As filed with the Securities and Exchange Commission on November 26, 2003
Registration No. 333-109062
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Amendment No. 2
to
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 of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Quest Diagnostics Incorporated
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.
Abigail Arms, Esq. Fried, Frank, Harris, Shriver & Jacobson
Shearman & Sterling LLP One New York Plaza
599 Lexington Avenue New York, New York 10004
New York, New York 10022 (212) 859-8000
(212) 848-4000
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
Maximum Offering Proposed Maximum Amount of
Title of each Class of Amount to be price Aggregate registration
Securities to be Registered registered (1) per share (2) Offering Price (2) fee
- ------------------------------------------------ ---------------- --------------------- ------------------- -------------
PRIMARY OFFERING:
Debt Securities of Quest Diagnostics (3) (8)....
Preferred Stock of Quest Diagnostics (4) (8)....
Common Stock of Quest Diagnostics (5) (8)....... (2) (2) (2)
Guarantees of Debt Securities of Quest
Diagnostics (6).................................
Guarantees of Preferred Stock of Quest
Diagnostics (7).................................
- ------------------------------------------------ ---------------- --------------------- ------------------- -------------
Total........................................... $650,000,000 100% $650,000,000 $52,585 (9)
- ------------------------------------------------ ---------------- --------------------- ------------------- -------------
SECONDARY OFFERING:
Common Stock of Quest Diagnostics (10).......... (10) (11)
- ------------------------------------------------ ---------------- --------------------- ------------------- -------------
(Footnotes on next page)
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
______________
(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 $650,000,000.
(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 may fully 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) Registrants listed on the Table of Additional Registrants may fully and
unconditionally guarantee on an unsecured basis our preferred stock.
Pursuant to Rule 457(n), no separate fee is required to be paid in respect
of guarantees of our preferred stock that is being registered concurrently.
(8) 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.
(9) This amount of $52,585 is offset under Rule 457(p) under the Securities Act
of 1933, as amended, by filing fees in this amount previously paid by Quest
Diagnostics in connection with unsold securities previously registerd under
Registration Statements Nos. 333-64806 and 333-74114 and deregistered
hereby. A total of $150,000 of filing fees was paid with Registration
Statement No. 333-64806, initially filed with the Securities and Exchange
Commission on July 10, 2001, for the registration of $600,000,000 of
securities. $400,000,000 of such securities are unsold and accordingly
$100,000 of the filing fees from Registration Statement No. 333-64806 is
applied as an offset herein under Rule 457(p). In addition, a total of
$62,500 of filing fees was paid with Registration Statement No. 333-74114,
initially filed with the Securities and Exchange Commission on November 29,
2001, for the registration of $250,000,000 of securities. $250,000,000 of
such securities are unsold and accordingly $62,500 of the filing fees from
Registration Statement No. 333-74114 is applied as an offset herein under
Rule 457(p). Accordingly, no additional registration fees are paid
herewith.
(10) The selling shareholder, GlaxoSmithKline plc, may offer a maximum of three
million shares of common stock of our company.
(11) The registration fee of $36,750 was previously paid by the Registrant in
connection with the registration of three million shares of common stock of
our company for resale by SmithKline Beecham plc under Registration
Statement No. 333-54310.
Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
prospectus included in this registration statement is a combined prospectus
relating to three million shares of our common stock previously registered by us
for resale by SmithKline Beecham plc under Registration Statement on Form S-3
No. 333-54310 previously filed by us and declared effective by the Securities
and Exchange Commission on June 1, 2001. In December 2000, Glaxo Wellcome and
SmithKline Beecham merged to form GlaxoSmithKline plc ("GlaxoSmithKline").
This registration statement, which is a new registration statement, also
constitutes post-effective amendment no. 3 to Registration Statement No.
333-54310, and such post-effective amendment shall hereafter become effective
concurrently with the effectiveness of this registration statement and in
accordance with section 8(c) of the Securities Act of 1933, as amended.
Upon effectiveness of this registration statement, there will be
$650,000,000 of debt securities, preferred stock or common stock registered
hereunder that may be sold by us from time to time and three million shares of
our common stock that may be resold by GlaxoSmithKline using the prospectus
included in this registration statement.
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 38-2084239
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 of Pennsylvania Inc...................... DE 8071 22-3137283
MetWest Inc................................................ DE 8071 33-0363116
Nichols Institute Diagnostics.............................. CA 8071 95-2955451
DPD Holdings, Inc.......................................... DE 8071 93-0988106
Diagnostic Reference Services Inc.......................... MD 8071 22-3479439
Pathology Building Partnership............................. MD 8071 51-1188454
Quest Diagnostics Investments Incorporated................. DE 8731 51-0314231
Quest Diagnostics Finance Incorporated..................... DE 8031 51-0390179
American Medical Laboratories Incorporated................. DE 8071 54-1983356
AML Inc.................................................... DE 8071 54-1847385
Quest Diagnostics Nichols Institute, Inc................... VA 8071 54-0854787
Quest Diagnostics Incorporated............................. NV 8071 88-0099333
APL Properties Limited Company............................. NV 8071 86-0864218
Quest Diagnostics LLC...................................... CT 8071 06-1460613
Quest Diagnostics LLC...................................... MA 8071 04-3248020
Unilab Corporation......................................... DE 8071 71-0897031
Unilab Acquisition Corporation............................. DE 8071 46-0466856
Information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any jurisdiction where the offer or sale is not permitted.
PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 26, 2003
QUEST DIAGNOSTICS INCORPORATED
Debt Securities
Guarantees of Debt Securities
Preferred Stock
Guarantees of 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,
GlaxoSmithKline plc may also use this prospectus to offer and sell up to three
million shares of our common stock owned by it. We will not receive any proceeds
from the sale of our common stock by GlaxoSmithKline plc.
Our debt securities and our preferred stock may be fully and
unconditionally guaranteed on an unsecured basis by our subsidiaries as
described in "Description of Senior Debt Securities," "Description of
Subordinated Debt Securities" and "Description of the Preferred Stock and the
Depositary Shares Representing Fractional Shares of Preferred Stock."
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 , 2003
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.................................................12
USE OF PROCEEDS...............................................................12
WHERE YOU CAN FIND MORE INFORMATION...........................................13
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 .............................15
SECURITIES WE MAY ISSUE.......................................................18
DESCRIPTION OF SENIOR DEBT SECURITIES.........................................22
DESCRIPTION OF SUBORDINATED DEBT SECURITIES...................................41
ESCRIPTION OF THE PREFERRED STOCK AND THE DEPOSITARY SHARES REPRESENTING
FRACTIONAL SHARES OF PREFERRED STOCK..........................................55
DESCRIPTION OF COMMON STOCK...................................................60
SELLING STOCKHOLDER...........................................................63
PLAN OF DISTRIBUTION..........................................................64
VALIDITY OF THE SECURITIES....................................................65
EXPERTS.......................................................................65
_____________________
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. GlaxoSmithKline 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 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 GlaxoSmithKline 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
The Company
We are the nation's leading provider of diagnostic testing,
information and services, providing insights that enable physicians, hospitals,
managed care organizations and other healthcare professionals to make decisions
to improve health. We offer patients and physicians the broadest access to
diagnostics laboratory services through our national network of laboratories and
patient service centers. We provide interpretive consultation through the
largest medical and scientific staff in the industry, with over 300 physicians
and Ph.D.'s around the country. We are the leading provider of esoteric testing,
including gene-based testing, and testing for drugs of abuse. We are also a
leading provider of anatomic pathology services and testing for clinical trials.
We empower healthcare organizations and clinicians with state-of-the-art
connectivity solutions that improve patient care.
During 2002, we generated net revenues of $4.1 billion and processed
over 115 million requisitions for testing. After giving effect to our recent
acquisition of Unilab Corporation, we process over 130 million requisitions on
an annual basis. 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.
We currently operate a nationwide network of approximately 1,900
patient service centers, principal laboratories located in more than 30 major
metropolitan areas throughout the United States, and approximately 170 smaller
"rapid response" laboratories (including, in each case, facilities operated at
our joint ventures and facilities operated by Unilab Corporation which we
acquired in February 2003). We are the only company in our industry to provide
full esoteric testing services, including gene-based testing, on both coasts
through our Quest Diagnostics Nichols Institute facilities, located in San Juan
Capistrano, California and Chantilly, Virginia. We also have laboratory
facilities in Mexico City, Mexico and San Juan, Puerto Rico and near London,
England.
We are a Delaware corporation. Our principal executive offices are
located at One Malcolm Avenue, Teterboro, New Jersey 07608, telephone number:
(201) 393-5000.
Recent Acquisitions
On February 26, 2003, we accepted for payment more than 99% of the
outstanding capital stock of Unilab Corporation, or Unilab, the leading
independent clinical laboratory in California. On February 28, 2003, we acquired
the remaining shares of Unilab through a merger. In connection with the
acquisition, we issued approximately 7.4 million shares of Quest Diagnostics
common stock (including 0.3 million shares of Quest
ii
Diagnostics common stock reserved for outstanding stock options of Unilab which
were converted upon the completion of the acquisition into options to acquire
shares of Quest Diagnostics common stock) and paid $297 million in cash. We also
repaid substantially all of Unilab's outstanding indebtedness. Unilab, which
generated net revenues of approximately $425 million in 2002, has three regional
laboratories, approximately 365 patient service centers and 35 rapid response
laboratories and approximately 4,100 employees. We expect to incur up to $20
million of costs through 2005 to integrate Unilab and our existