLE OF CONTENTS
Page
ABOUT THIS PROSPECTUS.........................................................ii
QUEST DIAGNOSTICS INCORPORATED................................................ii
RISK FACTORS...................................................................1
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS........................9
USE OF PROCEEDS................................................................9
WHERE YOU CAN FIND MORE INFORMATION...........................................10
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995.................................................................11
SECURITIES WE MAY ISSUE.......................................................14
DESCRIPTION OF SENIOR DEBT SECURITIES.........................................18
DESCRIPTION OF SUBORDINATED DEBT SECURITIES...................................37
DESCRIPTION OF THE PREFERRED STOCK AND THE DEPOSITARY
SHARES REPRESENTING FRACTIONAL SHARES OF PREFERRED STOCK....................51
DESCRIPTION OF COMMON STOCK...................................................56
SELLING STOCKHOLDER...........................................................59
PLAN OF DISTRIBUTION..........................................................60
VALIDITY OF THE SECURITIES....................................................61
EXPERTS.......................................................................61
---------------------
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission (the "SEC") using the SEC's shelf
registration rules. Under the shelf registration rules, using this prospectus,
together with a prospectus supplement, we may sell from time to time, in one or
more offerings, up to $650,000,000 of any of the securities described in this
prospectus. SmithKline Beecham may use this prospectus to offer and sell our
common stock that it owns as described in "Selling Stockholder" only as part of
an underwritten public offering. In December 2000, Glaxo Wellcome and SmithKline
Beecham merged to form GlaxoSmithKline plc.
In this prospectus we use the terms "Quest Diagnostics," "we," "us,"
and "our" to refer to Quest Diagnostics Incorporated, a Delaware corporation.
This prospectus provides you with a general description of the
securities we may sell and the common stock that SmithKline Beecham may sell.
Each time we sell securities under this prospectus, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read this prospectus, the applicable
prospectus supplement and the additional information described below under
"Where You Can Find More Information."
QUEST DIAGNOSTICS INCORPORATED
We are the nation's leading provider of diagnostic testing and related
services for the healthcare industry. We offer a broad range of clinical
laboratory testing services used by physicians in the detection, diagnosis,
evaluation, monitoring and treatment of diseases and other medical conditions.
We have a more extensive national network of laboratories and patient service
centers than our competitors and revenues nearly double those of our nearest
competitor. We have the leading market share in clinical laboratory testing and
esoteric testing, including molecular diagnostics, as well as non-hospital based
anatomic pathology services and testing for drugs of abuse.
We currently process over 100 million requisitions each year. Each
requisition form accompanies a patient specimen, indicating the tests to be
performed and the party to be billed for the tests. Our customers include
physicians, hospitals, managed care organizations, employers, governmental
institutions and other independent clinical laboratories.
As of June 20, 2001, we have a network of principal laboratories
located in approximately 30 major metropolitan areas throughout the United
States, several joint venture laboratories, approximately 150 smaller "rapid
response" laboratories and approximately 1,300 patient service centers. We also
operate a leading esoteric testing laboratory and development facility known as
Nichols Institute located in San Juan Capistrano, California as well as
laboratory facilities in Mexico City, Mexico and near London, England.
In addition to our laboratory testing business, our clinical trials
business is one of the leading providers of testing to support clinical trials
of new pharmaceuticals worldwide. We also collect and analyze laboratory,
pharmaceutical and other data through our Quest Informatics division in order to
help pharmaceutical companies with their marketing and disease management
efforts, as well as to help healthcare customers better manage the health of
their patients.
Our company is a Delaware corporation. Our principal executive offices
are located at One Malcolm Avenue, Teterboro, New Jersey 07608, and our
telephone number is (201) 393-5000.
ii
RISK FACTORS
You should carefully consider the risks described below before making a
decision to invest in our securities. Some of the following factors relate
principally to our business and the industry in which we operate. Other factors
relate principally to your investment in our securities. The risks and
uncertainties described below are not the only ones facing our company.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also adversely affect our business and operations.
If any of the matters included in the following risks were to occur,
our business, financial condition, results of operations, cash flows or
prospects could be materially adversely affected. In such case, you could lose
all or part of your investment.
Integrating our business operations with those businesses that we have acquired
or may acquire in the future may be difficult and may have a material adverse
impact on our business.
We are in the process of integrating into our company the operations of
SmithKline Beecham Clinical Laboratories, Inc., or SBCL, which we acquired in
August 1999. While we have substantially completed the transition of our
business affected by this integration, including consolidation of redundant
facilities and infrastructure and administrative and other duplicative
functions, certain other activities, such as standardization of information
systems, will continue beyond 2001. Given the large size of SBCL's operations
and the complexity of the clinical laboratory testing business, we expect that
it will take as long as three years from the date of this prospectus before we
fully complete the process. In addition, in February 2001 we acquired the assets
of Clinical Laboratories of Colorado. We may also acquire additional clinical
laboratories in the future as part of our growth strategy. Each of these
acquisitions involves the integration of separate companies that have previously
operated independently and have different corporate cultures. The process of
combining such companies may be disruptive to their businesses and may cause an
interruption of, or a loss of momentum in, such businesses as a result of the
following difficulties, among others:
o loss of key customers or employees;
o inconsistencies in standards, controls, procedures and
policies among the companies being combined make it more
difficult to implement and harmonize company-wide financial,
accounting, billing, information and other systems;
o failure to maintain the quality of services that such
companies have historically provided;
o coordination of geographically diverse organizations; and
o diversion of management's attention from the day-to-day
business of our company as a result of the need to deal with
the above disruptions and difficulties and the added costs of
dealing with such disruptions.
In particular, since most of our clinical laboratory testing is performed under
arrangements that are terminable at will or on short notice, any such
interruption of or deterioration in our services may result in a customer's
decision to stop using us for clinical laboratory testing.
Our acquisitions may not produce the anticipated benefits.
Even if we are able to successfully integrate the operations of SBCL
into our company, or the operations of other companies or businesses we may
acquire in the future, we may not be able to realize the benefits that we expect
to result from such integrations, either in monetary terms or a timely manner.
We continue to expect that the SBCL integration will result in approximately
$150 million of annual synergies to be achieved by the end of 2002. During 2000,
we estimate that we realized approximately $50 million of these synergies, and
at the end of 2000 we had achieved an annual rate of synergies approaching $100
million. We expect that during 2001 we will realize
1
additional synergies driven by cost reductions, and we anticipate that by the
end of 2001 we will achieve an annual rate of synergies of $100 million to $120
million. During the first quarter of 2001, we estimate that we realized
approximately $25 million of these synergies, and at the end of the first
quarter of 2001 we had achieved an annual rate of synergies of approximately
$100 million. However, we may not continue to realize these synergies or we may
not realize any of the additional anticipated benefits, either at all or in a
timely manner.
Failure to timely or accurately bill for our services could have a material
adverse impact on our net revenues and bad debt expense.
Billing for laboratory services is extremely complicated. Laboratories
must bill various payers, such as patients, insurance companies, Medicare,
Medicaid, physicians and employer groups, all of which have different billing
requirements. In addition, auditing for compliance with applicable laws and
regulations as well as internal compliance policies and procedures adds further
complexity to the billing process. Among many other factors complicating billing
are:
o pricing differences between our fee schedules and the
reimbursement rates of the payers;
o disputes with payers as to which party is responsible for
payment; and
o disparity in coverage among various carriers.
We believe that most of our bad debt expense, which was 7% of our net
revenues in 2000, is the result of several non-credit-related issues, primarily
missing or incorrect billing information on requisitions received from
healthcare providers. In general, we perform the requested tests and report test
results regardless of whether the billing information is incorrect or missing.
We subsequently attempt to contact the provider to obtain any missing
information or rectify incorrect billing information. Missing or incorrect
information on requisitions adds complexity to and slows the billing process,
creates backlogs of unbilled requisitions, and generally increases the aging of
accounts receivable. When all issues relating to the missing or incorrect
information are not resolved in a timely manner, the related receivables are
written off to the allowance for doubtful accounts.
Failure in our information technology systems, including failures resulting from
our systems conversions, could significantly increase turn-around time and
otherwise disrupt our operations, which could reduce our customer base and
result in lost net revenues.
Our success depends, in part, on the continued and uninterrupted
performance of our information technology, or IT, systems. Our computer systems
are vulnerable to damage from a variety of sources, including telecommunications
failures, malicious human acts and natural disasters. Moreover, despite network
security measures, some of our servers are potentially vulnerable to physical or
electronic break-ins, computer viruses and similar disruptive problems. Despite
the precautions we have taken, unanticipated problems affecting our systems
could cause failures in our IT systems. Sustained or repeated system failures
that interrupt our ability to process test orders, deliver test results or
perform tests in a timely manner would adversely affect our reputation and
result in a loss of customers and net revenues.
In addition, we are in the process of standardizing our systems as a
result of the SBCL acquisition, which process is difficult and will take several
years to complete. SBCL had standardized billing and laboratory information
systems throughout its laboratory network that are different from our existing
systems. We plan to begin to develop and implement a new laboratory information
system and a new billing system that combine the functionality of the existing
systems of Quest Diagnostics and SBCL. We expect that the development and
implementation of the enhanced systems will take several years. During systems
conversions of this type, workflow may be temporarily interrupted, which may
cause backlogs. In addition, the implementation process, including the transfer
of databases and master files to new data centers, presents significant
conversion risks which could cause failures in our IT systems and disrupt our
operations.
2
The development of new, more cost-effective tests that can be performed by
physicians in their offices or by patients could negatively impact our testing
volume and net revenues.
The diagnostics testing industry is faced with changing technology and
new product introductions. Advances in technology may lead to the development of
more cost-effective tests that can be performed outside of an independent
clinical laboratory such as (1) point-of-care tests that can be performed by
physicians in their offices and (2) home testing that can be performed by
patients. Development of such technology and its use by our customers would
reduce the demand for our laboratory testing services and negatively impact our
revenues. Currently, most clinical laboratory testing is categorized as "high"
or "moderate" complexity, and thereby subject to extensive and costly
regulation, under the Clinical Laboratory Improvement Amendments of 1988, or
CLIA. The cost of compliance with CLIA makes it not cost effective for most
physicians to operate clinical laboratories in their offices; other laws limit
the ability of physicians to have ownership in a laboratory and refer tests to
such laboratory. However, manufacturers of laboratory equipment and test kits
could seek to increase their sales by marketing point of care laboratory
equipment to physicians and by selling test kits approved for home use to both
physicians and patients. Over-the-counter diagnostics tests are automatically
deemed to be "waived" tests under CLIA, which may then be performed in physician
office laboratories as well as by patients in their homes with minimal
regulatory oversight. The Food and Drug Administration, or FDA, has regulatory
responsibility over instruments, test kits, reagents and other devices used by
clinical laboratories and recently has taken responsibility from Center for
Disease Control, or CDC, for test classification. Increased approval of home
test kits could lead to increased testing by physicians in their offices, which
could affect our market for laboratory testing services and negatively impact
our revenues.
Efforts by third party payers, including the government, to reduce utilization
and pricing could have a material adverse impact on our net revenues and
profitability.
Government payers, such as Medicare and Medicaid, as well as private
payers, including managed care organizations, have taken steps and may continue
to take steps to control the cost, utilization and delivery of healthcare
services, including clinical laboratory services. Primarily as a result of
recent reimbursement rate reductions and utilization controls implemented by
government regulations, the percentage of our aggregate net revenues derived
from Medicare programs declined from 20% in 1995 to 13% in 2000. For a more
detailed description of the developments in government regulations, we urge
investors to read carefully our most recent annual report on Form 10-K
incorporated by reference into this prospectus.
In addition to changes in government reimbursement programs, private
payers, including managed care organizations, are demanding discounted fee
structures or the assumption by clinical laboratory service providers of all or
a portion of the financial risk through capitated payment contracts. Under
capitated payment contracts, clinical laboratories receive a fixed monthly fee
per individual enrolled with the managed care organization for all laboratory
tests performed during the month. In particular, managed care organizations,
which have significant bargaining power, frequently negotiate for capitated
payment contracts. In 2000, we derived approximately 9% of our revenues from
capitated payment contracts with managed care organizations. As the number of
patients covered by managed care organizations increased during the 1990s, more
patients were covered under capitated payment contracts, which resulted in
reduced opportunities for higher priced fee-for-service business and adversely
affected our profit margin.
We expect efforts to impose reduced reimbursements and more stringent
cost controls by government and other payers to continue. If we cannot offset
additional reductions in the payments we receive for our services by reducing
costs, increasing test volume and/or introducing new procedures, it could have a
material adverse impact on our net revenues and profitability.
Failure to provide a higher quality of service than that of our competitors
could have a material adverse impact on our net revenues.
While there has been significant consolidation in the clinical
laboratory testing business in recent years; it remains a fragmented and highly
competitive industry. We compete with three types of laboratory providers:
hospital-affiliated laboratories, other independent clinical laboratories and
physician-office laboratories. Most
3
physicians have admitting privileges or other relationships with hospitals as
part of their medical practice. Almost all hospitals maintain an on-site
laboratory to perform routine clinical testing on their inpatients and
outpatients. Many hospitals leverage their relationships with community
physicians and encourage the physicians to send their outreach (non-hospital
patients) testing to the hospital's laboratory. In addition, hospitals that own
physician practices generally require the physicians to refer tests to the
hospital's affiliated laboratories. As a result of this affiliation between
hospitals and community physicians, we compete against hospital-affiliated
laboratories primarily based on quality of service. Our failure to provide
service superior to hospital-affiliated laboratories and other laboratories
could have a material adverse impact on our net revenues.
If we fail to comply with extensive laws and regulations, we could suffer
penalties or be required to make significant changes to our operations.
We are subject to extensive and frequently changing federal, state and
local laws and regulations. We believe that, based on our experience with
government settlements and public announcements by various government officials,
the federal government continues to strengthen its position on healthcare fraud.
In addition, legislative provisions relating to healthcare fraud and abuse give
federal enforcement personnel substantially increased funding, powers and
remedies to pursue suspected fraud and abuse. While we believe that we are in
material compliance with all applicable laws, many of the regulations applicable
to us, including those relating to billing and reimbursement of tests and those
relating to relationships with physicians and hospitals, are vague or indefinite
and have not been interpreted by the courts. They may be interpreted or applied
by a prosecutorial, regulatory or judicial authority in a manner that could
require us to make changes in our operations, including our billing practices.
If we fail to comply with applicable laws and regulations, we could suffer civil
and criminal penalties, including the loss of licenses or our ability to
participate in Medicare, Medicaid and other federal and state healthcare
programs.
During the mid-1990s, Quest Diagnostics and SBCL settled government
claims that primarily involved industry-wide billing and marketing practices
that both companies believed to be lawful. The aggregate amount of the
settlements for these claims exceeded $500 million. The federal or state
governments may bring additional claims based on new theories as to our
practices that we believe to be in compliance with law. The federal government
has substantial leverage in negotiating settlements since the amount of
potential fines far exceeds the rates at which we are reimbursed and the
government has the remedy of excluding a non-compliant provider from
participation in the Medicare program, which represented approximately 13% of
our consolidated net revenues during 2000.
There remain pending against Quest Diagnostics and SBCL private claims
arising out of the settlement of the government claims, including several class
actions brought against SBCL. We believe that our reserves with respect to such
claims are adequate. However, we understand that there may be pending qui tam,
or "whistle blower," claims brought by former employees or others as to which we
have not been provided with a copy of the complaint and accordingly cannot
determine the extent of any potential liability. Liabilities with respect to the
claims that we know are pending against SBCL are generally covered by an
indemnification from SmithKline Beecham a subsidiary of GlaxoSmithKline. The
indemnities we obtained from SmithKline Beecham in connection with liabilities
from government investigations do not cover governmental claims that arise after
the closing date of the SBCL acquisition, private claims unrelated to the
governmental claims or investigations subject to SBCL indemnification, and any
consequential or incidental damages relating to the billing claims, including
losses of revenues and profits as a consequence of exclusion from participation
in federal or state health care programs. For additional information, see our
most recent annual report on Form 10-K and quarterly reports on Form 10-Q
incorporated by reference into this prospectus.
The final privacy regulations that will take effect in 2003 and proposed federal
security regulations under the Health Insurance Portability and Accountability
Act of 1996 will increase our costs and could limit our ability to provide
medical information.
Pursuant to the Health Insurance Portability and Accountability Act of
1996, or HIPAA, on December 28, 2000, the Secretary of the Department of Health
and Human Services, or HHS, issued final regulations that established
comprehensive federal standards with respect to the use and disclosure of
protected health information
4
by health plans, healthcare providers and healthcare data clearinghouses. The
regulations establish a complex regulatory framework on a variety of subjects,
including:
o the circumstances under which disclosures and uses of
protected health information require a general patient
consent, specific authorization by the patient, or no patient
consent or authorization;
o the content of notices of privacy practices for protected
health information;
o patients' rights to access, amend, and receive an accounting
of the disclosures and uses of protected health information;
and
o administrative, technical and physical safeguards required of
entities that use or receive protected health information.
The regulations establish a "floor" and do not supersede state laws
that are more stringent. Therefore, we are required to comply with both federal
privacy standards and varying state privacy laws. In addition, for healthcare
data transfers relating to citizens of other countries, we will need to comply
with the laws of other countries. The federal privacy regulations became
effective in April 2001 for healthcare providers, but healthcare providers have
until April 2003 to comply with the regulations. In addition, final standards
for electronic transactions were issued in August 2000 and will become effective
in October 2002. These regulations provide uniform standards for code sets
(codes representing medical procedures and laboratory tests and diagnosis codes
which are used, among others, in connection with the identification and billing
of medical procedures and laboratory tests), electronic claims, remittance
advice, enrollment, eligibility and other electronic transactions. Finally, the
proposed security and electronic signature regulations issued by the Secretary
of HHS in August 1998 pursuant to HIPAA are expected to be finalized this year.
HIPAA provides for significant fines and other penalties for wrongful disclosure
of protected health information. Compliance with the HIPAA requirements, when
finalized, will require significant capital and personnel resources from all
healthcare organizations, including ours. However, we will not be able to
estimate the cost of complying with all of these regulations, which we expect to
be significant, until after all the regulations are finalized. These
regulations, when finalized and effective, could also restrict our ability to
use our laboratory database to provide medical information for purposes other
than payment, treatment or healthcare operations, except for information that
does not identify a patient.
Our tests and business processes may infringe on the intellectual property
rights of others, which could cause us to engage in costly litigation, pay
substantial damages or prohibit us from selling our tests.
Other companies or individuals, including our competitors, may obtain
patents or other property rights that would prevent, limit or interfere with our
ability to develop, perform or sell our tests or operate our business. As a
result, we may be involved in intellectual property litigation and we may be
found to infringe on the proprietary rights of others, which could force us to
do one or more of the following:
o cease developing, performing or selling products or services
that incorporate the challenged intellectual property;
o obtain and pay for licenses from the holder of the infringed
intellectual property right;
o redesign or reengineer our tests;
o change our business processes; or
o pay substantial damages, court costs and attorneys' fees,
including potentially increased damages for any infringement
held to be willful.
Patents generally are not issued until several years after an
application is filed. The possibility that, before a patent is issued to a third
party, we may be performing a test or other activity covered by the patent is
not a defense
5
to an infringement claim. Thus, tests that we develop could become the subject
of infringement claims if a third party obtains a patent covering those tests.
Infringement and other intellectual property claims, whether with or
without merit, can be expensive and time-consuming to litigate. In addition, any
requirement to reengineer our tests or change our business processes could
substantially increase our costs, force us to interrupt product sales or delay
new test releases. In the past, we have settled several disputes regarding our
alleged infringement of intellectual property of third parties. We are currently
involved in settling several additional disputes. We do not believe that
resolution of these disputes will have a material adverse effect on our
operations or financial condition. However, infringement claims could arise in
the future as patents could be issued on tests or processes that we may be
performing, particularly in such emerging areas as gene based testing and other
specialty testing.
Professional liability litigation could have an adverse impact on our client
base and reputation.
As a general matter, providers of clinical laboratory testing services
may be subject to lawsuits alleging negligence or other similar legal claims.
These suits could involve claims for substantial damages. Any professional
liability litigation could also have an adverse impact on our client base and
reputation. We maintain liability insurance for professional liability claims,
subject to maximum limits and self-insured retention. Our management believes
that the levels of coverage are adequate to cover currently estimated exposures.
Federal and state laws permit a court to void a guarantee issued by any of our
subsidiaries if the court finds the guarantee to constitute a fraudulent
conveyance.
Our obligations under our debt securities may be guaranteed by our
subsidiaries to the extent described in this prospectus, and as further
described in any prospectus supplement. These guarantees are subject to attack
under various federal and state fraudulent conveyance laws enacted for the
protection of creditors.
The issuance of a guarantee by any of our subsidiaries will constitute
a fraudulent conveyance if:
o the guarantee was incurred by the subsidiary with the intent
to hinder, delay or defraud any present or future creditor; or
o the subsidiary did not receive fair consideration for issuing
the guarantee and such subsidiary (1) was insolvent or
rendered insolvent by reason of the issuance of the guarantee,
(2) was engaged or about to engage in a business or
transaction for which the remaining assets of the subsidiary
constituted unreasonably small capital to carry on its
business or (3) intended to incur debts beyond its ability to
pay such debts as they matured.
Generally, an entity will be considered insolvent if:
o the sum of its debts is greater than the fair value of its
property;
o the present fair value of its assets is less than the amount
that it will be required to pay on its existing debts as they
become due; or
o it cannot pay its debts as they become due.
If a court finds a guarantee issued by a subsidiary of ours to
constitute a fraudulent conveyance, the court could give a lower priority to, or
subordinate, the claims of our debt securities against this subsidiary to the
claims of other creditors of this subsidiary. In addition, a court could void
all or part of the guarantee. To the extent the guarantee issued by a subsidiary
of ours was voided as a fraudulent conveyance, the holders of our debt
securities would cease to have any claim against the subsidiary and would be
creditors solely of Quest Diagnostics and any other subsidiary guarantor which
was not found to have made a fraudulent conveyance. See "Description of Senior
Debt Securities" and "Description of Subordinated Debt Securities."
6
Our substantial debt may impair our financial and operating flexibility.
On June 27, 2001, we completed a refinancing of a majority of our
long-term debt. Specifically, we completed a $550 million senior notes offering
and entered into a new $500 million senior unsecured credit facility which
included a $175 million term loan. We used the net proceeds from the senior
notes offering and the new term loan, together with our cash on hand, to repay
all of the $584 million which was outstanding under our existing senior secured
facility, including the costs to settle existing interest rate swap agreements,
and to consummate our cash tender offer and consent solicitation for our 10 3/4%
senior subordinated notes due 2006. For more information, see our Current Report
on Form 8-K filed on July 3, 2001, which is incorporated by reference into this
prospectus.
We have a significant amount of debt. As of March 31, 2001, on a pro
forma basis we would have had approximately $1 billion of debt outstanding and
approximately $312 million of available borrowings under our new $325 million
senior unsecured revolving credit facility. Set forth in the table below for
each of the next five years, on a pro forma basis, is the aggregate amount of
principal, interest and total payment obligations with respect to our debt,
including capital leases. The amounts in this table were calculated on a pro
forma basis to reflect, as of March 31, 2001, the completion of our $550 million
offering of notes, the incurrence of $175 million of term loans under our new
senior unsecured credit facility and the application of the net proceeds from
these two financing transactions, together with cash on hand to repay our
existing senior secured credit facility in its entirety and to make the payments
required to complete the tender offer and consent solicitation for our 10 3/4%
senior subordinated notes due 2006. As of the expiration of the cash tender
offer, approximately $147 million in aggregate principal amount, or 98% of the
$150 million of outstanding 10 3/4% senior subordinated notes due 2006 had been
validly tendered and not withdrawn. These calculations also reflect the
termination of the interest rate swap agreements which related to our
outstanding variable rate debt and assume that we did not enter into any new
interest rate swap agreements.
Twelve Months
Ended December 31, Principal Interest Total
------------------ --------- -------- -----
(in thousands)
2001........................... $26,670 $77,558 $104,228
2002........................... $59,431 $68,453 $127,884
2003........................... $35,530 $64,364 $ 99,894
2004........................... $35,400 $62,190 $ 97,590
2005........................... $41,963 $59,800 $101,763
The above table excludes our principal payment obligations with respect
to our receivables credit facility. The receivables credit facility is
classified as a current liability and therefore would be included in the
principal and total payment obligation amounts for the twelve months ended
December 31, 2001. The amount outstanding under the receivables credit facility
as of March 31, 2001 was $256 million.
Based on our net exposure to interest rate changes, an assumed 10%
increase in interest rates would result in an increase of approximately $2
million in annual interest payments during each of the next five twelve-month
periods ending December 31, 2005. The primary interest rate exposures on our
debt carrying variable interest rates are with respect to interest rates on
United States dollars as quoted in the London interbank market.
We and our subsidiaries may be able to incur additional indebtedness in
the future. If new debt is added to our current debt levels, an even greater
portion of our cash flow will be needed to satisfy our debt service obligations.
As a result, we would be more vulnerable to general adverse economic and
industry conditions and the other risks associated with high levels of
indebtedness. These risks could limit our ability to make payments under the
notes.
Our debt agreements contain various restrictive covenants. All these
restrictions, together with our high level of debt, could:
7
o limit our ability to use operating cash flow in other areas of
our business, because we must use a portion of these funds to
make principal and interest payments on our debt; and
o increase our vulnerability to interest rate fluctuations
because the debt under our credit facility is at variable
interest rates.
Our ability to make principal and interest payments on our debt and to
satisfy our other debt obligations will depend upon our ability to generate cash
in the future. If we do not generate sufficient cash flow to meet our debt
service requirements, we may need to seek additional financing. This may make it
more difficult for us to obtain financing on terms that are acceptable to us, or
at all. For additional information regarding our debt, including interest rates
and related payment obligations, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 12 to our consolidated
financial statements included in our annual report on Form 10-K for the year
ended December 31, 2000 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in our quarterly report on Form
10-Q for the quarter ended March 31, 2001.
Future sales by our stockholders could adversely affect our common stock price.
As of June 1, 2001, in addition to the shares of our common stock that
may be offered by this prospectus, approximately 10.4 million shares of our
common stock are issuable upon exercise of outstanding stock options under our
employee stock options plan and non-employee director stock option plan and an
additional approximately 9.1 million shares of our common stock are reserved for
issuance of additional options and shares under these plans. We also issue
shares of our common stock under our employee stock purchase plan, employee
stock ownership plan and supplemental deferred compensation plan. In addition,
SmithKline Beecham, which owns about 22.2 million shares of our common stock or
about 23.5% of our outstanding common stock as of June 1, 2001, is entitled to
demand up to four times that we register its shares of our common stock and to
participate in registered offerings initiated by us or a third party. Sale of a
substantial number of our common stock in the market could adversely affect the
price of our common stock.
Certain provisions of our charter, by-laws and Delaware law may delay or prevent
a change of control of our company.
Our corporate documents and Delaware law contain provisions that may
enable our management to resist a change of control of our company. These
provisions include a staggered board of directors, limitations on persons
authorized to call a special meeting of stockholders and advance notice
procedures required for stockholders to make nominations of candidates for
election as directors or to bring matters before an annual meeting of
stockholders. We also have a rights plan designed to make it more costly and
thus more difficult to gain control of our company. These anti-takeover defenses
might discourage, delay or prevent a change of control. These provisions could
also discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and cause us to take other corporate actions. In
addition, the existence of these provisions, together with Delaware law, might
hinder or delay an attempted takeover other than through negotiations with our
board of directors.
8
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Set forth below is information concerning our ratios of earnings to
fixed charges and earnings to combined fixed charges and preferred stock
dividends. These ratios show the extent to which our business generates enough
earnings after the payment of all expenses other than interest and preferred
stock dividends to make required interest and dividend payments on our debt and
preferred stock.
For this purpose, earnings consist of pretax income plus fixed charges.
Fixed charges consist of interest expense and one-third of rental expense,
representing that portion of rental expense we deemed representative of an
appropriate interest factor. Preferred stock dividends consist of the amount of
pretax earnings required to pay the dividends on outstanding preference
securities.
Three
Months
Ended
March 31, Year Ended December 31,
--------- -----------------------
2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges.......... 3.1x 2.4x 1.2x 2.0x (a) (a)
Ratio of earnings to combined fixed charges
and preferred stock dividends.......... 3.1x 2.4x 1.3x 2.0x (a) (a)
- ----------
(a) Earnings were insufficient to cover fixed charges and combined fixed
charges and preferred stock dividend requirements by the following
amounts in the years indicated:
Year Ended December 31,
-----------------------
1997 1996
---- ----
(Dollars in thousands)
$16,578 $676,202
USE OF PROCEEDS
Unless indicated otherwise in the applicable prospectus supplement, we
expect to use the net proceeds from the sale of our securities for general
corporate purposes, including, but not limited to, repayment or refinancing of
borrowings, working capital, capital expenditures and acquisitions. Additional
information on the use of net proceeds from the sale of securities offered by
this prospectus may be set forth in the prospectus supplement relating to such
offering. We will not receive any proceeds from any sale of our common stock by
SmithKline Beecham.
9
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information we file with the SEC at its public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Our filings are also available to the public on the
Internet, through a database maintained by the SEC at http://www.sec.gov. In
addition, you can inspect and copy our reports, proxy statements and other
information at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
Our subsidiary guarantors do not file separate financial statements
with the SEC and do not independently publish their financial statements.
Instead, our subsidiary guarantors' financial condition, results of operation
and cash flows are consolidated into our financial statements.
We filed a registration statement on Form S-3 to register with the SEC
the securities described in this prospectus. This prospectus is part of that
registration statement. As permitted by SEC rules, this prospectus does not
contain all the information contained in the registration statement or the
exhibits to the registration statement. You may refer to the registration
statement and accompanying exhibits for more information about us and our
securities.
The SEC allows us to incorporate by reference into this document the
information we filed with it. This means that we can disclose important
business, financial and other information to you by referring you to other
documents separately filed with the SEC. All information incorporated by
reference is part of this document, unless and until that information is updated
and superseded by the information contained in this document or any information
incorporated later.
We incorporate by reference the documents listed below:
1. Our current reports on Form 8-K filed on October 31, 2000,
June 1, 2001, and July 3, 2001;
2. Our annual report on Form 10-K for the fiscal year ended
December 31, 2000;
3. Our quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 2001; and
4. The description of our common stock contained in our
registration statement on Form 10, filed pursuant to Section
12(b) of the Securities Exchange Act of 1934 on September 23,
1996, as amended by Amendment No. 1 on Form 10/A, filed on
November 6, 1996, Amendment No. 2 on Form 10/A, filed on
November 19, 1996, Amendment No. 3 on Form 10/A filed on
November 25, 1996 and Amendment No. 4 on Form 101A filed on
November 26, 1996.
You may request a copy of these filings, at no cost, by writing or
telephoning our Corporate Secretary at the following address:
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, New Jersey 07608
Attention: Corporate Secretary
(201) 393-5000
We also incorporate by reference all future filings we make with the
SEC under Sections 13(a), 13 (c), 14 or 15 (d) of the Securities and Exchange
Act of 1934 on or (1) after the date of the filing of the registration statement
containing this prospectus and prior to the effectiveness of such registration
statement and (2) after the date of this prospectus and prior to the termination
of the offering made hereby.
10
You should rely only on the information contained or incorporated by
reference in this prospectus and any prospectus supplement. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information you should not rely on
it. We are not making an offer to sell these securities in any jurisdiction
where the offer and sale is not permitted. You should assume that the
information appearing in this prospectus and information incorporated by
reference into this prospectus, is accurate only as of the date of the documents
containing the information. Our business, financial condition, results of
operation and prospects may have changed since that date.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Some statements and disclosures in this prospectus, including the
documents incorporated by reference, are forward-looking statements.
Forward-looking statements include all statements that do not relate solely to
historical or current facts and can often be identified by the use of words such
as "may," "believe," "will," "expect," "project," "estimate," "anticipate,"
"plan" or "continue". These forward-looking statements are based on our current
plans and expectations and are subject to a number of risks and uncertainties
that could significantly cause our plans and expectations, including actual
results, to differ materially from the forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about their companies without fear of litigation.
We would like to take advantage of the "safe harbor" provisions of the
Litigation Reform Act in connection with the forward-looking statements included
in this prospectus, including the documents incorporated by reference. Investors
are cautioned not to unduly rely on such forward-looking statements when
evaluating the information presented in these documents. The following list of
important factors could cause our actual financial results to differ materially
from those projected, forecasted or estimated by us in forward-looking
statements.
(a) Heightened competition, including increased pricing pressure
and competition from hospitals for testing for non-patients.
See "Business -- Competition" in our Form 10-K for the year
ended December 31, 2000, which is incorporated by reference
into this prospectus.
(b) Impact of changes in payer mix, including any shift from
traditional, fee-for-service medicine to capitated
managed-cost healthcare. See "Business -- Payers and Customers
--Managed Care Organizations" in our Form 10-K for the year
ended December 31, 2000, which is incorporated by reference
into this prospectus.
(c) Adverse actions by government or other third-party payers,
including unilateral reduction of fee schedules payable to us
and an increase of the practice of managed care organizations
to negotiate for exclusive contracts that involve aggressively
priced capitated payments. See "Business -- Regulation of
Reimbursement for Clinical Laboratory Services" in our Form
10-K for the year ended December 31, 2000, which is
incorporated by reference into this prospectus.
(d) The impact on our volume and collected revenue or general or
administrative expenses resulting from our compliance with
Medicare and Medicaid administrative policies and requirements
of third-party payers. These include:
o the requirements of Medicare carriers to provide
diagnosis codes for many commonly ordered tests and
the likelihood that third-party payers will
increasingly adopt similar requirements;
o the policy of HCFA to limit Medicare reimbursement
for tests contained in automated chemistry panels to
the amount that would have been paid if only the
covered tests, determined on the basis of
demonstrable "medical necessity," had been ordered;
o continued inconsistent practices among the different
local carriers administering Medicare; and
o proposed changes to the ABN form by HCFA.
11
See "Business -- Regulation of Reimbursement for Clinical
Laboratory Services" in our Form 10-K for the year ended
December 31, 2000, which is incorporated by reference into
this prospectus.
(e) Adverse results from pending or future government
investigations or private actions. These include, in
particular:
o significant monetary damages and/or exclusion from
the Medicare and Medicaid programs and/or other
significant litigation matters;
o the absence of indemnification from Corning
Incorporated for private claims unrelated to the
indemnified government claims or investigations and
for private claims that are not settled by December
31, 2001. See "Business -- Government Investigations
and Related Claims" in our Form 10-K for the year
ended December 31, 2000, which is incorporated by
reference into this prospectus;
o the absence of indemnification from SmithKline
Beecham for: (1) governmental claims against SBCL
that arise after August 16, 1999, and (2) private
claims unrelated to the indemnified governmental
claims or investigations; and
o the absence of indemnification for consequential
damages from either SmithKline Beecham or Corning.
(f) Failure to obtain new customers at profitable pricing or
failure to retain existing customers, and reduction in tests
ordered or specimens submitted by existing customers.
(g) Failure to efficiently integrate acquired clinical laboratory
businesses, or to efficiently integrate clinical laboratory
businesses from joint ventures and alliances with hospitals,
and the costs related to any such integration, or to retain
key technical and management personnel. See "Business --
Acquisition and Integration of SBCL Operations" in our Form
10-K for the year ended December 31, 2000, which is
incorporated by reference into this prospectus.
(h) Inability to obtain professional liability insurance coverage
or a material increase in premiums for such coverage. See
"Business -- Insurance" in our Form 10-K for the year ended
December 31, 2000, which is incorporated by reference into
this prospectus.
(i) Denial of CLIA certification or any other license to any of
our clinical laboratories under the CLIA standards, by HCFA
for Medicare and Medicaid programs or other federal, state and
local agencies. See "Business -- Regulation of Clinical
Laboratory Operations" in our Form 10-K for the year ended
December 31, 2000, which is incorporated by reference into
this prospectus.
(j) Adverse publicity and news coverage about us or the clinical
laboratory industry.
(k) Computer or other system failures that affect our ability to
perform tests, report test results or properly bill customers,
including potential failures resulting from systems
conversions, including from the integration of the systems of
Quest Diagnostics and SBCL, telecommunications failures,
malicious human acts (such as electronic break-ins or computer
viruses) or natural disasters. See "Business -- Information
Systems" and "Business -- Billing" in our Form 10-K for the
year ended December 31, 2000, which is incorporated by
reference into this prospectus.
(l) Development of technologies that substantially alter the
practice of laboratory medicine, including technology changes
that lead to the development of more cost-effective tests such
as (1) point-of-care tests that can be performed by physicians
in their offices, and (2) home testing that can be carried out
without requiring the services of clinical laboratories.
12
(m) Issuance of patents or other property rights to our
competitors or others that could prevent, limit or interfere
with our ability to develop, perform or sell our tests or
operate our business. See "Business -- The United States
Clinical Laboratory Testing Market" in our Form 10-K for the
year ended December 31, 2000, which is incorporated by
reference into this prospectus.
(n) Development of tests by our competitors or others which we may
not be able to license or unauthorized use of our technology
or similar technologies or our trade secrets by competitor,
any of which could negatively affect our competitive position.
(o) Development of an Internet based electronic commerce business
model that does not require an extensive logistics and
laboratory network.
(p) The impact of the privacy and security regulations issued
under HIPAA on our operations (including our medical
information services) as well as the cost to comply with the
regulations. See "Risk Factors" and see "Business --
Confidentiality of Health Information" in our Form 10-K for
the year ended December 31, 2000, which is incorporated by
reference into this prospectus.
(q) Changes in interest rates causing a substantial increase in
our effective borrowing rate.
(r) Inability to hire and retain qualified personnel or the loss
of the services of one or more of our key senior management
personnel.
Many of these risks are described in greater detail under "Risk
Factors" in this prospectus and we advise investors to review the forward
looking statements in light of the disclosure contained under "Risk Factors."
13
SECURITIES WE MAY ISSUE
Overview
This prospectus describes the securities we may issue from time to
time. The remainder of this section provides some background information about
the manner in which the securities may be held, then describes the terms of the
three basic categories of securities:
o our debt securities, which may be senior or subordinated;
o our preferred stock, which may be issued in the form of
depositary shares representing fractions of shares of
preferred stock; and
o our common stock.
Prospectus Supplements
This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add to or change information
contained in this prospectus. If so, the prospectus supplement should be read as
superseding this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information."
The prospectus supplement to be attached to the front of this
prospectus will describe the terms of any securities that we offer and any
initial offering price to the public in that offering, the purchase price and
net proceeds that we will receive and the other specific terms related to our
offering of the securities. For more details on the terms of the securities, you
should read the exhibits filed with our registration statement, of which this
prospectus is a part.
Legal Ownership of Securities
Holders of Securities
Book-Entry Holders. We will issue debt securities in book-entry form
only, unless we specify otherwise in the applicable prospectus supplement. We
may issue shares of common stock and shares of preferred stock in book-entry
form. If securities are issued in book-entry form, this means the securities
will be represented by one or more global securities registered in the name of a
financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositary's book-entry system. These
participating institutions, in turn, hold beneficial interests in the securities
on behalf of themselves or their customers.
We will only recognize the person in whose name a security is
registered as the holder of that security. Consequently, for securities issued
in global form, we will recognize only the depositary as the holder of the
securities and all payments on the securities will be made to the depositary.
The depositary passes along the payments it receives to its participants, which
in turn pass the payments along to their customers who are the beneficial
owners. The depositary and its participants do so under agreements they have
made with one another or with their customers; they are not obligated to do so
under the terms of the securities.
As a result, investors will not own securities directly. Instead, they
will own beneficial interests in a global security, through a bank, broker or
other financial institution that participates in the depositary's book-entry
system or holds an interest through a participant. As long as the securities are
issued in global form, investors will be indirect holders, and not holders, of
the securities.
14
Street Name Holders. In the future, we may terminate a global security
or issue securities initially in non-global form. In these cases, investors may
choose to hold their securities in their own names or in "street name."
Securities held by an investor in street name would be registered in the name of
a bank, broker or other financial institution that the investor chooses, and the
investor would hold only a beneficial interest in those securities through an
account he or she maintains at that institution.
For securities held in street name, we will recognize only the
intermediary banks, brokers and other financial institutions in whose names the
securities are registered as the holders of those securities and all payments on
those securities will be made to them. These institutions pass along the
payments they receive to their customers who are the beneficial owners, but only
because they agree to do so in their customer agreements or because they are
legally required to do so. Investors who hold securities in street name will be
indirect holders, not holders, of those securities.
Legal Holders. We, and any third parties employed by us or acting on
your behalf, such as trustees, depositories and transfer agents, are obligated
only to the legal holders of the securities. We do not have obligations to
investors who hold beneficial interests in global securities, in street name or
by any other indirect means. This will be the case whether an investor chooses
to be an indirect holder of a security or has no choice because we are issuing
the securities only in global form.
For example, once we make a payment or give a notice to the legal
holder, we have no further responsibility for the payment or notice even if that
legal holder is required, under agreements with depositary participants or
customers or by law, to pass it along to the indirect holders but does not do
so. Similarly, if we want to obtain the approval of the holders for any purpose
(for example, to amend an indenture or to relieve ourselves of the consequences
of a default or of our obligation to comply with a particular provision of the
indenture), we would seek the approval only from the legal holders, and not the
indirect holders, of the securities. Whether and how the legal holders contact
the indirect holders is up to the legal holders.
When we refer to you, we mean those who invest in the securities being
offered by this prospectus, whether they are the legal holders or only indirect
holders of those securities. When we refer to your securities, we mean the
securities in which you hold a direct or indirect interest.
Special Considerations for Indirect Holders. If you hold securities
through a bank, broker or other financial institution, either in book-entry form
or in street name, you should check with your own institution to find out:
o how it handles securities payments and notices;
o whether it imposes fees or charges;
o how it would handle a request for the holders' consent, if
ever required;
o whether and how you can instruct it to send you securities
registered in your own name so you can be a legal holder, if
that is permitted in the future;
o how it would exercise rights under the securities if there
were a default or other event triggering the need for holders
to act to protect their interests; and
o if the securities are in book-entry form, how the depositary's
rules and procedures will affect these matters.
Global Securities
What is a Global Security? A global security represents one or any
other number of individual securities. Generally, all securities represented by
the same global securities will have the same terms. We may, however,
15
issue a global security that represents multiple securities that have different
terms and are issued at different times. We call this kind of global security a
master global security.
Each security issued in book-entry form will be represented by a global
security that we deposit with and register in the name of a financial
institution that we select or its nominee. The financial institution that is
selected for this purpose is called the depositary. Unless we specify otherwise
in the applicable prospectus supplement, The Depository Trust Company, New York,
New York, known as DTC, will be the depositary for all securities issued in
book-entry form.
A global security may not be transferred to or registered in the name
of anyone other than the depositary or its nominee, unless special termination
situations arise or as otherwise described in the prospectus supplement. We
describe those situations below under "-- Special Situations When a Global
Security Will Be Terminated." As a result of these arrangements, the depositary,
or its nominee, will be the sole registered owner and holder of all securities
represented by a global security, and investors will be permitted to own only
beneficial interests in a global security. Beneficial interests must be held by
means of an account with a broker, bank or other financial institution that in
turn has an account with the depositary or with another institution that does.
Thus, an investor whose security is represented by a global security will not be
a holder of the security, but only an indirect holder of a beneficial interest
in the global security.
Special Considerations for Global Securities. As an indirect holder, an
investor's rights relating to a global security will be governed by the account
rules of the investor's financial institution and of the depositary, as well as
general laws relating to securities transfers. We do not recognize this type of
investor as a holder of securities and instead will deal only with the
depositary that holds the global security.
If securities are issued only in the form of a global security, an
investor should be aware of the following:
o An investor cannot cause the securities to be registered in
his or her name, and cannot obtain physical certificates for
his or her interest in the securities, except in the special
situations we describe below.
o An investor will be an indirect holder and must look to his or
her own bank or broker for payments on the securities and
protection of his or her legal rights relating to the
securities, as we describe under "-- Holders of Securities"
above.
o An investor may not be able to sell interests in the
securities to some insurance companies and to other
institutions that are required by law to own their securities
in non-book-entry form.
o An investor may not be able to pledge his or her interest in a
global security in circumstances where certificates
representing the securities must be delivered to the lender or
other beneficiary of the pledge in order for the pledge to be
effective.
o The depositary's policies, which may change from time to time,
will govern payments, transfers, exchanges and other matters
relating to an investor's interest in a global security.
Neither we nor any third parties employed by us or acting on
your behalf, such as trustees and transfer agents, have any
responsibility for any aspect of the depositary's actions or
for its records of ownership interests in a global security.
We and the trustee do not supervise the depositary in any way.
o DTC requires that those who purchase and sell interests in a
global security within its book-entry system use immediately
available funds and your broker or bank may require you to do
so as well.
o Financial institutions that participate in the depositary's
book-entry system, and through which an investor holds its
interest in a global security, may also have their own
policies affecting payments, notices and other matters
relating to the security. There may be more than one financial
intermediary in the chain of ownership for an investor. We do
not monitor and are not responsible for the actions of any of
those intermediaries.
16
Special Situations When a Global Security Will Be Terminated. In a few
special situations described below, a global security will be terminated and
interests in it will be exchanged for certificates in non-global form
representing the securities it represented. After that exchange, the choice of
whether to hold the securities directly or in street name will be up to the
investor. Investors must consult their own banks or brokers to find out how to
have their interests in a global security transferred on termination to their
own names, so that they will be holders. We have described the rights of holders
and street name investors above under "-- Legal Ownership of Securities --
Holders of Securities."
The special situations for termination of a global security are as
follows:
o if the depositary notifies us that it is unwilling, unable or
no longer qualified to continue as depositary for that global
security and we do not appoint another institution to act as
depositary within a specified time period;
o if we elect to terminate that global security; or
o if an event of default has occurred with regard to securities
represented by that global security and it has not been cured
or waived.
The prospectus supplement may also list additional situations for
terminating a global security that would apply to a particular series of
securities covered by the prospectus supplement. If a global security is
terminated, only the depositary is responsible for deciding the names of the
institutions in whose names the securities represented by the global security
will be registered and, therefore, who will be the holders of those securities.
17
DESCRIPTION OF SENIOR DEBT SECURITIES
We may issue senior debt securities from time to time in one or more
distinct series. This section summarizes the material terms of our senior debt
securities and these provisions will apply unless otherwise specified in a
prospectus supplement. Some of the financial and other terms of any series of
senior debt securities that we offer will be described in the prospectus
supplement to be attached to the front of this prospectus.
As required by U.S. federal law for all bonds and notes of companies
that are publicly offered, the senior debt securities will be governed by a
document called an "indenture." An indenture is a contract between us and a
financial institution, in this case, The Bank of New York, acting as trustee on
your behalf. The indenture will be subject to and governed by the Trust
Indenture Act of 1939. The trustee has two main roles:
o First, subject to some limitations, the trustee can enforce
your rights against us if we default.
o Second, the trustee performs certain administrative duties for
us, which include sending you interest payments and notices.
Because this section is a summary of the material terms of the
indenture, it does not describe every aspect of the senior debt securities. We
urge you to read the indenture because it, and not this description, defines
your rights as a holder of senior debt securities. Some of the definitions are
repeated in this prospectus, but for the rest you will need to read the
indenture. We have filed the indenture as an exhibit to our Securities Act and
Exchange Act reports that we have filed with the SEC. See "Where You Can Find
More Information," for information on how to obtain a copy of the indenture.
Whenever we refer in this Description of Senior Debt Securities to
terms defined in the indenture below, such defined terms are incorporated herein
by reference. As used in this Description of Senior Debt Securities, the terms
"we," "our," "us," and "Quest Diagnostics" do not include any current or future
subsidiary of Quest Diagnostics Incorporated, unless the context indicates
otherwise.
The senior debt securities will be issued under an indenture dated as
of June 27, 2001 as supplemented by a first supplemental indenture, dated as of
June 27, 2001 (collectively, the "Indenture"), each among Quest Diagnostics, as
issuer, the Initial Subsidiary Guarantors, as guarantors, and the Bank of New
York, as trustee. On June 27, 2001, Quest Diagnostics completed a $550 million
senior notes offering under the Indenture. The Indenture for the senior debt
securities may also be modified by future supplemental indentures. The terms
of the senior debt securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939. A
copy of the Indenture is available for inspection at the office of the trustee.
General
The senior debt securities will be unsecured obligations of our
company. The senior debt securities will be guaranteed by the Subsidiary
Guarantors.
Quest Diagnostics may, from time to time, without the consent of the
holders of senior debt securities, issue additional senior debt securities
having the same ranking and the same interest rate, maturity and other terms as
the senior debt securities of that series. Any additional senior debt securities
and the senior debt securities of that series will constitute a single series
under the Indenture. This type of offering is often referred to as a
"reopening."
Senior debt securities will bear interest at the annual rate noted on
the cover page of a prospectus supplement. Interest will be payable semiannually
each year. Interest on the senior debt securities will be paid to holders of
record immediately before the interest payment date.
The senior debt securities do not provide for any sinking fund.
18
subordinated in favor of the subsidiary guarantor's other creditors. See "Risk
Factors -- Federal and state laws permit a court to void a guarantee issued by
any of our subsidiaries if the court finds the guarantee to constitute a
fraudulent conveyance."
You should read the prospectus supplement for the following terms of
the series of senior debt securities offered by the prospectus supplement:
o The title of the senior debt securities.
o The aggregate principal amount of the senior debt securities,
the percentage of their principal amount at which the senior
debt securities will be issued and the date or dates when the
principal of the senior debt securities will be payable or how
those dates will be determined.
o The interest rate or rates, which may be fixed or variable,
that the senior debt securities will bear, if any, and how the
rate or rates will be determined.
o The date or dates from which any interest will accrue or how
the date or dates will be determined, the date or dates on
which any interest will be payable, any regular record dates
for these payments or how these dates will be determined and
the basis on which any interest will be calculated, if other
than on the basis of a 360-day year of twelve 30-day months.
o The place or places, if any, other than or in addition to New
York City, of payment, transfer, conversion and exchange of
the debt securities and where notices or demands to or upon us
in respect of the senior debt securities may be served.
o Any optional redemption provisions.
o Whether the amount of payments of principal of, or premium, if
any, or interest on the senior debt securities will be
determined with reference to an index, formula or other
method, which could be based on one or more commodities,
equity indices or other indices, and how these amounts will be
determined.
o If other than the trustee, the name of any paying agent,
security registrar and transfer agent for the senior debt
securities.
o If the senior debt securities are not to be issued in
book-entry form only and held by The Depositary Trust Company,
as depositary, the form of such senior debt securities,
including whether such senior debt securities are to be
issuable in permanent or temporary global form, as registered
securities, bearer securities or both, any restrictions on the
offer, sale or delivery of bearer securities and the terms, if
any, upon which bearer securities of the series may be
exchanged for registered securities of the series and vice
versa, if permitted by applicable law and regulations.
o The denomination or denominations that the senior debt
securities will be issued, if other than denominations of
$1,000 or any integral multiples in the case of the registered
securities and $5,000 or any integral multiples in the case of
the bearer securities.
o Any changes or additions to the provisions concerning
defeasance and covenant defeasance contained in the indenture
that will be applicable to the senior debt securities.
o Any provisions granting special rights to the holders of the
senior debt securities upon the occurrence of specified
events.
o If other than US dollars, the currency or currencies of such
senior debt securities.
19
o The person to whom any interest in a senior debt security will
be payable, if other than the registered holder at the close
of business on the regular record date.
o Whether such senior debt securities will be convertible into
or exchangeable for any other securities and, if so, the terms
and conditions upon which such senior debt securities will be
so convertible or exchangeable.
o A discussion of federal income tax, accounting and other
special considerations, procedures and limitations with
respect to the senior debt securities.
o Whether and under what circumstances we will pay additional
amounts to holders in respect of any tax assessment or
government charge, and, if so, whether we will have the option
to redeem the senior debt securities rather than pay such
additional amounts.
o Any other terms of the senior debt securities that are
consistent with the provisions of the indenture.
You should also read the prospectus supplement, in which we will
describe material changes, if any, to the following terms of the senior debt
securities:
o Any sinking fund or other provisions that would obligate us to
repurchase or redeem the senior debt securities.
o Any change or additions to the events of default under the
applicable indenture or our covenants, including additions of any
restrictive covenants, with respect to the senior debt securities.
o If not the entire principal amount of the senior debt securities,
the portion of the principal amount that will be payable upon
acceleration of the maturity of the senior debt securities or how
that portion will be determined.
o Whether payment of any amounts due under the applicable indenture
will be guaranteed by one or more of our subsidiaries.
For purposes of this prospectus, any reference to the payment of
principal of, premium or interest, if any, on senior debt securities will
include additional amounts if required by the terms of such senior debt
securities.
The indenture does not limit the amount of senior debt securities that
we are authorized to issue from time to time. The indenture also provides that
there may be more than one trustee thereunder, each for one or more series of
senior debt securities. At a time when two or more trustees are acting under the
indenture, each with respect to only certain series, the term "debt securities"
means the series of senior debt securities for which each respective trustee is
acting. If there is more than one trustee under the indenture, the powers and
trust obligations of each trustee will apply only to the senior debt securities
for which it is trustee. If two or more trustees are acting under the indenture,
then the senior debt securities for which each trustee is acting would be
treated as if issued under separate indentures.
We may issue senior debt securities with terms different from those of
senior debt securities that may already have been issued. Without the consent of
the holders thereof, we may reopen a previous issue of a series of senior debt
securities and issue additional senior debt securities of that series unless the
reopening was restricted when that series was created.
There is no requirement that we issue senior debt securities in the
future under the indenture, and we may use other indentures or documentation,
containing different provisions in connection with future issues of other senior
debt securities.
We may issue the senior debt securities as original issue discount
securities, which are senior debt securities, including any zero-coupon senior
debt securities, that are issued and sold at a discount from their stated
20
principal amount. Original issue discount securities provide that, upon
acceleration of their maturity, an amount less than their principal amount will
become due and payable. We will describe the U.S. federal income tax
consequences and other considerations applicable to original issue discount
securities in any prospectus supplement relating to them.
Guarantees
Each Subsidiary Guarantor will fully and unconditionally guarantee, on
a joint and several basis, the payment of the principal of, premium and interest
on the senior debt securities. The guarantees of the senior debt securities will
be endorsed on the senior debt securities. In addition, each future domestic
Subsidiary of Quest Diagnostics or any Subsidiary Guarantor which has been
released and discharged from its obligations under the guarantee of the senior
debt securities will be required to guarantee Quest Diagnostics' obligations
under the senior debt securities, if such Subsidiary:
o guarantees any Indebtedness of Quest Diagnostics when the
amount of such Indebtedness, together with any other
outstanding Indebtedness of Quest Diagnostics guaranteed by
its Subsidiaries that are not Subsidiary Guarantors, exceeds
$50 million in the aggregate at any time; or
o incurs Indebtedness, unless such Indebtedness is permitted
under the "-- Limitation on Subsidiary Indebtedness and
Preferred Stock" covenant described below.
The Indenture provides that the obligations of each Subsidiary
Guarantor under its guarantee will be limited so as to not constitute a
fraudulent conveyance under any United States federal or state laws. Application
of this clause could limit the amount which holders of senior debt securities
may be entitled to collect under the guarantees. Holders, by their acceptance of
the senior debt securities, will have agreed to such limitations. See "Risk
Factors -- Federal and state laws permit a court to void a guarantee issued by
any of our subsidiaries if the court finds the guarantee to constitute a
fraudulent conveyance."
The guarantees of the Subsidiary Guarantors with respect to the senior
debt securities of a series will remain in effect with respect to each
Subsidiary Guarantor until the entire amount of principal of, premium, and
interest on the senior debt securities of that series shall have been paid in
full or otherwise discharged in accordance with the provisions of the Indenture;
provided, however, that if (a) a Subsidiary Guarantor does not guarantee any
Indebtedness of Quest Diagnostics the amount of which, excluding any outstanding
securities of the series to which any Subsidiary Guarantees of such Subsidiary
Guarantor apply, when added together with any other outstanding Indebtedness of
Quest Diagnostics guaranteed by its Subsidiaries that are not Subsidiary
Guarantors, would exceed $50 million in the aggregate, at the time of
determination, and all outstanding Indebtedness of such Subsidiary Guarantor
would have been permitted to be incurred under the "--Limitation on Subsidiary
Indebtedness and Preferred Stock" covenant described below measured at the time
of the release and discharge as described in this paragraph, (b) the senior debt
securities of that series are defeased and discharged as described under
"Defeasance" or (c) all or substantially all of the assets of such Subsidiary
Guarantor or all of the capital stock of such Subsidiary Guarantor is sold
(including by issuance, merger, consolidation or otherwise) by Quest Diagnostics
or any of its Subsidiaries, then in each case of (a), (b) or (c) above, such
Subsidiary Guarantor or the corporation acquiring such assets (in the event of a
sale or other disposition of all or substantially all of the assets or capital
stock of such Subsidiary Guarantor) shall be released and discharged from its
obligations under its guarantee of the senior debt securities of that series.
In accordance with Securities and Exchange Commission rules and
regulations, Quest Diagnostics presents, among other things, condensed financial
information with respect to in the Initial Subsidiary Guarantors on a combined
basis in a footnote to its consolidated financial statements in lieu of
providing separate financial statements for each such subsidiary.
21
Ranking
The senior debt securities will be senior unsecured obligations of
Quest Diagnostics and will rank equally with the other senior unsecured
obligations of Quest Diagnostics. Each guarantee will be a senior unsecured
obligation of the Subsidiary Guarantor issuing such guarantee and will rank
equally with the other senior unsecured obligations of such Subsidiary
Guarantor.
The senior debt securities and the guarantees will be effectively
subordinated to any secured obligations of Quest Diagnostics or Subsidiary
Guarantors, as the case may be, to the extent of the value of the assets
securing such obligations. The Indenture does not limit the amount of
indebtedness that Quest Diagnostics can incur, but does limit the amount of
secured indebtedness pursuant to the covenant described under the heading "--
Limitation on Liens." This covenant is subject to important exceptions described
under such heading.
Quest Diagnostics conducts its operations through subsidiaries, which
generate a substantial portion of its operating income and cash flow. As a
result, distributions or advances from subsidiaries of Quest Diagnostics are a
major source of funds necessary to meet its debt service and other obligations.
Contractual provisions, laws or regulations, as well as any subsidiary's
financial condition and operating requirements, may limit the ability of Quest
Diagnostics to obtain cash required to pay Quest Diagnostics' debt service
obligations, including payments on the senior debt securities. The senior debt
securities will be structurally subordinated to all existing and future
obligations of Quest Diagnostics' subsidiaries (unless such subsidiaries are
Subsidiary Guarantors), including claims with respect to trade payables. In
addition, the guarantees of our Subsidiary Guarantors will be structurally
subordinated to all existing and future obligations of the Subsidiary
Guarantor's subsidiaries (unless such subsidiaries are also Subsidiary
Guarantors), including claims with respect to trade payables. This means that
holders of the senior debt securities as guaranteed by the Subsidiary Guarantors
will have a junior position to the claims of creditors of the direct and
indirect subsidiaries of Quest Diagnostics which are not Subsidiary Guarantors
on the assets and earnings of such subsidiaries.
As described above, all of our debt securities are effectively
subordinated to all existing and future obligations of any of our non-guarantor
subsidiaries not giving a guarantee, and would be so subordinated if a guarantee
issued by any of our subsidiary guarantors were avoided or
Sinking Fund
The senior debt securities will not be entitled to the benefit of any
sinking fund.
Covenants
The following covenants will apply unless otherwise specified in a
prospectus supplement:
Limitation on Liens
Other than as provided under "-- Exempted Liens and Sale and Leaseback
Transactions," Quest Diagnostics will not, and will not permit any Restricted
Subsidiary to, create or assume any Indebtedness secured by any Lien on any
Principal Property or shares of stock or Indebtedness of any Restricted
Subsidiary, unless: (1) in the case of Quest Diagnostics, the senior debt
securities are secured by such Lien equally and ratably with, or prior to, the
Indebtedness secured by such Lien, or (2) in the case of any Subsidiary
Guarantor, such Subsidiary Guarantor's existing subsidiary guarantee is secured
by such Lien equally and ratably with, or prior to, the Indebtedness secured by
such Lien. The restrictions do not apply to Indebtedness that is secured by:
o Liens existing on the date of the issuance of the senior debt
securities;
o Liens securing only the senior debt securities;
o Liens in favor of only Quest Diagnostics or any Restricted
Subsidiary;
o Liens on property or shares of stock or indebtedness of a
Person existing at the time such Person becomes a Restricted
Subsidiary or is merged into or consolidated with, or its
assets are acquired by,
22
Quest Diagnostics or any Restricted Subsidiary (provided that
such Lien was not incurred in anticipation of such transaction
and was in existence prior to such transaction) so long as
such Lien does not extend to any other property and the
Indebtedness so secured is not increased;
o Liens on property existing immediately prior to the
acquisition thereof (provided that such Lien was not incurred
in anticipation of such transaction and was in existence prior
to such transaction) so long as such Lien does not extend to
any other property and the Indebtedness so secured is not
increased;
o Liens to secure Indebtedness incurred for the purpose of
financing all or any part of a property's purchase price or
cost of construction or additions, repairs, alterations, or
other improvements; provided that (1) the principal amount of
any Indebtedness secured by such Lien does not exceed 100% of
such property's purchase price or cost, (2) such Lien does not
extend to or cover any other property other than the property
so purchased, constructed or on which such additions, repairs,
alterations or other improvements were so made, and (3) such
Lien is incurred prior to or within 270 days after the
acquisition of such property or the completion of construction
or such additions, repairs, alterations or other improvements
and the full operation of such property thereafter;
o Liens in favor of the United States or any state thereof, or
any instrumentality of either, to secure certain payments
pursuant to any contract or statute;
o Liens for taxes or assessments or other governmental charges
or levies which are being contested in good faith and for
which adequate reserves are being maintained, to the extent
required by generally accepted accounting principles;
o title exceptions, easements and other similar Liens that are
not consensual and that do not materially impair the use of
the property subject thereto;
o Liens to secure obligations under workmen's compensation laws,
unemployment compensation, old-age pensions and other social
security benefits or similar legislation, including Liens with
respect to judgments which are not currently dischargeable;
o Liens arising out of legal proceedings, including Liens
arising out of judgments or awards;
o warehousemen's, materialmen's and other similar Liens for sums
being contested in good faith and for which adequate reserves
are being maintained, to the extent required by generally
accepted accounting principles;
o Liens incurred to secure the performance of statutory
obligations, surety or appeal bonds, performance or
return-of-money bonds or other obligations of a like nature
incurred in the ordinary course of business; or
o Liens to secure any extension, renewal, refinancing or
refunding (or successive extensions, renewals, refinancings or
refundings), in whole or in part, of any Indebtedness secured
by Liens referred to in the foregoing bullets or Liens created
in connection with any amendment, consent or waiver relating
to such Indebtedness, so long as such Lien does not extend to
any other property and the Indebtedness so secured does not
exceed the fair market value (as determined by the board of
directors of Quest Diagnostics) of the assets subject to such
Liens at the time of such extension, renewal, refinancing or
refunding, or such amendment, consent or waiver, as the case
may be.
Limitation on Sale and Leaseback Transactions
Other than as provided under "-- Exempted Liens and Sale and Leaseback
Transactions," Quest Diagnostics will not, and will not permit any Restricted
Subsidiary to, enter into any Sale and Leaseback Transaction with respect to any
Principal Property unless:
23
o the Sale and Leaseback Transaction is solely with Quest
Diagnostics or a Subsidiary Guarantor; or
o the lease is for a period not in excess of five years,
including renewal rights; or
o Quest Diagnostics or the Restricted Subsidiary, prior to or
within 270 days after the sale of such Principal Property in
connection with the Sale and Leaseback Transaction is
completed, applies the net cash proceeds of the sale of the
Principal Property leased to:
(1) the retirement of the senior debt securities or
Indebtedness ranking equally with the senior debt
securities of Quest Diagnostics or any Restricted
Subsidiary, or
(2) the acquisition of different property, facilities or
equipment or the expansion of Quest Diagnostics'
existing business, including the acquisition of other
businesses.
Exempted Liens and Sale and Leaseback Transactions
Notwithstanding the restrictions described under the headings "--
Limitation on Liens" or "-- Limitation on Sale and Leaseback Transactions,"
Quest Diagnostics or any Restricted Subsidiary may create or assume any Liens or
enter into any Sale and Leaseback Transactions not otherwise permitted as
described above, if the sum of the following does not exceed 5% of Consolidated
Total Assets:
o the outstanding Indebtedness secured by such Liens (not
including any Liens permitted under "-- Limitation on Liens"
other than any Liens permited solely under the provisions of
this "-- Exempted Liens and Sale and Leaseback Transactions");
plus
o all Attributable Debt in respect of such Sale and Leaseback
Transaction entered into (not including any Sale and Leaseback
Transactions permitted under "-- Limitation on Sale and
Leaseback Transactions" other than any Sale and Leaseback
Transactions permitted solely under the provisions of this "--
Exempted Liens and Sale and Leaseback Transactions"),
measured, in each case, at the time such Lien is incurred or any such Sale and
Leaseback Transaction is entered into by Quest Diagnostics or the Restricted
Subsidiary.
Limitation on Subsidiary Indebtedness and Preferred Stock
None of the Subsidiaries of Quest Diagnostics other than the Subsidiary
Guarantors may, directly or indirectly, create, incur, issue, assume or extend
the maturity of any Indebtedness (including Acquired Indebtedness) or Preferred
Stock except for the following, provided that, for purposes of this covenant,
any Acquired Indebtedness shall not be deemed to have been incurred until 270
days from the date (1) the Person obligated on such Acquired Indebtedness
becomes a Subsidiary of Quest Diagnostics or (2) the acquisition of assets, in
connection with which such Acquired Indebtedness was assumed, is consummated:
o Indebtedness outstanding on the date of the issuance of the
senior debt securities;
o Indebtedness representing the assumption by one Subsidiary of
Indebtedness of another Subsidiary;
o Indebtedness outstanding under any Receivables Credit
Facility;
o Indebtedness secured by a Lien incurred for the purpose of
financing all or any part of a property's purchase price or
cost of construction or additions, repairs, alterations or
other improvements, provided that such Indebtedness and Lien
is incurred prior to or within 270 days after the acquisition
of such property or the completion of construction or such
additions, repairs, alterations or other improvements and the
full operation of such property thereafter;
24
o Indebtedness of any Subsidiary of Quest Diagnostics, the
proceeds of which are used to renew, extend, refinance or
refund outstanding Indebtedness of such Subsidiary; provided
that such Indebtedness is scheduled to mature no earlier than
the Indebtedness being renewed, extended, refinanced or
refunded; provided further that such Indebtedness shall be
permitted hereunder only to the extent that the aggregate
principal amount of such Indebtedness (or, if such
Indebtedness is issued at a price less than the principal
amount thereof, the aggregate amount of gross proceeds
therefrom) does not exceed the aggregate principal amount then
outstanding under the Indebtedness being renewed, extended,
refinanced or refunded (or if the Indebtedness being renewed,
extended, refinanced or refunded, was issued at a price less
than the principal amount thereof, then not in excess of the
amount of liability in respect thereof determined in
accordance with generally accepted accounting principles) plus
the lesser of (A) the stated amount of any premium or other
payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being
refinanced or (B) the amount of premium or other payment
actually paid at such time to refinance the Indebtedness,
plus, in either case, the amount of expenses of such
Subsidiary incurred in connection with such refinancing;
o Indebtedness of a Subsidiary of Quest Diagnostics to Quest
Diagnostics or to another Subsidiary of Quest Diagnostics;
o any Indebtedness resulting from a Sale and Leaseback
Transaction which is permitted by the "-- Limitation on Sale
and Leaseback Transactions" covenant (other than any Sale and
Leaseback Transaction which is permitted solely pursuant to
the provisions of "-- Exempted Liens and Sale and Leaseback
Transactions");
o any Permitted Acquired Indebtedness;
o Preferred Stock to the extent that the aggregate liquidation
preference of Preferred Stock, outstanding at any one time,
does not exceed 5% of Consolidated Total Assets; or
o any Indebtedness, including any Acquired Indebtedness that is
not Permitted Acquired Indebtedness, the outstanding aggregate
principal amount of which does not at any one time exceed the
greater of (1) 10% of Consolidated Total Assets or (2) $200
million, measured in each case at the time such Indebtedness
is incurred.
Merger, Consolidation or Sale of Assets
Quest Diagnostics shall not consolidate with or merge with or into any
other Person or sell, transfer or lease all or substantially all of its assets
to any Person, unless:
o either Quest Diagnostics shall be the continuing corporation,
or the corporation (if other than Quest Diagnostics) formed by
such consolidation or into which Quest Diagnostics is merged
or the Person which acquires by sale, transfer or lease of all
or substantially all of Quest Diagnostics' assets shall (1) be
organized under the laws of the United States or any state
thereof and (2) expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to
the Trustee, all of the obligations of Quest Diagnostics under
the indenture and on all the securities;
o immediately after giving effect to such transaction, no event
of default shall have occurred and be continuing; and
o Quest Diagnostics and the successor Person have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel
each stating that such consolidation, merger, conveyance or
transfer and such supplemental indenture comply with this
provision and that all conditions precedents for such
transaction have been complied with.
25
Events of Default
The term "Event of Default" in respect of the senior debt securities of
a series means any of the following:
o Quest Diagnostics or any Subsidiary Guarantor does not pay the
principal of or any premium on the senior debt securities of
that series on its due date;
o Quest Diagnostics or any Subsidiary Guarantor does not pay
interest on the senior debt securities of that series within
30 days of its due date whether at maturity, upon redemption
or upon acceleration;
o Quest Diagnostics or any Subsidiary Guarantor remains in
breach of a covenant in respect of the senior debt securities
of that series for 60 days after it receives a written notice
of default stating it is in breach and requiring that it
remedy the breach. The notice must be sent by either the
trustee or holders of 25% of the aggregate principal amount of
the senior debt securities of that series;
o An event of default under any indenture or instrument
evidencing or under which Quest Diagnostics or any Subsidiary
Guarantor then has outstanding any Indebtedness shall occur
and be continuing and either:
(1) such event of default results from the failure to
pay the principal of such Indebtedness in excess of $50
million at final maturity of such Indebtedness, individually
or in the aggregate; or
(2) as a result of such event of default the maturity
of such Indebtedness shall have been accelerated so that the
same shall be or become due and payable prior to the date on
which the same would otherwise have become due and payable and
the principal amount of such Indebtedness, together with the
principal of any other Indebtedness of Quest Diagnostics or
such Subsidiary Guarantor in default, or the maturity of which
has been accelerated, aggregates at least $50 million,
individually or in the aggregate;
o Any Subsidiary Guarantor repudiates its obligations under its
guarantee of the senior debt securities of that series or,
other than by reason of the termination of the Indenture or
the release of any such guarantee in accordance with the
Indenture, any such guarantee ceases to be in full force and
effect or is declared null and void and such condition shall
have continued for a period of 30 days after written notice of
such failure requiring Quest Diagnostics or the Subsidiary
Guarantor to remedy the same shall have been given to Quest
Diagnostics by the trustee or to Quest Diagnostics and the
trustee by the holders of 25% in aggregate principal amount of
the senior debt securities of that series then outstanding; or
o Quest Diagnostics or any Subsidiary Guarantor files for
bankruptcy or certain other events of bankruptcy, insolvency
or reorganization occur.
The trustee may withhold notice to the holders of senior debt
securities of any default (except in the payment of principal or interest) if it
considers such withholding of notice to be in the best interests of the holders.
If an event of default with respect to the senior debt securities of a
series has occurred and has not been cured, the trustee or the holders of not
less than 25% in principal amount of the outstanding senior debt securities of
that series may declare the entire principal amount (and premium, if any) of,
and accrued interest on all the senior debt securities of that series to be due
and immediately payable. This is called a declaration of acceleration of
maturity. If an event of default with respect to the senior debt securities of a
series occurs because of certain events in bankruptcy, insolvency or
reorganization, the principal amount of the senior debt securities of that
series will be automatically accelerated, without any action by the trustee or
any holder. Holders of a majority in principal amount of the senior debt
securities of a series may also waive certain past defaults under the Indenture
on behalf of all of the holders of the senior debt securities of that series. A
declaration of acceleration of maturity with respect to the
26
senior debt securities of a series may be canceled, under specified
circumstances, by the holders of at least a majority in principal amount of the
senior debt securities of that series.
Except in cases of default, where the trustee has some special duties,
the trustee is not required to take any action under the Indenture at the
request of any of the holders unless the holders offer the Trustee protection
reasonably satisfactory to it from expenses and liability called an "indemnity."
If such indemnity is provided, the holders of a majority in principal amount of
the senior debt securities of a series may, with respect to the senior debt
securities of that series, direct the time, method and place of conducting any
lawsuit or other formal legal action seeking any remedy available to the
trustee. The trustee may refuse to follow those directions in certain
circumstances. No delay or omission in exercising any right or remedy will be
treated as a waiver of the right, remedy or event of default.
Before you are allowed to bypass the trustee and bring a lawsuit or
other formal legal action or take other steps to enforce your rights or protect
your interests relating to the senior debt securities of a series, the following
must occur:
o You must give the trustee written notice that an event of
default has occurred and remains uncured;
o The holders of at least 25% in principal amount of the
outstanding senior debt securities of that series must make a
written request that the trustee take action because of the
default and must offer the trustee indemnity against the cost
and other liabilities of taking that action;
o The trustee must not have taken action for 60 days after
receipt of the above notice and offer of indemnity; and
o Holders of a majority in principal amount of the senior debt
securities of that series must not have given the trustee a
direction inconsistent with the above notice.
However, you are entitled at any time to bring a lawsuit for the
payment of money due on your senior debt securities on or after the due date.
Holders of a majority in principal amount of the senior debt securities
of the affected series may waive any past defaults other than (1) the payment of
principal, any premium or interest or (2) in respect of a covenant or other
provision that cannot be modified or amended without the consent of each holder.
"Street name" and other indirect holders should consult their banks or
brokers for information on how to give notice or direction or to make a request
of the trustee and to make or cancel a declaration of acceleration.
Each year, we will furnish to the trustee a written statement of
certain of our officers certifying that to their knowledge we are in compliance
with the indenture and the senior debt securities, or else specifying any
default.
Conversion and Exchange
If any senior debt securities are convertible into or exchangeable for
other securities, the prospectus supplement will explain the terms and
conditions of such conversion or exchange, including:
o the conversion price or exchange ratio, or the calculation
method for such price or ratio;
o the conversion or exchange period, or how such period will be
determined;
o if conversion or exchange will be mandatory or at the option
of the holder or our company;
o provisions for adjustment of the conversion price or the
exchange ratio; and
27
o provisions affecting conversion or exchange in the event of
the redemption of the senior debt securities.
Such terms may also include provisions under which the number or amount
of other securities to be received by the holders of such debt securities upon
conversion or exchange would be calculated according to the market price of such
other securities as of a time stated in the prospectus supplement.
Additional Mechanics
Form, Exchange and Transfer
The senior debt securities will be issued:
o as registered securities; or
o as bearer securities (unless otherwise stated in the
prospectus supplement, with interest coupons attached); or
o in global form, see "Securities We May Issue-- Global
Securities"; or
o in denominations that are even multiples of $1,000, in the
case of registered securities, and in even multiples of
$5,000, in the case of bearer securities.
You may have your registered securities divided into registered
securities of smaller denominations or combined into registered securities of
larger denominations, as long as the total principal amount is not changed. This
is called an "exchange."
You may exchange or transfer registered securities of a series at the
office of the trustee in New York City. That office is currently located at The
Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attn: Corporate Trust -- Trustee Administration. The trustee maintains the list
of registered holders and acts as our agent for registering senior debt
securities in the names of holders and transferring senior debt securities.
However, we may appoint another trustee to act as our agent or act as our own
agent. If provided in the prospectus supplement, you may exchange your bearer
securities for registered securities of the same series so long as the total
principal amount is not changed. Unless otherwise specified in the prospectus
supplement, bearer securities will not be issued in exchange for registered
securities.
You will not be required to pay a service charge to transfer or
exchange senior debt securities, but you may be required to pay for any tax or
other governmental charge associated with the exchange or transfer. The transfer
or exchange will only be made if the transfer agent is satisfied with your proof
of ownership.
If we designate additional transfer agents, they will be named in the
prospectus supplement. We may cancel the designation of any particular transfer
agent. We may also approve a change in the office through which any transfer
agent acts.
If the senior debt securities are redeemable and we redeem less than
all of the senior debt securities of a particular series, we may block the
transfer or exchange of senior debt securities for 15 days before the day we
mail the notice of redemption or publish such notice (in the case of bearer
securities) and ending on the day of that mailing or publication in order to
freeze the list of holders to prepare the mailing. At our option, we may mail or
publish such notice of redemption through an electronic medium. We may also
refuse to register transfers or exchanges of senior debt securities selected for
redemption, except that we will continue to permit transfers and exchanges of
the unredeemed portion of any senior debt security being partially redeemed.
28
Paying and Paying Agents
If you are a holder of registered securities, we will pay interest to
you if you are a direct holder in the list of registered holders at the close of
business on a particular day in advance of each due date for interest, even if
you no longer own the security on the interest due date. That particular time
and day, usually about two weeks in advance of the interest due date, is called
the "Regular Record Date" and is stated in the prospectus supplement. Holders
buying and selling senior debt securities must work out between them how to
compensate for the fact that we will pay all the interest for an interest period
to the one who is the registered holder on the Regular Record Date. The most
common manner is to adjust the sales price of the senior debt securities to
prorate interest fairly between buyer and seller. This prorated interest amount
is called "accrued interest."
With respect to registered securities, we will pay interest, principal
and any other money due on the senior debt securities at the corporate trust
office of the trustee in New York City. That office is currently located at The
Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attn: Corporate Trust Administration. You must make arrangements to have your
payments picked up at or wired from that office. We may also choose to pay
interest by mailing checks or making wire transfers.
"Street name" and other indirect holders should consult their banks or
brokers for information on how they will receive payments.
If bearer securities are issued, unless otherwise provided in the
prospectus supplement, we will maintain an office or agency outside the United
States for the payment of all amounts due on the bearer securities. If senior
debt securities are listed on the Luxembourg Stock Exchange or any other stock
exchange located outside the United States, we will maintain an office or agency
for such senior debt securities in any city located outside the United States
required by such stock exchange. The initial locations of such offices and
agencies will be specified in the prospectus supplement. Unless otherwise
provided in the prospectus supplement, payment of interest on any bearer
securities on or before maturity will be made only against surrender of coupons
for such interest installments as they mature. Unless otherwise provided in the
prospectus supplement, no payment with respect to any bearer security will be
made at any office or agency of our company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal, premium and interest, if any, on bearer
securities payable in US dollars will be made at the office of our paying agent
in The City of New York if (but only if) payment of the full amount in US
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
Regardless of who acts as the paying agent, all money paid by us to a
paying agent that remains unclaimed at the end of two years after the amount is
due to registered holders will be repaid to us. After that two-year period, you
may look only to us for payment and not to the trustee, any other paying agent
or anyone else.
We may also arrange for additional payment offices, and may cancel or
change these offices, including our use of the trustee's corporate trust office.
We may also choose to act as our own paying agent. We must notify you of changes
in identities of the paying agents for any particular series of senior debt
securities.
Notices
With respect to registered securities, we and the trustee will send
notices regarding the senior debt securities only to registered holders, using
their addresses as listed in the list of registered holders. With respect to
bearer securities, we and the trustee will give notice by publication in a
newspaper of general circulation in the City of New York or in such other cities
that may be specified in a prospectus supplement. At our option, we may send or
publish notices through an electronic medium as specified in the applicable
prospectus supplement.
29
Book Entry, Delivery and Form
The senior debt securities of a series will be issued in one or more
fully registered global securities (the "Global Securities") which will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York (the "Depository") and registered in the name of Cede & Co., the
Depository's nominee. Quest Diagnostics will not issue senior debt securities in
certificated form. Beneficial interests in the Global Securities will be
represented through book-entry accounts of financial institutions acting on
behalf of beneficial owners as direct and indirect participants in the
Depository. Investors may elect to hold interests in the Global Securities
through the Depository. Beneficial interests in the Global Securities will be
held in denominations of $1,000 and integral multiples thereof.
Modification or Waiver
There are three types of changes we can make to the indenture and the
senior debt securities.
Changes Requiring Your Approval. First, there are changes that cannot
be made to your senior debt securities without your specific approval. Following
is a list of those types of changes:
o changing the stated maturity of the principal of or interest
on a senior debt security;
o reducing any amounts due on a senior debt security or payable
upon acceleration of the maturity of a security following a
default;
o adversely affecting any right of repayment at the holder's
option;
o changing the place (except as otherwise described in this
prospectus) or currency of payment on a senior debt security;
o impairing your right to sue for payment or to convert or
exchange a security;
o modifying the senior debt securities to subordinate the senior
debt securities to other indebtedness;
o reducing the percentage of holders of senior debt securities
whose consent is needed to modify or amend the indenture;
o reducing the percentage of holders of senior debt securities
whose consent is needed to waive compliance with certain
provisions of the indenture or to waive certain defaults;
o reducing the requirements for quorum or voting with respect to
the senior debt securities;
o modifying any other aspect of the provisions of the indenture
dealing with modification and waiver except to increase the
voting requirements;
o change in any of our obligations to pay additional amounts
which are required to be paid to holders with respect to taxes
imposed on such holders in certain circumstances; and
o other provisions specified in the prospectus supplement.
Changes Requiring a Majority Vote. The second type of change to the
indenture and the outstanding senior debt securities is the kind that requires a
vote in favor by holders of outstanding senior debt securities owning a majority
of the principal amount of the particular series affected. Separate votes will
be needed for each series even if they are affected in the same way. Most
changes fall into this category, except for clarifying changes and certain other
changes that would not adversely affect holders of the outstanding senior debt
securities in any material respect. The same vote would be required for us and
our subsidiary guarantors to obtain a waiver of all or part of
30
certain covenants in the applicable indenture, or a waiver of a past default.
However, we and our subsidiary guarantors cannot obtain a waiver of a payment
default or any other aspect of the indenture or the outstanding senior debt
securities listed in the first category described previously under "-- Changes
Requiring Your Approval" unless we and our subsidiary guarantors obtain your
individual consent to the waiver.
Changes Not Requiring Approval. The third type of change does not
require any vote by holders of outstanding senior debt securities. This type is
limited to clarifications; curing ambiguities, defects or inconsistencies and
certain other changes that would not adversely affect holders of the outstanding
senior debt securities in any material respect. Qualifying or maintaining the
qualification of the indenture under the Trust Indenture Act does not require
any vote by holders of senior debt securities.
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a senior
debt security:
o for original issue discount securities, we will use the
principal amount that would be due and payable on the voting
date if the maturity of the senior debt securities were
accelerated to that date because of a default; and
o for debt securities whose principal amount is not known (for
example, because it is based on an index), we will use a
special rule for that senior debt security described in the
prospectus supplement.
Senior debt securities will not be considered outstanding, and
therefore not eligible to vote, if we have deposited or set aside in trust for
you money for their payment or redemption. Senior debt securities will also not
be eligible to vote if they have been fully defeased as described later under
"Defeasance -- Full Defeasance."
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding indenture securities that are
entitled to vote or take other action under the indenture.
We are not required to set a record date. If we set a record date for a
vote or other action to be taken by holders of a particular series, that vote or
action may be taken only by persons who are holders of outstanding securities of
that series on the record date and must be taken within 180 days following the
record date or another period that we may specify. We may shorten or lengthen
this period from time to time.
"Street name" and other indirect holders should consult their banks or
brokers for information on how approval may be granted or denied if we seek to
change the indenture or the debt securities or request a waiver.
Satisfaction and Discharge
The indenture will cease to be of further effect, and we and our
subsidiary guarantors will be deemed to have satisfied and discharged the
indenture with respect to a particular series of senior debt securities, when
the following conditions have been satisfied:
o all debt securities of that series not previously delivered to
the trustee for cancellation have become due and payable or
will become due and payable at their stated maturity or on a
redemption date within one year,
o we deposit with the trustee, in trust, funds sufficient to pay
the entire indebtedness on the senior debt securities of that
series that had not been previously delivered for
cancellation, for the principal and interest to the date of
the deposit (for senior debt securities that have become due
and payable) or to the stated maturity or the redemption date,
as the case may be (for senior debt securities that have not
become due and payable),
o we have paid or caused to be paid all other sums payable under
the indenture in respect of that series, and
31
o we have delivered to the trustee an officer's certificate and
opinion of counsel, each stating that all these conditions
have been complied with.
We will remain obligated to provide for registration of transfer and
exchange and to provide notices of redemption.
Defeasance
The following discussion of full defeasance and covenant defeasance
will be applicable to your series of senior debt securities only if we choose to
have them apply to that series. If we choose to do so, we will state that in the
applicable prospectus supplement and describe any changes to these provisions.
Full Defeasance. If there is a change in federal tax law, as described
below, we can legally release ourselves and our subsidiary guarantors from any
payment or other obligations on the senior debt securities, called "full
defeasance," if we put in place the following other arrangements for you to be
repaid:
o We must deposit in trust for your benefit and the benefit of
all other registered holders of the senior debt securities a
combination of money and U.S. government or U.S. government
agency notes or bonds that will generate enough cash to make
interest, principal and any other payments on the senior debt
securities on their various due dates including, possibly,
their earliest redemption date.
o Under current federal tax law, the deposit and our legal
release from the senior debt securities would likely be
treated as though you surrendered your senior debt securities
in exchange for your share of the cash and notes or bonds
deposited in trust. In that event, you could recognize gain or
loss on the senior debt securities you surrendered. In order
for us to effect a full defeasance, we must deliver to the
trustee a legal opinion confirming that you will not recognize
income gain or loss for federal income tax purposes as a
result of the defeasance and that you will not be taxed on the
debt securities any differently than if we did not make the
deposit and just repaid the senior debt securities ourselves.
o We must comply with any additional provisions set forth in the
prospectus supplement.
If we accomplish a full defeasance, as described above, you would have
to rely solely on the trust deposit for repayment on the senior debt securities.
You could not look to us or our subsidiary guarantors for repayment in the
unlikely event of any shortfall. Conversely, the trust deposit would most likely
be protected from claims of our lenders and other creditors if we ever become
bankrupt or insolvent.
Covenant Defeasance. Under current federal tax law, we can make the
same type of deposit described above and be released and cause our subsidiary
guarantors to be released, from the restrictive covenants in the senior debt
securities, if any. This is called "covenant defeasance." In that event, you
would lose the protection of those restrictive covenants but would gain the
protection of having money and securities set aside in trust to repay the senior
debt securities. In order to achieve covenant defeasance, we must do the
following:
o We must deposit in trust for your benefit and the benefit of
all other registered holders of the senior debt securities a
combination of money and U.S. government or U.S. government
agency notes or bonds that will generate enough cash to make
interest, principal and any other payments on the senior debt
securities on their various due dates.
o We must deliver to the trustee a legal opinion confirming that
under current federal income tax law we may make the above
deposit without causing you to be taxed on the senior debt
securities any differently than if we did not make the deposit
and just repaid the senior debt securities ourselves.
o We must comply with any additional provisions set forth in the
prospectus supplement.
32
If we accomplish covenant defeasance, the following provisions of the
indenture and the senior debt securities would no longer apply unless otherwise
specified:
o any promises of our subsidiary guarantors relating to their
guarantees, the conduct of their business and any other
covenants applicable to the series of senior debt securities;
o our promises regarding conduct of our business and other
matters and any other covenants applicable to the series of
senior debt securities; and
o the definition of an event of default as a breach of such
covenants.
If we accomplish covenant defeasance, you can still look to us and our
subsidiary guarantors for repayment of the senior debt securities if there were
a shortfall in the trust deposit. In fact, if one of the remaining events of
default occurred (such as our bankruptcy) and the senior debt securities become
immediately due and payable, there may be such a shortfall. Depending on the
event causing the default, of course, you may not be able to obtain payment of
the shortfall.
In order to exercise either full defeasance or covenant defeasance, we
must comply with certain conditions, and no event or condition can exist that
would prevent us and our subsidiary guarantors from making payments of
principal, premium, and interest, if any, on the senior debt securities of such
series on the date the irrevocable deposit is made or at any time during the
period ending on the 91st day after the deposit date.
The Trustee
The initial trustee under the indenture will be The Bank of New York.
The Bank of New York will also be the initial paying agent and registrar for the
senior debt securities. The Bank of New York is also the trustee and note
registrar for our 6 3/4% senior notes due 2006, our 7 1/2% senior notes due 2011
and any remaining 10 3/4% senior subordinated notes due 2006.
The indenture provides that, except during the continuance of an event
of default under the indenture, the trustee under the indenture will perform
only such duties as are specifically set forth in the indenture. Under the
indenture, the holders of a majority in outstanding principal amount of the
senior debt securities will have the right to direct the time, method and place
of conducting any proceeding or exercising any remedy available to the trustee
under the indenture, subject to certain exceptions. If an event of default has
occurred and is continuing, the trustee under the indenture will exercise such
rights and powers vested in it under the indenture and use the same degree of
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act incorporated by
reference in the indenture contain limitations on the rights of the trustee
under such indenture, should it become a creditor of our company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The trustee under
the indenture is permitted to engage in other transactions. However, if the
trustee under the indenture acquires any prohibited conflicting interest, it
must eliminate the conflict or resign.
The trustee may resign or be removed with respect to one or more series
of securities and a successor trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of securities under the indenture, each such trustee
shall be a trustee of a trust separate and apart from the trust administered by
any other such trustee and any action described herein to be taken by the
"trustee" may then be taken by each such trustee with respect to, and only with
respect to, the one or more series of securities for which it is trustee.
33
Governing Law
The indenture and the senior debt securities will be governed by, and
construed in accordance with, the laws of the State of New York without
application of principles of conflicts of law thereunder.
Definitions
The following definitions are applicable to this Description of Senior
Debt Securities:
"Acquired Indebtedness" means Indebtedness of a Person (1) existing at
the time such Person becomes a Restricted Subsidiary or (2) assumed in
connection with the acquisition of assets by such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary or acquiring such assets, as the case
may be.
"Attributable Debt" means, with respect to a Sale and Leaseback
Transaction, an amount equal to the lesser of: (1) the fair market value of the
property (as determined in good faith by our board of directors); and (2) the
present value of the total net rental payments to be made under the lease during
its remaining term, discounted at the rate of interest set forth or implicit in
the terms of the lease, compounded semi-annually. The term "net rental payments"
under any lease for any period shall mean the sum of the rental and other
payments required to be paid in such period by the lessee thereunder, not
including, however, any amounts required to be paid by such lessee (whether or
not designated as rental or additional rental) on account of maintenance and
repairs, reconstructions, insurance, taxes, assessments, water rates, operating
and labor costs or similar charges required to be paid by such lessee thereunder
or any amounts required to be paid by such lessee thereunder contingent upon the
amount sales, maintenance and repairs, reconstruction, insurance, taxes,
assessments, water rates or similar charges.
"Capitalized Lease" means any obligation of a Person to pay rent or
other amounts incurred with respect to real property or equipment acquired or
leased by such Person and used in its business that is required to be recorded
as a capital lease in accordance with generally accepted accounting principles.
"Consolidated Total Assets" means, with respect to any Person as of any
date, the amount of total assets as shown on the consolidated balance sheet of
such Person for the most recent fiscal quarter for which financial statements
have been filed with the Securities and Exchange Commission, prepared in
accordance with accounting principles generally accepted in the United States.
"Existing Receivables Credit Facility" means the receivables-backed
financing transaction pursuant to (1) the Receivables Sales Agreement, dated as
of July 21, 2000 between Quest Diagnostics and each of its direct and indirect
wholly owned Subsidiaries that is a seller thereunder, and Quest Diagnostics
Receivables Inc., as the buyer, (2) the Credit and Security Agreement, dated as
of July 21, 2000 among Quest Diagnostics Receivables Inc., as borrower, Quest
Diagnostics, as initial servicer, each of the lenders from time to time party
thereto, and Wachovia Bank, N.A., as administrative agent, and (3) the various
related ancillary documents.
"Indebtedness" of any Person means, without duplication (1) any
obligation of such Person for money borrowed, (2) any obligation of such Person
evidenced by bonds, debentures, notes or other similar instruments, (3) any
reimbursement obligation of such Person in respect of letters of credit or other
similar instruments which support financial obligations which would otherwise
become Indebtedness, and (4) any obligation of such Person under Capitalized
Leases; provided, however, that "Indebtedness" of such Person shall not include
any obligation of such Person to any Subsidiary of such Person or to any Person
with respect to which such Person is a Subsidiary.
"Initial Subsidiary Guarantors" means each of Quest Diagnostics
Holdings Incorporated, Quest Diagnostics Clinical Laboratories, Inc., Quest
Diagnostics Incorporated (CA), Quest Diagnostics Incorporated (MD), Quest
Diagnostics LLC, Quest Diagnostics Incorporated (MI), Quest Diagnostics
Incorporated (CT), Quest Diagnostics Incorporated (MA), Quest Diagnostics of
Pennsylvania Inc., Quest Diagnostics Incorporated (OH), Metwest Inc., Nichols
Institute Diagnostics, DPD Holdings, Inc., Diagnostics Reference Services Inc.,
Laboratory Holdings Incorporated, Pathology Building Partnership, Quest
Diagnostics Investments Incorporated and Quest Diagnostics Finance Incorporated.
34
"Lien" means any pledge, mortgage, lien, encumbrance or other security
interest.
"Officer's Certificate" means a certificate signed by any Officer of
Quest Diagnostics or any Subsidiary Guarantor, as the case may be, in his or her
capacity as such Officer and delivered to the trustee.
"Permitted Acquired Indebtedness" means any Acquired Indebtedness that
remains outstanding following the expiration of a good faith offer by Quest
Diagnostics or the Subsidiary of Quest Diagnostics obligated under such Acquired
Indebtedness to acquire such Acquired Indebtedness, including, without
limitation, an offer to exchange such Acquired Indebtedness for debt securities
of Quest Diagnostics, on terms, which in the opinion of an independent
investment banking firm of national reputation and standing, are consistent with
market practices in existence at the time for offers of a similar nature;
provided that the initial expiration date of any such offer shall be not later
than the expiration of the 270-day period referred to in the first paragraph of
the "Limitation on Subsidiary Indebtedness and Preferred Stock" covenant;
provided further that the amount of Acquired Indebtedness that shall constitute
"Permitted Acquired Indebtedness" shall only be equal to the amount of Acquired
Indebtedness that Quest Diagnostics or such Subsidiary has made an offer to
acquire in accordance with the foregoing.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or other similar entity.
"Preferred Stock" means, with respect to any Person, any and all shares
of preferred stock (however designated) issued by such Person, that is entitled
to preference or priority over one or more series or classes of capital stock
issued by such Person upon any distribution of such Person's property and
assets, whether by dividend or on liquidation, whether now outstanding, or
issued after the date that the senior debt securities are issued.
"Principal Property" means any real property and any related buildings,
fixtures or other improvements located in the United States owned by Quest
Diagnostics or its Subsidiaries (1) on or in which one of its 30 largest
domestic clinical laboratories conducts operations, as determined by net
revenues for the four most recent fiscal quarters for which financial statements
have been filed with the Securities and Exchange Commission, or (2) the net book
value of which at the time of the determination exceeds 1% of the Consolidated
Total Assets of Quest Diagnostics. As of June 20, 2001, Quest Diagnostics and
its Subsidiaries owned 13 of the 30 largest domestic clinical laboratories
operated by Quest Diagnostics and its Subsidiaries. These 13 owned domestic
clinical laboratories and Quest Diagnostic's administrative office located in
Collegeville, Pennsylvania are "Principal Properties" under the above
definition.
"Receivables Credit Facility" means any receivables-backed financing
transaction including the Existing Receivables Credit Facility, in each case as
such transaction may be amended or otherwise modified from time to time or
refinanced or replaced with respect to all or any portion of the indebtedness
under such transaction.
"Restricted Subsidiary" means any Subsidiary of Quest Diagnostics that
owns a Principal Property.
"Sale and Leaseback Transaction" means any arrangement with any person
providing for the leasing by Quest Diagnostics or any Restricted Subsidiary of
any Principal Property that has been or is to be sold or transferred by Quest
Diagnostics or any Restricted Subsidiary to such person, as the case may be.
"Subsidiary" of any Person means (1) a corporation, a majority of the
outstanding voting stock of which is, at the time, directly or indirectly, owned
by such Person by one or more Subsidiaries of such Person, or by such Person and
one or more Subsidiaries thereof or (2) any other Person (other than a
corporation), including, without limitation, a partnership or joint venture, in
which such Person, one or more Subsidiaries thereof or such Person and one or
more Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions).
"Subsidiary Guarantors" means, at any time, (1) each Initial Subsidiary
Guarantor and (2) each existing and future domestic Subsidiary of Quest
Diagnostics which is required to guarantee the obligations of Quest Diagnostics
35
under the senior debt securities, provided that, in each case, such Initial
Subsidiary Guarantor or such other domestic Subsidiary continues to guarantee
the senior debt securities at such time.
36
DESCRIPTION OF SUBORDINATED DEBT SECURITIES
We may issue subordinated debt securities from time to time in one or
more distinct series. This section summarizes the material terms of our
subordinated debt securities. Some of the financial and other terms of any
series of subordinated debt securities that we offer will be described in the
prospectus supplement to be attached to the front of this prospectus.
As required by U.S. federal law for all bonds and notes of companies
that are publicly offered, the subordinated debt securities will be governed by
a document called an "indenture." An indenture is a contract between us and a
financial institution, in this case, The Bank of New York, acting as trustee on
your behalf. The indenture will be subject to and governed by the Trust
Indenture Act of 1939. The trustee has two main roles:
o First, subject to some limitations, the trustee can enforce
your rights against us if we default.
o Second, the trustee performs certain administrative duties for
us, which include sending you interest payments and notices.
Because this section is a summary of the material terms of the
indenture, it does not describe every aspect of the subordinated debt
securities. We urge you to read the indenture because it, and not this
description, defines your rights as a holder of subordinated debt securities.
Some of the definitions are repeated in this prospectus, but for the rest you
will need to read the indenture. We have filed the indenture as an exhibit to
our Securities Act and Exchange Act reports that we have filed with the SEC. See
"Where You Can Find More Information," for information on how to obtain a copy
of the indenture.
Whenever we refer in this Description of Subordinated Debt Securities
to terms defined in the indenture below, such defined terms are incorporated
herein by reference. As used in this Description of Subordinated Debt
Securities, the terms "we," "our," "us," and "Quest Diagnostics" do not include
any current or future subsidiary of Quest Diagnostics Incorporated, unless the
context indicates otherwise.
The subordinated debt securities will be issued under an indenture (the
"Indenture") among Quest Diagnostics, as issuer, the Bank of New York, as
trustee and, if the subordinated debt securities are to be guaranteed by
subsidiaries of Quest Diagnostics, the initial subsidiary guarantors party
thereto. The terms of the subordinated debt securities will include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939. A copy of the Indenture is available for inspection at
the office of the trustee.
General
The subordinated debt securities will be unsecured obligations of our
company
Our subordinated debt securities may be guaranteed by certain of our
subsidiaries. We refer to these subsidiaries as our "subsidiary guarantors."
Because our subordinated debt securities may or may not be guaranteed by our
subsidiary guarantors, references to our subsidiary guarantors are applicable
only if the prospectus supplement indicates that the debt securities will be
guaranteed by our subsidiary guarantors.
Quest Diagnostics may, from time to time, without the consent of the
holders of subordinated debt securities, issue additional subordinated debt
securities having the same ranking and the same interest rate, maturity and
other terms as the subordinated debt securities of that series. Any additional
subordinated debt securities and the subordinated debt securities of that series
will constitute a single series under the Indenture. This type of offering is
often referred to as a "reopening."
Subordinated debt securities will bear interest at the annual rate
noted on the cover page of a prospectus supplement. Interest will be payable
semiannually each year. Interest on the subordinated debt securities will be
paid to holders of record immediately before the interest payment date.
37
You should read the prospectus supplement for the following terms of
the series of subordinated debt securities offered by the prospectus supplement:
o The title of the subordinated debt securities.
o The aggregate principal amount of the subordinated debt
securities, the percentage of their principal amount at which
the subordinated debt securities will be issued and the date
or dates when the principal of the subordinated debt
securities will be payable or how those dates will be
determined.
o The interest rate or rates, which may be fixed or variable,
that the subordinated debt securities will bear, if any, and
how the rate or rates will be determined.
o The date or dates from which any interest will accrue or how
the date or dates will be determined, the date or dates on
which any interest will be payable, any regular record dates
for these payments or how these dates will be determined and
the basis on which any interest will be calculated, if other
than on the basis of a 360-day year of twelve 30-day months.
o The place or places, if any, other than or in addition to New
York City, of payment, transfer, conversion and exchange of
the subordinated debt securities and where notices or demands
to or upon us in respect of the subordinated debt securities
may be served.
o Any optional redemption provisions.
o Any sinking fund or other provisions that would obligate us to
repurchase or redeem the subordinated debt securities.
o Whether the amount of payments of principal of, or premium, if
any, or interest on the subordinated debt securities will be
determined with reference to an index, formula or other
method, which could be based on one or more commodities,
equity indices or other indices, and how these amounts will be
determined.
o Any changes or additions to the events of default under the
applicable indenture or our covenants, including additions of
any restrictive covenants, with respect to the subordinated
debt securities.
o If not the principal amount of the subordinated debt
securities, the portion of the principal amount that will be
payable upon acceleration of the maturity of the subordinated
debt securities or how that portion will be determined.
o Any changes or additions to the provisions concerning
defeasance and covenant defeasance contained in the indenture
that will be applicable to the subordinated debt securities.
o Any provisions granting special rights to the holders of the
subordinated debt securities upon the occurrence of specified
events.
o If other than the trustee, the name of any paying agent,
security registrar and transfer agent for the subordinated
debt securities.
o If the subordinated debt securities are not to be issued in
book-entry form only and held by The Depositary Trust Company,
as depositary, the form of such subordinated debt securities,
including whether such subordinated debt securities are to be
issuable in permanent or temporary global form, as registered
securities, bearer securities or both, any restrictions on the
offer, sale or delivery of bearer securities and the terms, if
any, upon which bearer securities of the series may be
exchanged for registered securities of the series and vice
versa, if permitted by applicable law and regulations.
38
o If other than US dollars, the currency or currencies of such
subordinated debt securities.
o The person to whom any interest in a subordinated debt
security will be payable, if other than the registered holder
at the close of business on the regular record date.
o The denomination or denominations that the subordinated debt
securities will be issued, if other than denominations of
$1,000 or any integral multiples in the case of the registered
securities and $5,000 or any integral multiples in the case of
the bearer securities.
o Whether such subordinated debt securities will be convertible
into or exchangeable for any other securities and, if so, the
terms and conditions upon which such subordinated debt
securities will be so convertible or exchangeable.
o A discussion of federal income tax, accounting and other
special considerations, procedures and limitations with
respect to the subordinated debt securities.
o Whether and under what circumstances we will pay additional
amounts to holders in respect of any tax assessment or
government charge, and, if so, whether we will have the option
to redeem the subordinated debt securities rather than pay
such additional amounts.
o Whether payment of any amounts due under the applicable
indenture will be guaranteed by one or more of our
subsidiaries.
o Any other terms of the subordinated debt securities that are
consistent with the provisions of the indenture.
For purposes of this prospectus, any reference to the payment of
principal of, premium or interest, if any, on subordinated debt securities will
include additional amounts if required by the terms of such subordinated debt
securities.
The indenture does not limit the amount of subordinated debt securities
that we are authorized to issue from time to time. The indenture also provides
that there may be more than one trustee thereunder, each for one or more series
of subordinated debt securities. At a time when two or more trustees are acting
under the indenture, each with respect to only certain series, the term "debt
securities" means the series of subordinated debt securities for which each
respective trustee is acting. If there is more than one trustee under the
indenture, the powers and trust obligations of each trustee will apply only to
the subordinated debt securities for which it is trustee. If two or more
trustees are acting under the indenture, then the subordinated debt securities
for which each trustee is acting would be treated as if issued under separate
indentures.
We may issue subordinated debt securities with terms different from
those of subordinated debt securities that may already have been issued. Without
the consent of the holders thereof, we may reopen a previous issue of a series
of subordinated debt securities and issue additional subordinated debt
securities of that series unless the reopening was restricted when that series
was created.
There is no requirement that we issue subordinated debt securities in
the future under any indenture, and we may use other indentures or
documentation, containing different provisions in connection with future issues
of other subordinated debt securities.
We may issue the subordinated debt securities as original issue
discount securities, which are subordinated debt securities, including any
zero-coupon subordinated debt securities, that are issued and sold at a discount
from their stated principal amount. Original issue discount securities provide
that, upon acceleration of their maturity, an amount less than their principal
amount will become due and payable. We will describe the U.S. federal income tax
consequences and other considerations applicable to original issue discount
securities in any prospectus supplement relating to them.
39
Guarantees
Each of our subsidiaries may fully and unconditionally guarantee the
payment of the principal of, premium and interest on our subordinated debt
securities. The guarantees of the subordinated debt securities will be endorsed
on the subordinated debt securities and will be unsecured obligations of our
subsidiary guarantors.
To the extent that our subordinated debt securities are guaranteed, the
subordinated debt securities described in this prospectus may be fully and
unconditionally guaranteed on a joint and several basis by any of the following
wholly-owned subsidiaries: Quest Diagnostics Holdings Incorporated, Quest
Diagnostics Clinical Laboratories, Inc., Quest Diagnostics Incorporated (CA),
Quest Diagnostics Incorporated (MD), Quest Diagnostics LLC, Quest Diagnostics
Incorporated (MI), Quest Diagnostics Incorporated (CT), Quest Diagnostics
Incorporated (MA), Quest Diagnostics of Pennsylvania Inc., Quest Diagnostics
Incorporated (OH), Metwest Inc., Nichols Institute Diagnostics, DPD Holdings,
Inc., Diagnostics Reference Services Inc., Pathology Building Partnership, Quest
Diagnostics Investments Incorporated, Quest Diagnostics Finance Incorporated and
Laboratory Holdings Incorporated.
The Indenture provides that the obligations of each subsidiary
guarantor under its guarantee will be limited so as not to constitute a
fraudulent conveyance under applicable United States federal or state laws.
Application of this clause could limit the amount that holders of subordinated
debt securities may be entitled to collect under the guarantees. Holders, by
their acceptance of our subordinated debt securities, will have agreed to such
limitations. See "Risk Factors -- Federal and state laws permit a court to void
a guarantee issued by any of our subsidiaries if the court finds the guarantee
to constitute a fraudulent conveyance."
Ranking
Unless provided otherwise in the applicable prospectus supplement, the
subordinated debt securities are not secured by any of our property or assets.
Accordingly, your ownership of subordinated debt securities means you are one of
our unsecured creditors. The subordinated debt securities are subordinated to
some of our existing and future debt and other liabilities. See "--
Subordination" for additional information on how subordination limits your
ability to receive payment or pursue other rights if we default or have certain
other financial difficulties. In addition, both the senior and subordinated debt
securities, if they are not guaranteed by our subsidiaries, will be effectively
subordinated to the indebtedness of our subsidiaries.
The subordinated debt securities will be subordinate and junior in
right of payment to all the existing and future Senior Indebtedness of Quest
Diagnostics. The subordinated debt securities will rank equally with other
unsecured obligations of Quest Diagnostics which are subordinated to Senior
Indebtedness of Quest Diagnostics to the same extent as the subordinated debt
securities. The subordinated guarantees of a Subsidiary Guarantor will be
subordinate and junior in right of payment to all the existing and future Senior
Indebtedness of such Subsidiary Guarantor. The subordinated guarantees of a
Subsidiary Guarantor will rank equally with other unsecured obligations of such
Subsidiary Guarantor which is subordinated to Senior Indebtedness of such
Subsidiary Guarantor to the same extent as the subordinated guarantees.
The subordinated debt securities and the subordinated guarantees will
be effectively subordinated to any secured obligations (whether senior or
subordinated) of Quest Diagnostics or Subsidiary Guarantors, as the case may be,
to the extent of the value of the assets securing such obligations.
Quest Diagnostics conducts its operations through subsidiaries, which
generate a substantial portion of its operating income and cash flow. As a
result, distributions or advances from subsidiaries of Quest Diagnostics are a
major source of funds necessary to meet its debt service and other obligations.
Contractual provisions, laws or regulations, as well as any subsidiary's
financial condition and operating requirements, may limit the ability of Quest
Diagnostics to obtain cash required to pay Quest Diagnostics' debt service
obligations, including payments on the subordinated debt securities. The
subordinated debt securities will be structurally subordinated to all existing
and future obligations (whether senior or subordinated) of Quest Diagnostics'
subsidiaries (unless such subsidiaries are Subsidiary Guarantors), including
claims with respect to trade payables. In addition, the subordinated guarantees
of our Subsidiary Guarantors will be structurally subordinated to all existing
and future obligations
40
(whether senior or subordinated) of the Subsidiary Guarantor's subsidiaries
(unless such subsidiaries are also Subsidiary Guarantors), including claims with
respect to trade payables. This means that holders of the subordinated debt
securities as guaranteed by the Subsidiary Guarantors will have a junior
position to the claims of creditors of the direct and indirect subsidiaries of
Quest Diagnostics which are not Subsidiary Guarantors on the assets and earnings
of such subsidiaries.
As described above, all of our debt securities are effectively
subordinated to all existing and future obligations of any of our non-guarantors
subsidiaries not giving a guarantee, and would be so subordinated if a guarantee
issued by any of our subsidiary guarantors were avoided or subordinated in favor
of the subsidiary guarantor's other creditors. See "Risk Factors -- Federal and
state laws permit a court to void a guarantee issued by any of our subsidiaries
if the court finds the guarantee to constitute a fraudulent conveyance."
Subordination
Unless the prospectus supplement provides otherwise, the following
provisions will apply to the subordinated debt securities:
The payment of principal, any premium and interest on the subordinated
debt securities is subordinated in right of payment to the prior payment in full
of all of our senior indebtedness. This means that in certain circumstances
where we may not be making payments on all of our debt obligations as they
become due, the holders of all of our senior indebtedness will be entitled to
receive payment in full of all amounts that are due or will become due on the
senior indebtedness before you and the other holders of subordinated debt
securities will be entitled to receive any payment or distribution (other than
in the form of subordinated securities) on the subordinated debt securities.
These circumstances include the following circumstances:
o We make a payment or distribute assets to creditors upon any
liquidation, dissolution, winding up or reorganization of our
company, or as part of an assignment or marshalling of our
assets for the benefit of our creditors.
o We file for bankruptcy or certain other events in bankruptcy,
insolvency or similar proceedings occur.
o The maturity of the subordinated debt securities is
accelerated. For example, the entire principal amount of a
series of subordinated debt securities may be declared to be
due and payable and immediately payable or may be
automatically accelerated due to an event of default as
described under "-- Events of Default."
In addition, we are generally not permitted to make payments of
principal, any premium or interest on the subordinated debt securities if we
default in our obligation to make payments on our senior indebtedness and do not
cure such default. We are also prohibited from making payments on subordinated
debt securities if an event of default (other than a payment default) that
permits the holders of senior indebtedness to accelerate the maturity of the
senior indebtedness occurs and we and the trustee have received a notice of such
event of default. However, unless the senior indebtedness has been accelerated
because of that event of default, this payment blockage notice cannot last more
than 179 days.
These subordination provisions mean that if we are insolvent a holder
of senior indebtedness is likely to ultimately receive out of our assets more
than a holder of the same amount of our subordinated debt securities, and a
creditor of our company that is owed a specific amount but who owns neither our
senior indebtedness nor our subordinated debt securities may ultimately receive
less than a holder of the same amount of senior indebtedness and more than a
holder of subordinated debt securities.
The subordinated indenture does not limit the amount of senior
indebtedness we are permitted to have and we may in the future incur additional
senior indebtedness.
41
"Senior Indebtedness" is defined in the subordinated indenture as the
principal of, and premium, if any, and unpaid interest on
o indebtedness of Quest Diagnostics whether outstanding on the
date of the subordinated indenture or thereafter created,
incurred, assumed or guaranteed, for money borrowed, unless in
the instrument creating or evidencing the same or pursuant to
which the same is outstanding it is provided that such
indebtedness is not senior or prior in right of payment to the
subordinated debt securities. This includes the indebtedness
of others guaranteed by Quest Diagnostics, but excludes the
debt securities Quest Diagnostics issued under the
subordinated indenture and any remaining 10 3/4% senior
subordinated notes due 2006 of Quest Diagnostics, and
o renewals, extensions, modifications and refunding of any such
indebtedness.
"Senior Guarantees" with respect to any subsidiary guarantor is defined
in the subordinated indenture as all obligations of such subsidiary guarantor
under a guarantee of Senior Indebtedness of Quest Diagnostics.
If this prospectus is being delivered in connection with a series of
subordinated securities, the accompanying prospectus supplement or the
information incorporated by reference will set forth the approximate amount of
senior indebtedness outstanding as of a recent date.
Merger or Consolidation
Under the terms of the indenture, we are generally permitted to
consolidate or merge with another entity. We are also permitted to sell all or
substantially all of our assets to another entity. However, we may not take any
of these actions unless all the following conditions are met:
o either we will be the surviving corporation or, if we merge
out of existence or sell assets, the entity into which we
merge or to which we sell assets must agree to be legally
responsible for the subordinated debt securities;
o immediately after the merger or transfer of assets, no default
on the subordinated debt securities can exist. A default for
this purpose includes any event that would be an event of
default if the requirements for giving a default notice or of
having the default exist for a specific period of time were
disregarded;
o we must deliver certain certificates and documents to the
trustee; and
o we must satisfy any other requirements specified in the
prospectus supplement.
Events of Default
You will have special rights if an event of default occurs in respect
of the subordinated debt securities of your series and is not cured, as
described later in this subsection.
What is an Event of Default? The term "event of default" in respect of
the subordinated debt securities of your series means any of the following:
o We and any of our subsidiary guarantors do not pay the
principal of or any premium on a subordinated debt security of
such series on its due date.
o We and any of our subsidiary guarantors do not pay interest on
a subordinated debt security of such series within 30 days of
its due date whether at maturity, upon redemption or upon
acceleration.
42
o We do not deposit any sinking fund payment in respect of
subordinated debt securities of such series on its due date.
o We or any of our subsidiary guarantors remains in breach of a
covenant in respect of subordinated debt securities of such
series for 60 days after we receive a written notice of
default stating we are in breach and requiring that we remedy
the breach. The notice must be sent by either the trustee or
holders of 25% of the principal amount of subordinated debt
securities of such series.
o We or any of our subsidiary guarantors files for bankruptcy or
certain other events in bankruptcy, insolvency or
reorganization occur.
o Any of our of subsidiary guarantors repudiates its obligations
under any subsidiary guarantee or, except to the extent
contemplated by the related indenture, any subsidiary
guarantee is determined to be unenforceable or invalid or
shall for any reasons cease to be in full force and effect.
o Any other event of default in respect of subordinated debt
securities of such series described in the prospectus
supplement occurs.
The events of default described above may be modified as described in
the applicable prospectus supplement. An event of default for a particular
series of subordinated debt securities does not necessarily constitute an event
of default for any other series of debt securities issued under an indenture.
The trustee may withhold notice to the holders of subordinated debt securities
of any default (except in the payment of principal or interest) if it considers
such withholding of notice to be in the best interests of the holders.
Remedies if an Event of Default Occurs. If an event of default has
occurred and has not been cured, the trustee or the holders of 25% in principal
amount of the subordinated debt securities of the affected series may declare
the entire principal amount of all the subordinated debt securities of that
series to be due and immediately payable. This is called a declaration of
acceleration of maturity. If an event of default occurs because of certain
events in bankruptcy, insolvency or reorganization, the principal amount of all
the subordinated debt securities of that series will be automatically
accelerated, without any action by the trustee or any holder. There are special
notice and timing rules which apply to the acceleration of subordinated debt
securities which are designed to protect the interests of holders of senior
debt. A declaration of acceleration of maturity may be cancelled by the holders
of at least a majority in principal amount of the subordinated debt securities
of the affected series if (1) all existing events of default, other than the
nonpayment of principal of or premium or interest, if any, on the subordinated
debt securities of such series which have become due solely because of the
acceleration, have been cured or waived and (2) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
Except in cases of default, where the trustee has some special duties,
the trustee is not required to take any action under the indenture at the
request of the holders unless the holders offer the trustee protection
reasonably satisfactory to it from expenses and liability, called an
"indemnity". If such indemnity is provided, the holders of a majority in
principal amount of the outstanding subordinated debt securities of the relevant
series may direct the time, method and place of conducting any lawsuit or other
formal legal action seeking any remedy available to the trustee. The trustee may
refuse to follow those directions in certain circumstances. No delay or omission
in exercising any right or remedy will be treated as a waiver of such fight,
remedy or event of default.
Before you are allowed to bypass the trustee and bring your own lawsuit
or other formal legal action or take other steps to enforce your rights or
protect your interests relating to the debt securities, the following must
occur:
o You must give the trustee written notice that an event of
default has occurred and remains uncured.
o The holders of not less than 25% in principal amount of all
outstanding subordinated debt securities of the relevant
series must make a written request that the trustee take
action because of the default and must offer reasonable
indemnity to the trustee against the cost and other
liabilities of taking that action.
43
o The trustee must not have taken action for 60 days after
receipt of the above notice and offer of indemnity.
o The holders of a majority in principal amount of the
subordinated debt securities must not have given the trustee a
direction inconsistent with the above notice during the 60-day
period.
However, you are entitled at any time to bring a lawsuit for the
payment of money due on your subordinated debt securities on or after the due
date.
Holders of a majority in principal amount of the subordinated debt
securities of the affected series may waive any past defaults other than (1) the
payment of principal, any premium or interest or (2) in respect of a covenant or
other provision that cannot be modified or amended without the consent of each
holder.
"Street name" and other indirect holders should consult their banks or
brokers for information on how to give notice or direction or to make a request
of the trustee and to make or cancel a declaration of acceleration.
Each year, we will furnish to the trustee a written statement of
certain of our officers certifying that to their knowledge we are in compliance
with the indenture and the subordinated debt securities, or else specifying any
default.
Conversion and Exchange
If any subordinated debt securities are convertible into or
exchangeable for other securities, the prospectus supplement will explain the
terms and conditions of such conversion or exchange, including:
o the conversion price or exchange ratio, or the calculation
method for such price or ratio;
o the conversion or exchange period, or how such period will be
determined;
o if conversion or exchange will be mandatory or at the option
of the holder or our company;
o provisions for adjustment of the conversion price or the
exchange ratio; and
o provisions affecting conversion or exchange in the event of
the redemption of the debt securities.
Such terms may also include provisions under which the number or amount
of other securities to be received by the holders of such debt securities upon
conversion or exchange would be calculated according to the market price of such
other securities as of a time stated in the prospectus supplement.
Additional Mechanics
Form, Exchange and Transfer
The subordinated debt securities will be issued:
o as registered securities; or
o as bearer securities (unless otherwise stated in the
prospectus supplement, with interest coupons attached); or
o in global form, see "Securities We May Issue -- Global
Securities"; or
44
o in denominations that are even multiples of $1,000, in the
case of registered securities, and in even multiples of
$5,000, in the case of bearer securities.
You may have your registered securities divided into registered
securities of smaller denominations or combined into registered securities of
larger denominations, as long as the total principal amount is not changed. This
is called an "exchange."
You may exchange or transfer registered securities of a series at the
office of the trustee in New York City. That office is currently located at The
Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attn: Corporate Trust -- Trustee Administration. The trustee maintains the list
of registered holders and acts as our agent for registering subordinated debt
securities in the names of holders and transferring subordinated debt
securities. However, we may appoint another trustee to act as our agent or act
as our own agent. If provided in the prospectus supplement, you may exchange
your bearer securities for registered securities of the same series so long as
the total principal amount is not changed. Unless otherwise specified in the
prospectus supplement, bearer securities will not be issued in exchange for
registered securities.
You will not be required to pay a service charge to transfer or
exchange subordinated debt securities, but you may be required to pay for any
tax or other governmental charge associated with the exchange or transfer. The
transfer or exchange will only be made if the transfer agent is satisfied with
your proof of ownership.
If we designate additional transfer agents, they will be named in the
prospectus supplement. We may cancel the designation of any particular transfer
agent. We may also approve a change in the office through which any transfer
agent acts.
If the subordinated debt securities are redeemable and we redeem less
than all of the subordinated debt securities of a particular series, we may
block the transfer or exchange of subordinated debt securities for 15 days
before the day we mail the notice of redemption or publish such notice (in the
case of bearer securities) and ending on the day of that mailing or publication
in order to freeze the list of holders to prepare the mailing. At our option, we
may mail or publish such notice of redemption through an electronic medium. We
may also refuse to register transfers or exchanges of subordinated debt
securities selected for redemption, except that we will continue to permit
transfers and exchanges of the unredeemed portion of any subordinated debt
security being partially redeemed.
Paying and Paying Agents
If you are a holder of registered securities, we will pay interest to
you if you are a direct holder in the list of registered holders at the close of
business on a particular day in advance of each due date for interest, even if
you no longer own the security on the interest due date. That particular time
and day, usually about two weeks in advance of the interest due date, is called
the "Regular Record Date" and is stated in the prospectus supplement. Holders
buying and selling subordinated debt securities must work out between them how
to compensate for the fact that we will pay all the interest for an interest
period to the one who is the registered holder on the Regular Record Date. The
most common manner is to adjust the sales price of the subordinated debt
securities to prorate interest fairly between buyer and seller. This prorated
interest amount is called "accrued interest."
With respect to registered securities, we will pay interest, principal
and any other money due on the subordinated debt securities at the corporate
trust office of the trustee in New York City. That office is currently located
at The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York
10286, Attn: Corporate Trust Administration. You must make arrangements to have
your payments picked up at or wired from that office. We may also choose to pay
interest by mailing checks or making wire transfers.
"Street name" and other indirect holders should consult their banks or
brokers for information on how they will receive payments.
If bearer securities are issued, unless otherwise provided in the
prospectus supplement, we will maintain an office or agency outside the United
States for the payment of all amounts due on the bearer securities. If
subordinated debt securities are listed on the Luxembourg Stock Exchange or any
other stock exchange located
45
outside the United States, we will maintain an office or agency for such
subordinated debt securities in any city located outside the United States
required by such stock exchange. The initial locations of such offices and
agencies will be specified in the prospectus supplement. Unless otherwise
provided in the prospectus supplement, payment of interest on any bearer
securities on or before maturity will be made only against surrender of coupons
for such interest installments as they mature. Unless otherwise provided in the
prospectus supplement, no payment with respect to any bearer security will be
made at any office or agency of our company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal, premium and interest, if any, on bearer
securities payable in US dollars will be made at the office of our paying agent
in The City of New York if (but only if) payment of the full amount in US
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
Regardless of who acts as the paying agent, all money paid by us to a
paying agent that remains unclaimed at the end of two years after the amount is
due to registered holders will be repaid to us. After that two-year period, you
may look only to us for payment and not to the trustee, any other paying agent
or anyone else.
We may also arrange for additional payment offices, and may cancel or
change these offices, including our use of the trustee's corporate trust office.
We may also choose to act as our own paying agent. We must notify you of changes
in identities of the paying agents for any particular series of subordinated
debt securities.
Notices
With respect to registered securities, we and the trustee will send
notices regarding the subordinated debt securities only to registered holders,
using their addresses as listed in the list of registered holders. With respect
to bearer securities, we and the trustee will give notice by publication in a
newspaper of general circulation in the City of New York or in such other cities
that may be specified in a prospectus supplement. At our option, we may send or
publish notices through an electronic medium as specified in the applicable
prospectus supplement.
Modification or Waiver
There are three types of changes we can make to the indenture and the
subordinated debt securities.
Changes Requiring your Approval. First, there are changes that cannot
be made to your subordinated debt securities without your specific approval.
Following is a list of those types of changes:
o changing the stated maturity of the principal of or interest
on a subordinated debt security;
o reducing any amounts due on a subordinated debt security or
payable upon acceleration of the maturity of a security
following a default;
o adversely affecting any right of repayment at the holder's
option;
o changing the place (except as otherwise described in this
prospectus) or currency of payment on a subordinated debt
security;
o impairing your right to sue for payment or to convert or
exchange a security;
o modifying the subordination provisions in a manner that is
adverse to holders of the subordinated debt securities;
o reducing the percentage of holders of subordinated debt
securities whose consent is needed to modify or amend the
indenture;
46
o reducing the percentage of holders of subordinated debt
securities whose consent is needed to waive compliance with
certain provisions of the indenture or to waive certain
defaults;
o reducing the requirements for quorum or voting with respect to
the subordinated debt securities;
o modifying any other aspect of the provisions of the indenture
dealing with modification and waiver except to increase the
voting requirements;
o change in any of our obligations to pay additional amounts
which are required to be paid to holders with respect to taxes
imposed on such holders in certain circumstances; and
o other provisions specified in the prospectus supplement.
Changes Requiring a Majority Vote. The second type of change to the
indenture and the outstanding subordinated debt securities is the kind that
requires a vote in favor by holders of outstanding subordinated debt securities
owning a majority of the principal amount of the particular series affected.
Separate votes will be needed for each series even if they are affected in the
same way. Most changes fall into this category, except for clarifying changes
and certain other changes that would not adversely affect holders of the
outstanding subordinated debt securities in any material respect. The same vote
would be required for us and our subsidiary guarantors to obtain a waiver of all
or part of certain covenants in the applicable indenture, or a waiver of a past
default. However, we and our subsidiary guarantors cannot obtain a waiver of a
payment default or any other aspect of the indenture or the outstanding
subordinated debt securities listed in the first category described previously
under "-- Changes Requiring Your Approval" unless we and our subsidiary
guarantors obtain your individual consent to the waiver.
Changes Not Requiring Approval. The third type of change does not
require any vote by holders of outstanding subordinated debt securities. This
type is limited to clarifications; curing ambiguities, defects or
inconsistencies and certain other changes that would not adversely affect
holders of the outstanding subordinated debt securities in any material respect.
Qualifying or maintaining the qualification of the indenture under the Trust
Indenture Act does not require any vote by holders of subordinated debt
securities.
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a
subordinated debt security:
o for original issue discount securities, we will use the
principal amount that would be due and payable on the voting
date if the maturity of the subordinated debt securities were
accelerated to that date because of a default; and
o for subordinated debt securities whose principal amount is not
known (for example, because it is based on an index), we will
use a special rule for that subordinated debt security
described in the prospectus supplement.
Subordinated debt securities will not be considered outstanding, and
therefore not eligible to vote, if we have deposited or set aside in trust for
you money for their payment or redemption. Subordinated debt securities will
also not be eligible to vote if they have been fully defeased as described later
under "Defeasance -- Full Defeasance."
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding indenture securities that are
entitled to vote or take other action under the indenture.
We are not required to set a record date. If we set a record date for a
vote or other action to be taken by holders of a particular series, that vote or
action may be taken only by persons who are holders of outstanding securities of
that series on the record date and must be taken within 180 days following the
record date or another period that we may specify. We may shorten or lengthen
this period from time to time.
47
"Street name" and other indirect holders should consult their banks or
brokers for information on how approval may be granted or denied if we seek to
change the indenture or the debt securities or request a waiver.
Satisfaction and Discharge
The indenture will cease to be of further effect, and we and our
subsidiary guarantors will be deemed to have satisfied and discharged the
indenture with respect to a particular series of debt securities, when the
following conditions have been satisfied:
o all subordinated debt securities of that series not previously
delivered to the trustee for cancellation have become due and
payable or will become due and payable at their stated
maturity or on a redemption date within one year,
o we deposit with the trustee, in trust, funds sufficient to pay
the entire indebtedness on the subordinated debt securities of
that series that had not been previously delivered for
cancellation, for the principal and interest to the date of
the deposit (for subordinated debt securities that have become
due and payable) or to the stated maturity or the redemption
date, as the case may be (for subordinated debt securities
that have not become due and payable),
o we have paid or caused to be paid all other sums payable under
the indenture in respect of that series, and
o we have delivered to the trustee an officer's certificate and
opinion of counsel, each stating that all these conditions
have been complied with.
We will remain obligated to provide for registration of transfer and
exchange and to provide notices of redemption.
Defeasance
The following discussion of full defeasance and covenant defeasance
will be applicable to your series of subordinated debt securities only if we
choose to have them apply to that series. If we choose to do so, we will state
that in the applicable prospectus supplement and describe any changes to these
provisions.
Full Defeasance. If there is a change in federal tax law, as described
below, we can legally release ourselves and our subsidiary guarantors from any
payment or other obligations on the subordinated debt securities, called "full
defeasance", if we put in place the following other arrangements for you to be
repaid:
o We must deposit in trust for your benefit and the benefit of
all other registered holders of the subordinated debt
securities a combination of money and U.S. government or U.S.
government agency notes or bonds that will generate enough
cash to make interest, principal and any other payments on the
subordinated debt securities on their various due dates
including, possibly, their earliest redemption date.
o Under current federal tax law, the deposit and our legal
release from the subordinated debt securities would likely be
treated as though you surrendered your debt securities in
exchange for your share of the cash and notes or bonds
deposited in trust. In that event, you could recognize gain or
loss on the subordinated debt securities you surrendered. In
order for us to effect a full defeasance, we must deliver to
the trustee a legal opinion confirming that you will not
recognize income gain or loss for federal income tax purposes
as a result of the defeasance and that you will not be taxed
on the debt securities any differently than if we did not make
the deposit and just repaid the debt securities ourselves.
o We must comply with any additional provisions set forth in the
prospectus supplement.
48
If we accomplish a full defeasance, as described above, you would have
to rely solely on the trust deposit for repayment on the subordinated debt
securities. You could not look to us or our subsidiary guarantors for repayment
in the unlikely event of any shortfall. Conversely, the trust deposit would most
likely be protected from claims of our lenders and other creditors if we ever
become bankrupt or insolvent. You would also be released from any applicable
subordination provisions on the subordinated debt securities described below
under "-- Subordination."
Covenant Defeasance. Under current federal tax law, we can make the
same type of deposit described above and be released and cause our subsidiary
guarantors to be released, from the restrictive covenants in the subordinated
debt securities, if any. This is called "covenant defeasance." In that event,
you would lose the protection of those restrictive covenants but would gain the
protection of having money and securities set aside in trust to repay the
subordinated debt securities, and you would be released from any applicable
subordination provisions on the subordinated debt securities described later
under "-- Subordination." In order to achieve covenant defeasance, we must do
the following:
o We must deposit in trust for your benefit and the benefit of
all other registered holders of the subordinated debt
securities a combination of money and U.S. government or U.S.
government agency notes or bonds that will generate enough
cash to make interest, principal and any other payments on the
subordinated debt securities on their various due dates.
o We must deliver to the trustee a legal opinion confirming that
under current federal income tax law we may make the above
deposit without causing you to be taxed on the subordinated
debt securities any differently than if we did not make the
deposit and just repaid the subordinated debt securities
ourselves.
o We must comply with any additional provisions set forth in the
prospectus supplement.
If we accomplish covenant defeasance, the following provisions of the
indenture and the subordinated debt securities would no longer apply unless
otherwise specified:
o any promises of our subsidiary guarantors relating to their
guarantees, the conduct of their business and any other
covenants applicable to the series of subordinated debt
securities that will be described in the prospectus
supplement;
o our promises regarding conduct of our business and other
matters and any other covenants applicable to the series of
subordinated debt securities that will be described in the
prospectus supplement; and
o the definition of an event of default as a breach of such
covenants that may be specified in the prospectus supplement.
If we accomplish covenant defeasance, you can still look to us and our
subsidiary guarantors for repayment of the subordinated debt securities if there
were a shortfall in the trust deposit. In fact, if one of the remaining events
of default occurred (such as our bankruptcy) and the subordinated debt
securities become immediately due and payable, there may be such a shortfall.
Depending on the event causing the default, of course, you may not be able to
obtain payment of the shortfall.
In order to exercise either full defeasance or covenant defeasance, we
must comply with certain conditions, and no event or condition can exist that
would prevent us and our subsidiary guarantors from making payments of
principal, premium, and interest, if any, on the subordinated debt securities of
such series on the date the irrevocable deposit is made or at any time during
the period ending on the 91st day after the deposit date.
49
The Trustee
The initial trustee under the indenture will be The Bank of New York.
The Bank of New York will also be the initial paying agent and registrar for the
debt securities. The Bank of New York is also the trustee and note registrar for
our 6 3/4% senior notes due 2006, our 7 1/2% senior notes due 2011 and any
remaining 10 3/4% senior subordinated notes due 2006.
The indenture provides that, except during the continuance of an event
of default under the indenture, the trustee under the indenture will perform
only such duties as are specifically set forth in the indenture. Under the
indenture, the holders of a majority in outstanding principal amount of the
subordinated debt securities will have the right to direct the time, method and
place of conducting any proceeding or exercising any remedy available to the
trustee under the indenture, subject to certain exceptions. If an event of
default has occurred and is continuing, the trustee under the indenture will
exercise such rights and powers vested in it under the indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act incorporated by
reference in the indenture contain limitations on the rights of the trustee
under such indenture, should it become a creditor of our company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The trustee under
the indenture is permitted to engage in other transactions. However, if the
trustee under the indenture acquires any prohibited conflicting interest, it
must eliminate the conflict or resign.
The trustee may resign or be removed with respect to one or more series
of securities and a successor trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of securities under the indenture, each such trustee
shall be a trustee of a trust separate and apart from the trust administered by
any other such trustee and any action described herein to be taken by the
"trustee" may then be taken by each such trustee with respect to, and only with
respect to, the one or more series of securities for which it is trustee.
Governing Law
The indenture and the subordinated debt securities will be governed by,
and construed in accordance with, the laws of the State of New York without
application of principles of conflicts of law thereunder.
50
DESCRIPTION OF THE PREFERRED STOCK
AND THE DEPOSITARY SHARES REPRESENTING
FRACTIONAL SHARES OF PREFERRED STOCK
This section describes the general terms and provisions of the
preferred stock that we may offer by this prospectus. The applicable prospectus
supplement will describe the specific terms of the series of preferred stock
then offered, and the terms and provisions described in this section will apply
only to the extent not superseded by the terms of the applicable prospectus
supplement.
This section is only a summary of the preferred stock that we may
offer. We urge you to read carefully our certificate of incorporation and the
certificate of designation we will file in relation to an issue of any
particular series of preferred stock before you buy any preferred stock.
Book-Entry Securities
The preferred stock may be issued in whole or in part in the form of
one or more global securities. See "Securities We May Issue" for additional
information about your limited rights as the beneficial owner of a global
security.
Our Series of Preferred Stock
Our certificate of incorporation permits us to issue, without prior
permission from our stockholders, up to 10,000,000 shares of preferred stock. As
of June 1, 2001, we had previously authorized:
o 1,000 shares of voting cumulative preferred stock, par value
$1.00 per share, all of which are issued and outstanding; and
o 1,300,000 shares of series A preferred stock par value $1.00
per share, none of which are expected to be issued nor are any
outstanding; series A preferred stock will be issued pursuant
to our rights agreement as described under "Description of
Common Stock -- Rights Agreement."
Voting Cumulative Preferred Stock
We have 1,000 outstanding shares of voting cumulative preferred stock,
all of which are owned by Corning Incorporated. The shares of our voting
cumulative preferred stock rank senior to our common stock and series A
preferred stock; they have a liquidation preference of $1,000 per share over the
shares of our common stock and receive quarterly dividends payable in cash at
the greater of (1) 10% per annum or (2) the yield to maturity of our 10 3/4%
notes expressed as a percentage plus 1%. The voting cumulative preferred stock
has one vote per share and votes together with our common stock as a single
class. The voting cumulative preferred stock also votes as a separate class on
any amendment to our certificate of incorporation that adversely affects the
rights of such preferred stock, subject to certain exceptions. We may redeem all
the shares of our voting cumulative preferred stock beginning on January 1,
2003. The initial redemption price is 106% of the liquidation preference per
share, plus accrued and unpaid dividends. The redemption price will decline each
year after 2003 and will be 100% of the liquidation preference, plus accrued and
unpaid dividends, on or after January 1, 2006. On January 1, 2022, we must
redeem all of the then outstanding shares of voting cumulative preferred stock
at a redemption price equal to the liquidation preference.
Terms of Future Series of Preferred Stock
Our board of directors may, without further action of the stockholders,
issue undesignated preferred stock in one or more classes or series. Any
undesignated preferred stock issued by us may:
o rank prior to our common stock as to dividend rights,
liquidation preference or both;
51
o have full or limited voting rights; and
o be convertible into shares of common stock or other
securities.
The powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, including dividend rights, voting rights, conversion rights, terms
of redemption and liquidation preferences, of the preferred stock of each series
will be fixed or designated by our board of directors pursuant to a certificate
of designation. We will describe in the applicable prospectus supplement the
specific terms of a particular series of preferred stock, which may include the
following:
o the maximum number of shares in the series;
o the designation of the series;
o the terms of any voting rights of the series;
o the dividend rate, if any, on the shares of such series, the
conditions and dates upon which such dividends shall be
payable, the preference or relation which such dividends shall
bear to the dividends payable on any other class or classes or
on any other series of capital stock, and whether such
dividends shall be cumulative or non-cumulative;
o whether the shares of such series shall be redeemable by us
and, if so, the times, prices and other terms and conditions
of such redemption;
o the rights of the holders of shares of such series upon the
liquidation, dissolution or winding up of our company;
o whether or not the shares of such series shall be subject to
the operation of a retirement or sinking fund and, if so, the
extent to and manner in which any such retirement or sinking
fund shall be applied to the purchase or redemption of the
shares of such series for retirement or to other corporate
purposes and the terms and provisions relative to the
operation thereof;
o whether or not the shares of such series shall be convertible
into, or exchangeable for, (a) our debt securities, (b) shares
of any other class or classes of stock of our company, or of
any other series of the same or different class of stock, or
(c) shares of any class or series of stock of any other
corporation, and if so convertible or exchangeable, the price
or prices or the rate or rates of conversion or exchange and
the method, if any, of adjusting the same;
o the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the
payment of dividends or making of other distributions on, and
upon the purchase, redemption or other acquisition by our
company of, our common stock, or any other class or classes of
stock of our company ranking junior to the shares of such
series either as to dividends or upon liquidation;
o the conditions or restrictions, if any, upon the creation of
indebtedness of our company or upon the issue of any
additional stock, including additional shares of such series
or of any other series or of any other class, ranking on a
parity with or prior to the shares of such series as to
dividends or distribution of assets on liquidation,
dissolution or winding up;
o whether fractional interests in shares of the series will be
offered in the form of depositary shares as described below
under "-- Depositary Shares";
o any other preference or provision and relative, participating,
optional or other special rights or qualifications,
limitations or restrictions thereof; and
52
o our ability to modify the rights of holders otherwise than by
a vote of a majority or more of the series outstanding.
The preferred stock will, when issued, be fully paid and nonassessable.
We will select the transfer agent, registrar and dividend disbursement agent for
a series of preferred stock and will describe its selection in the applicable
prospectus supplement. The registrar for shares of preferred stock will send
notices to stockholders of any meetings at which holders of the preferred stock
have the right to elect directors of our company or to vote on any other matter
of our company.
Depositary Shares
This section describes the general terms and provisions of the
depositary shares we may offer. The applicable prospectus supplement will
describe the specific terms of the depositary shares offered through that
prospectus supplement, including, but not limited to, the title of the
depositary shares and the deposited security, the amount of deposited securities
represented by one depositary share, and any general terms outlined in this
section that will not apply to those depositary shares.
We have summarized certain terms and provisions of the depositary
agreement, the depositary shares and the depositary receipts in this section.
The summary is not complete. We will file the form of depositary agreement,
including the form of depositary receipt, as an exhibit to the registration
statement, of which this prospectus is a part. You should read the forms of
depositary agreement and depositary receipt relating to a series of preferred
stock for additional information before you buy any depositary shares that
represent preferred stock of such series.
General. We may offer fractional interests in preferred stock rather
than full shares of preferred stock. If this occurs, we will provide for the
issuance by a depositary to the public of receipts for depositary shares, each
of which will represent a fractional interest in a share of a particular series
of preferred stock.
The stock of any series of preferred stock underlying the depositary
shares will be deposited under a separate depositary agreement between us and a
depositary. For these purposes, the depositary will be a bank or trust company
having its principal office in the United States and having a combined capital
and surplus of at least $50 million. We will name the depositary and give the
address of its principal executive office in the applicable prospectus
supplement. Subject to the terms of the depositary agreement, each owner of a
depositary share will have a fractional interest in all the rights and
preferences of the preferred stock underlying such depositary shares. Those
rights include any dividend, voting, redemption, conversion and liquidation
rights.
The depositary shares will be evidenced by depositary receipts issued
under the depositary agreement. If you purchase fractional interests in shares
of the related series of preferred stock, you will receive depositary receipts
as described in the applicable prospectus supplement. While the final depositary
receipts are being prepared, we may order the depositary to issue temporary
depositary receipts substantially identical to the final depositary receipts in
final form. The holders of the temporary depositary receipts will be entitled to
the same rights as if they held the depositary receipts although not in final
form. Holders of the temporary depositary receipts can exchange them for the
final depositary receipts at our expense.
If you surrender depositary receipts at the principal office of the
depositary, unless the related depositary shares have previously been called for
redemption, you are entitled to receive at such office the number of shares of
preferred stock and any money or other property represented by such depositary
shares. We will not issue partial shares of preferred stock. If you deliver
depositary receipts evidencing a number of depositary shares that represent more
than a whole number of shares of preferred stock, the depositary will issue you
a new depositary receipt evidencing such excess number of depositary shares at
the same time that the shares of preferred stock are withdrawn. Holders of
preferred stock received in exchange for depositary shares will no longer be
entitled to deposit such shares under the depositary agreement or to receive
depositary shares in exchange for such preferred stock.
Dividends and Other Distributions. The depositary will distribute all
cash dividends or other distributions received with respect to the preferred
stock to the record holders of depositary shares representing the preferred
53
stock in proportion to the number of depositary shares owned by the holders on
the relevant record date. The depositary will distribute only the amount that
can be distributed without attributing to any holder of depositary shares a
fraction of one cent. The balance not distributed will be added to and treated
as part of the next sum received by the depositary for distribution to record
holders of depositary shares.
If there is a distribution other than in cash, the depositary will
distribute property to the holders of depositary shares, unless the depositary
determines that it is not feasible to make such distribution. If this occurs,
the depositary may, with our approval, sell the property and distribute the net
proceeds from the sale to the holders of depositary shares.
The depositary agreement will also contain provisions relating to how
any subscription or similar rights offered by us to the holders of the preferred
stock will be made available to the holders of depositary shares.
Conversion and Exchange. If any series of preferred stock underlying
the depositary shares is subject to conversion or exchange, the applicable
prospectus supplement will describe the rights or obligations of each record
holder of depositary receipts to convert or exchange the depositary shares.
Redemption of Depositary Shares. If the series of the preferred stock
underlying the depositary shares is subject to redemption, the depositary shares
will be redeemed from the redemption proceeds, in whole or in part, of such
series of the preferred stock held by the depositary. The depositary will mail
notice of redemption between 30 to 60 days prior to the date fixed for
redemption to the record holders of the depositary shares to be redeemed at
their addresses appearing in the depositary's records. The redemption price per
depositary share will bear the same relationship to the redemption price per
share of preferred stock that the depositary share bears to the underlying
preferred share. Whenever we redeem preferred stock held by the depositary, the
depositary will redeem, as of the same redemption date, the number of depositary
shares representing the preferred stock redeemed. If less than all the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected by lot or pro rata as determined by the depositary.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be outstanding. When the depositary shares are no
longer outstanding, all rights of the holders will cease, except the right to
receive money or other property that the holders of the depositary shares were
entitled to receive upon such redemption. Such payments will be made when
holders surrender their depositary receipts to the depositary.
Voting the Preferred Stock. Upon receipt of notice of any meeting at
which the holders of the preferred stock are entitled to vote, the depositary
will mail information about the meeting contained in the notice to the record
holders of the depositary shares relating to such preferred stock. Each record
holder of such depositary shares on the record date, which will be the same date
as the record date for the preferred stock, will be entitled to instruct the
depositary as to how the preferred stock underlying the holder's depositary
shares should be voted.
The depositary will try, if practical, to vote the number of shares of
preferred stock underlying the depositary shares according to the instructions
received. We will agree to take all action requested and deemed necessary by the
depositary in order to enable the depositary to vote the preferred stock in that
manner. The depositary will not vote any preferred stock for which it does not
receive specific instructions from the holder of the depositary shares relating
to such preferred stock.
Taxation. Provided that each obligation in the depositary agreement and
any related agreement is performed in accordance with its terms, owners of
depositary shares will be treated for federal income tax purposes as if they
were owners of the shares of preferred stock represented by the depositary
shares. Accordingly, for federal income tax purposes they will have the income
and deductions to which they would be entitled if they were holders of the
preferred stock. In addition:
o No gain or loss will be recognized for federal income tax
purposes upon withdrawal of preferred stock in exchange for
depositary shares as provided in the depositary agreement.
54
o The tax basis of each share of preferred stock to an
exchanging owner of depositary shares will, upon the exchange,
be the same as the aggregate tax basis of the depositary
shares exchanged for such preferred stock.
o The holding period for the preferred stock, in the hands of an
exchanging owner of depositary shares who held the depositary
shares as a capital asset at the time of the exchange, will
include the period that the owner held such depositary shares.
Amendment and Termination of the Depositary Agreement. The form of
depositary receipt evidencing the depositary shares and any provision of the
depositary agreement may be amended by agreement between our company and the
depositary at any time. However, any amendment that materially and adversely
alters the rights of the existing holders of depositary shares will not be
effective unless approved by the record holders of at least a majority of the
depositary shares then outstanding. A depositary agreement may be terminated by
us or the depositary only if:
o All outstanding depositary shares relating to the depositary
agreement have been redeemed.
o There has been a final distribution on the preferred stock of
the relevant series in connection with the liquidation,
dissolution or winding up of the business and the distribution
has been distributed to the holders of the related depositary
shares.
Charges of Depositary. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. We will pay associated charges of the depositary for the initial
deposit of the preferred stock and any redemption of the preferred stock.
Holders of depositary shares will pay transfer and other taxes and governmental
charges and any other charges that are stated to be their responsibility in the
depositary agreement.
Miscellaneous. We will forward to the holders of depositary shares all
reports and communications that it must furnish to the holders of the preferred
stock.
Neither the depositary nor we will be liable if the depositary is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the depositary agreement. Our obligations and the
depositary's obligations under the depositary agreement will be limited to
performance in good faith of duties set forth in the depositary agreement.
Neither the depositary nor we will be obligated to prosecute or defend any legal
proceeding connected with any depositary shares or preferred stock unless
satisfactory indemnity is furnished to us or the depositary. We and the
depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting preferred stock for deposit, holders
of depositary shares or other persons believed to be competent and on documents
believed to be genuine.
Resignation and Removal of Depositary. The depositary may resign at any
time by delivering notice to us. We may also remove the depositary at any time.
Resignations or removals will take effect upon the appointment of a successor
depositary and its acceptance of the appointment. The successor depositary must
be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50 million.
55
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 300,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par
value $1.00 per share. As of June 1, 2001, there were 94,316,052 shares of
common stock outstanding held of record by approximately 6,800 stockholders, and
1,000 shares of preferred stock outstanding held of record by Corning
Incorporated. The following description of our common stock and provisions of
our certificate of incorporation and bylaws are only summaries and we encourage
you to review complete copies of our certificate of incorporation and bylaws,
which we have previously filed with the SEC.
Common Stock
Holders of our common stock are entitled to receive, as, when and if
declared by our board of directors, dividends and other distributions in cash,
stock or property from our assets or funds legally available for those purposes
subject to any dividend preferences that may be attributable to preferred stock.
Holders of common stock are entitled to one vote for each share held of record
on all matters on which stockholders may vote. Holders of common stock are not
entitled to cumulative voting for the election of directors. There are no
preemptive, conversion, redemption or sinking fund provisions applicable to our
common stock. All outstanding shares of our common stock are fully paid and
non-assessable. In the event of our liquidation, dissolution or winding up,
holders of common stock are entitled to share ratably in the assets available
for distribution, subject to any prior rights of any holders of preferred stock
then outstanding.
Our common stock is traded on the New York Stock Exchange under the
symbol "DGX."
Delaware Law and our Certificate of Incorporation and Bylaw Provisions may have
an Anti-Takeover Effect
Provisions in our certificate of incorporation, bylaws and Delaware law
could make it harder for someone to acquire us through a tender offer, proxy
contest or otherwise. We are governed by the provisions of Section 203 of the
Delaware General Corporate Law, which provides that a person who owns (or within
three years, did own) 15% or more of a company's voting stock is an "interested
stockholder." Section 203 prohibits a public Delaware corporation from engaging
in a business combination with an interested stockholder for a period commencing
three years from the date in which the person became an interested stockholder
unless:
o the board of directors approved the transaction which resulted
in the stockholder becoming an interested stockholder;
o upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the
corporation (excluding shares owned by officers, directors, or
certain employee stock purchase plans); or
o at or subsequent to the time the transaction is approved by
the board of directors, there is an affirmative vote of at
least 66.67% of the outstanding voting stock.
Section 203 could prohibit or delay mergers or other takeover attempts
against us, and accordingly, may discourage attempts to acquire us through
tender offer, proxy contest or otherwise.
Our certificate of incorporation and bylaws include certain
restrictions on who may call a special meeting of stockholders and prohibit
certain actions by written consent of the holders of common stock. These
provisions could delay, deter or prevent a future takeover or acquisition of us
unless such takeover or acquisition is approved by the board of directors. We
have a staggered board of directors, so that it would take three successive
annual meetings to replace all directors. Our certificate of incorporation also
requires the approval of holders of at least 80% of the voting power of the
outstanding capital stock of our company entitled to vote generally in the
election of directors as a condition for mergers and certain other business
combinations with any beneficial owner of more than 10% of such voting power or
an interested stockholder, unless (1) the transaction is approved by at least a
majority
56
of directors which are not affiliated or associated with the interested
stockholder with whom we are seeking a business combination or (2) certain
minimum price, form of consideration and procedural requirements are met.
Rights Agreement
On December 31, 1996, we adopted a shareholder rights agreement. As
with most shareholder rights agreements, the terms of our rights agreement are
complex and not easily summarized. This summary may not contain all of the
information that is important to you. Accordingly, you should carefully read our
rights agreement, as amended, that is incorporated by reference as an exhibit to
the registration statement of which this prospectus is a part.
Our rights agreement provides that each of our common shares will have
the right to purchase a unit consisting of one-hundredth of our series A
preferred stock at a purchase price of $250. Each share of series A preferred
stock is entitled to 100 votes per share and votes together with our common
stock as a single class. The series A preferred stock is not redeemable. Holders
of rights will have no rights as our stockholders, including the right to vote
or receive dividends, simply by virtue of holding the rights.
Initially, the rights under our rights agreement are attached to
outstanding certificates representing our common shares and no separate
certificates representing the rights will be distributed. The rights will
separate from our common shares and be represented by separate certificates
approximately 10 days after someone acquires or commences a tender or exchange
offer for 20% of our outstanding common stock except in the case of SmithKline
Beecham and its affiliates, who may acquire up to 29.5% of our outstanding
common stock without triggering the separation of the rights from our common
stock.
After the rights separate from our common shares, certificates
representing the rights will be mailed to record holders of our common shares.
Once distributed, the rights certificates alone will represent the rights. All
of our common shares issued prior to the date the rights separate from the
common shares will be issued with the rights attached. The rights are not
exercisable until the date the rights separate from the common shares. The
rights will expire on December 31, 2006 unless earlier redeemed or exchanged by
us.
If a person or group obtains or has the right to obtain 20% or more of
our common shares, then each holder of a right shall be entitled to receive
common stock in lieu of the series A preferred stock upon exercise of the right
and payment of the purchase price. The number of shares of common stock the
holder of the right shall be entitled to receive shall have a value equal to two
times the purchase price paid by such holder upon exercise of the right, unless
our board of directors exercises its option pursuant to the rights agreement to
exchange all or part of the outstanding rights for common stock at an exchange
ratio of one common stock per right prior to a person or group beneficially
owning 50% or more of our common shares. If our company is acquired in a merger,
consolidation or other business combination or more than 50% of our assets is
sold or transferred, each right will thereafter entitle the holder thereof to
receive, upon the exercise of such fight, common stock of the acquiring
corporation having a value equal to two times the purchase price of such right.
Our rights agreement may have anti-takeover effects. The rights may
cause substantial dilution to a person or group that attempts to acquire us.
Accordingly, the existence of the rights may deter acquirors from making
takeover proposals or tender offers. However, the rights are not intended to
prevent a takeover, but rather are designed to enhance the ability of our board
to negotiate with an acquiror on behalf of all the stockholders. In addition,
the rights should not interfere with a proxy contest.
Limitations on Liability and Indemnification of Officers and Directors
Our certificate of incorporation limits the liability of directors to
the fullest extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, including, without
limitation, directors serving on committees of our board of directors. Directors
remain liable for:
57
o any breach of the director's duty of loyalty to our or its
stockholders;
o any act or omission not in good faith or which involves
intentional misconduct or a knowing violation of the law;
o any violation of Section 174 of the DGCL, which proscribes the
payment of dividends and stock purchases or redemptions under
certain circumstances; and
o any transaction from which the directors derive an improper
personal benefit.
This provision, however, has no effect on the availability of equitable
remedies such as an injunction or rescission. Additionally, this provision will
not limit liability under state or federal securities laws.
The certificate of incorporation provides that we shall indemnify our
officers and directors to the fullest extent permitted by such law. We believe
that these provisions will assist us in attracting and retaining qualified
individuals to serve as directors.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare
Investors Services LLC, 2 North LaSalle Street, Chicago, Illinois 60602, and its
telephone number at this location is (312) 588-4991.
58
SELLING STOCKHOLDER
We have registered 3,000,000 shares of our common stock that may be
offered by SmithKline Beecham in the registration statement of which this
prospectus is a part. As of June 1, 2001, these shares represented 3.2% of the
outstanding shares of our common stock and SmithKline Beecham held 22,128,672
shares of our common stock, representing approximately 23.5% of the outstanding
shares of our common stock.
In a letter agreement dated as of January 22, 2001, SmithKline Beecham
has agreed that (1) it will not offer or sell any shares of common stock
pursuant to such registration statement other than as part of an underwritten
public offering; (2) the maximum number of shares of common stock that it will
sell pursuant to such registration statement will equal the lesser of (a)
3,000,000 shares of common stock or (b) such number of shares of common stock
having an aggregate offering price of $225 million; and (3) it will not make
more than one offering of common stock pursuant to such registration statement.
Since SmithKline Beecham may sell all or some of its shares of common stock that
have been registered pursuant to such registration statement, no estimate can be
made of the aggregate number of shares of common stock that will be owned by
SmithKline Beecham upon completion of any such sale.
59
PLAN OF DISTRIBUTION
We may sell the securities and SmithKline Beecham may sell shares of
our common stock that it owns to one or more underwriters for public offering or
to investors directly or through agents. The name of any such underwriter or
agent involved in the offer and sale of the securities, the amounts underwritten
and the nature of its obligation to take the securities will be named in the
applicable prospectus supplement. We have reserved the right to sell the
securities, and SmithKline Beecham has reserved the right to sell shares of our
common stock that it owns, directly to investors on our own behalf in those
jurisdictions where we are authorized to do so. The sale of the securities may
be effected in transactions (a) on any national or international securities
exchange or quotation service on which the securities may be listed or quoted at
the time of sale, (b) in the over-the-counter market, (c) in transactions
otherwise than on such exchanges or in the over-the-counter market or (d)
through the writing of options. In a letter agreement dated as of January 22,
2001, SmithKline Beecham has agreed that it will not offer or sell any common
stock pursuant to this prospectus other than as part of an underwritten public
offering.
Underwriters may offer and sell the securities at a fixed price or
prices that may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. They
may offer the securities on an exchange, which will be disclosed in the
applicable prospectus supplement. We and SmithKline Beecham also may, from time
to time, authorize dealers, acting as our agents, to offer and sell the
securities, and in the case of SmithKline Beecham, our common stock, upon such
terms and conditions as set forth in the applicable prospectus supplement. In
connection with the sale of the securities, underwriters may receive
compensation from us and SmithKline Beecham in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of the
securities for whom they may act as agent. Underwriters may sell the securities
to or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions
(which may be changed from time to time) from the purchasers for whom they may
act as agents.
Any underwriting compensation paid by our company and SmithKline
Beecham to underwriters or agents in connection with the offering of the
securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the applicable
prospectus supplement. SmithKline Beecham, dealers and agents participating in
the distribution of the securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and
commissions under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements entered into with our company and SmithKline Beecham,
to indemnification against and contribution towards certain civil liabilities,
including any liabilities under the Securities Act.
Until the distribution of the securities is completed, rules of the SEC
may limit the ability of the underwriters to bid for and purchase the
securities. As an exception to these rules, the underwriters are permitted to
engage in certain transactions that stabilize the price of the securities. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the securities. If the underwriters create a short
position in the securities in connection with the offering, i.e., if they sell
more securities than are set forth on the cover page of the applicable
prospectus supplement, the underwriters may reduce that short position by
purchasing securities in the open market. The underwriters may also impose a
penalty bid on certain underwriters. This means that if the underwriters
purchase the securities in the open market to reduce the underwriters' short
position or to stabilize the price of the securities, they may reclaim the
amount of the selling concession from the underwriters who sold those securities
as part of the offering. In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases. The
imposition of a penalty bid might also have an effect on the price of a security
to the extent that it were to discourage resales of the security.
Any securities other than our common stock issued hereunder may be new
issues of securities with no established trading market. Any underwriters or
agents to or through whom such securities are sold for public offering and sale
may make a market in such securities, but such underwriters or agents will not
be obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any such securities. The amount of expenses expected to be incurred by us in
connection with any issuance of securities will be set forth in the prospectus
supplement. Certain of the underwriters, dealers or
60
agents and their associates may engage in transactions with, and perform
services for, our company, SmithKline Beecham and certain of our affiliates and
SmithKline Beecham's affiliate's in the ordinary course.
VALIDITY OF THE SECURITIES
The validity of any securities issued hereunder will be passed upon for
our company by Shearman & Sterling, New York, New York. Unless otherwise
indicated in the applicable prospectus supplement, the validity of any
securities issued hereunder will be passed upon for any agents or underwriters
by Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York.
EXPERTS
The consolidated financial statements of Quest Diagnostics Incorporated
and subsidiaries as of December 31, 2000 and 1999, and for each of the years in
the three-year period ended December 31, 2000, have been incorporated by
reference into this prospectus in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
said firm as experts in accounting and auditing.
The combined balance sheets at December 31, 1998 and 1997 and the
related combined statements of operations, changes in parent's equity and cash
flows for the three year period ended December 31, 1998, of SmithKline Beecham
Clinical Laboratories, Inc. and Certain Related Affiliates' have been
incorporated by reference into this prospectus in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
said firm as experts in accounting and auditing.
61
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all fees and expenses payable by the
registrant in connection with the issuance and distribution of the securities
being registered hereby (other than underwriting discounts and commissions). All
of such expenses, except the SEC registration fee, are estimated.
Securities and Exchange Commission registration fee.................................... $ 150,000
NYSE listing fee....................................................................... $ 65,000
Legal fees and expenses................................................................ $ 200,000
Transfer Agent's fees and expenses..................................................... $ 10,000
Trustee's fees and expenses............................................................ $ 20,000
Rating agency fees..................................................................... $ 420,000
Accounting fees and expenses........................................................... $ 200,000
Blue Sky fees and expenses (including counsel fees).................................... $ 10,000
Printing expenses...................................................................... $ 400,000
Miscellaneous.......................................................................... $ 25,000
-----------
Total.......................................................................... $ 1,500,000
===========
Item 15. Indemnification of Directors and Officers.
Limitation on Liability of Directors
Pursuant to authority conferred by Section 102 of the Delaware General
Corporation Law (the "DGCL"), Paragraph 11 of our certificate of incorporation
(the "Certificate") eliminates the personal liability of directors to us or our
stockholders for monetary damages for breach of fiduciary duty, including,
without limitation, directors serving on committees of our board of directors.
Directors remain liable for (1) any breach of the duty of loyalty to us or our
stockholders, (2) any act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law, (3) any violation of
Section 174 of the DGCL, which proscribes the payment of dividends and stock
purchases or redemptions under certain circumstances, and (4) any transaction
from which directors derive an improper personal benefit.
Indemnification and Insurance
In accordance with Section 145 of the DGCL, which provides for the
indemnification of directors, officers and employees under certain
circumstances, Paragraph 11 of the Certificate grants our directors and officers
a right to indemnification for all expenses, liabilities and losses relating to
civil, criminal, administrative or investigative proceedings to which they are a
party (1) by reason of the fact that they are or were our directors or officers
or (2) by reason of the fact that, while they are or were our directors or
officers, they are or were serving at our request as directors or officers of
another corporation, partnership, joint venture, trust or enterprise.
Paragraph 11 of the Certificate further provides for the mandatory
advancement of expenses incurred by officers and directors in defending such
proceedings in advance of their final disposition upon delivery to us by the
indemnitee of an undertaking to repay all amounts so advanced if it is
ultimately determined that such indemnitee is not entitled to be indemnified
under Paragraph 11. We may not indemnify or make advance payments to any person
in connection with proceedings initiated against us by such person without the
authorization of our board of directors.
II-1
In addition, Paragraph 11 of the Certificate provides that directors
and officers therein described shall be indemnified to the fullest extent
permitted by Section 145 of the DGCL, or any successor provisions or amendments
thereunder.
In the event that any such successor provisions or amendments provide
indemnification rights broader than permitted prior thereto, Paragraph 11 of the
Certificate allows such broader indemnification rights to apply retroactively
with respect to any predating alleged action or inaction and also allows the
indemnification to continue after an indemnitee has ceased to be our director or
officer and to inure to the benefit of the indemnitee's heirs, executors and
administrators.
Paragraph 11 of the Certificate further provides that the right to
indemnification is not exclusive of any other right that any indemnitee may have
or thereafter acquire under any statute, the Certificate, any agreement or vote
of stockholders or disinterested directors or otherwise, and allows us to
indemnify and advance expenses to any person whom the corporation has the power
to indemnify under the DGCL or otherwise.
Each of the form of underwriting agreement to be filed as Exhibits 1.1,
1.2 and 1.3 hereto will provide for the indemnification of the registrant, its
controlling persons, its directors and certain of its officers by the
underwriters against certain liabilities, including liabilities under the
Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for directors and officers and controlling persons pursuant
to the foregoing provisions, we have been advised that in the opinion of the
SEC, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
The Certificate authorizes us to purchase insurance for our directors
and officers and persons who serve at our request as directors, officers,
employees or agents of another corporation, partnership, joint venture, trust or
enterprise against any expense, liability or loss incurred in such capacity,
whether or not we would have the power to indemnify such persons against such
expense or liability under the DGCL. We intend to maintain insurance coverage of
our officers and directors as well as insurance coverage to reimburse us for
potential costs of our corporate indemnification of directors and officers.
Item 16. Exhibits and Financial Statements Schedules.
The exhibits to this registration statement are listed in the Exhibit
Index to this registration statement, which Exhibit Index is hereby incorporated
by reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales
are being made of the securities registered hereby, a
post-effective amendment to this registration
statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) to reflect in the prospectus any facts or
events arising after the effective date of
this registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; provided, however, that
notwithstanding the foregoing, any increase
or decrease in volume of securities offered
(if the total dollar value of securities
offered would not exceed that which was
registered) and any deviation from the low
or high end of the estimated maximum
offering range may be reflected in the form
of prospectus
II-2
filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and
price represent no more than a 20% change in
the maximum aggregate offering price set
forth in the "Calculation of Registration
Fee" table in the effective registration
statement; and
(iii) to include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement;
provided, however, that the undertakings set forth in
clauses (i) and (ii) above do not apply if the
information required to be included in a
post-effective amendment by those clauses is
contained in periodic reports filed by the registrant
pursuant to Section 13 or 15 (d) of the Securities
and Exchange Act of 1934 that are incorporated by
reference in this registration statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-
effective amendment any of the securities being
registered which remain unsold at the termination of
the offering;
(b) That, for the purposes of determining any liability
under the Securities Act of 1933, each filing of our
annual report pursuant to Section 13(a) or 15(d) of
the Securities and Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15 (a) of the
Securities Exchange Act of 1934) that is incorporated
by reference in this registration statement shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(c) To deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security
holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim
financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically
incorporated by reference in the prospectus to
provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant, the registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is therefore unenforeceable.
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305 (b) (2) of
the Trust Indenture Act.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS INCORPORATED
By: /s/ Kenneth W. Freeman
-----------------------------------------
Kenneth W. Freeman, Chairman of
the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- -----
/s/ Kenneth W. Freeman Chairman of the Board, Chief Executive Officer
- ----------------------------------------------------- And Director (principal executive officer)
Kenneth W. Freeman
/s/ Robert A. Hagemann Corporate Vice President and Chief Financial
- ----------------------------------------------------- Officer (principal financial officer)
Robert A. Hagemann
/s/ Thomas F. Bongiorno Vice President, Corporate Controller and Chief
- ----------------------------------------------------- Accounting Officer (chief accounting officer)
Thomas F. Bongiorno
/s/ Kenneth D. Brody
- ----------------------------------------------------- Director
Kenneth D. Brody
/s/ William F. Buehler
- ----------------------------------------------------- Director
William F. Buehler
- ----------------------------------------------------- Director
Van C. Campbell
/s/ Mary A. Cirillo
- ----------------------------------------------------- Director
Mary A. Cirillo
/s/ William R. Grant
- ----------------------------------------------------- Director
William R. Grant
- ----------------------------------------------------- Director
Dan C. Stanzione
II-4
/s/ Gail R. Wilensky
- ----------------------------------------------------- Director
Gail R. Wilensky
/s/ John B. Ziegler
- ----------------------------------------------------- Director
John B. Ziegler
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS HOLDINGS INCORPORATED
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS CLINICAL LABORATORIES,
INC.
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- -----
/s/ Kenneth W. Freeman Chief Executive Officer
- ---------------------------------------- (principal executive officer)
Kenneth W. Freeman
/s/ Surya N. Mohapatra
- ---------------------------------------- President and Director
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS INCORPORATED (CA)
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS INCORPORATED (MD)
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS LLC
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS INCORPORATED (MI)
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS INCORPORATED (CT)
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS INCORPORATED (MA)
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS PENNSYLVANIA INC.
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
QUEST DIAGNOSTICS INCORPORATED (OH)
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
METWEST INC.
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
NICHOLS INSTITUTE DIAGNOSTICS
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
DPD HOLDINGS, INC.
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
DIAGNOSTICS REFERENCE SERVICES INC.
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
LABORATORY HOLDINGS INCORPORATED
By: /s/ Kenneth W. Freeman
-----------------------------------------------
Kenneth W. Freeman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on July 9, 2001.
PATHOLOGY BUILDING PARTNERSHIP
By: Quest Diagnostics Incorporated (MD),
General Partner
By: /s/ Kenneth W. Freeman
-------------------------------------
Kenneth W. Freeman
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on July 9, 2001.
Each individual whose signature appears below constitutes and appoints
Michael E. Prevoznik and Leo C. Farrenkopf, Jr., and each of them singly, his or
her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign this registration statement and any and all amendments
thereto, including post-effective amendments, and to file the same, with all
exhibits thereto, any related registration filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all the said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- ------
/s/ Kenneth W. Freeman
- ---------------------------------------- Chief Executive Officer
Kenneth W. Freeman (principal executive officer)
/s/ Surya N. Mohapatra President and Director
- ----------------------------------------
Surya N. Mohapatra
/s/ Robert A. Hagemann
- ---------------------------------------- Vice President and Director
Robert A. Hagemann
II-21
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
*1.2 Underwriting Agreement for Debt Securities.
*1.3 Underwriting Agreement for Preferred Stock.
*1.1 Underwriting Agreement for Common Stock.
3.1 Certificate of Incorporation of Quest Diagnostics Incorporated
(filed as an exhibit to our registration statement on Form 10
(File No. 1-12215) and incorporated hereby by reference).
3.2 Amendment to Certificate of Incorporation of Quest Diagnostics
Incorporated (filed as an exhibit to our proxy statement on
Schedule 14A dated April 12, 2000 and incorporated herein by
reference).
3.3 Amended and Rested By-Laws of Quest Diagnostics Incorporated
(filed as an exhibit to our 2000 annual report on Form 10-K and
incorporated herein by reference).
4.1 Form of Rights Agreement dated December 31, 1996 (the "Rights
Agreement") between our company and Harris Trust and Savings
Bank as Rights Agent (filed as an Exhibit to our registration
statement on Form 10 (File No. 1-2215) and incorporated herein
by reference).
4.2 Form of Amendment No. 1 effective as of July 1, 1999 to the
Rights Agreement (filed as an exhibit to our current report on
Form 8-K dated August 16, 1999 and incorporated herein by
reference).
4.3 Form of Amendment No. 2 to the Rights Agreement (filed as an
exhibit to our 1999 annual report on Form 10-K and incorporated
herein by reference).
4.4 Indenture for senior debt securities, dated as of June 27, 2001
(filed as an exhibit to our current report on Form 8-K dated July
2, 2001 and incorporated herein by reference).
4.5 First Supplemental Indenture for senior debt securities, dated as
of June 27, 2001 (filed as an exhibit to our current report on
Form 8-K dated July 2, 2001 and incorporated herein by
reference).
4.6 Form of Subordinated Indenture (filed as an exhibit to our
registration statement on Form S-3 (File No. 333-54310) and
incorporated herein by reference).
4.7 Form of Debt Security included in the First Supplemental
Indenture (filed as an exhibit to our current report on Form 8-K
dated July 2, 2001 and incorporated herein by reference) and
included in the Form of Subordinated Indenture (filed as an
exhibit to our registration statement on Form S-3 (File No.
333-54310) and incorporated herein by reference).
*4.8 Certificate of Designation relating to preferred stock.
*4.9 Depositary Agreement relating to preferred stock.
*4.10 Depositary Receipt (included in the Depositary Agreement).
4.11 Form of Amendment No. 3 to the Rights Agreement (filed as an
exhibit to our 2000 annual report on Form 10-K and incorporated
herein by reference).
+5.1 Opinion of Shearman & Sterling.
*8.1 Opinion of Shearman & Sterling as to tax matters.
+12.1 Computation of Ratio of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
+23.1 Consent of Shearman & Sterling (included in Exhibit 5.1).
*23.2 Consent of Shearman & Sterling (included in Exhibit 8.1).
+23.3 Consent of PricewaterhouseCoopers LLP, as independent accountants
for Quest Diagnostics Incorporated.
+23.4 Consent of PricewaterhouseCoopers LLP, as independent accountants
for SmithKline Beecham Clinical Laboratories, Inc. and Certain
Related Affiliates.
+24.1 Powers of Attorney (included on signature page).
+25.1 Form T-1 Statement of Eligibility of the Senior Indenture
Trustee.
+25.2 Form T-1 Statement of Eligibility of the Subordinated Indenture
Trustee.
- ---------------
* Executed versions of these documents will, if applicable, be filed by
Current Report on Form 8-K after the issuance of the securities to which
they relate.
+ Filed herewith.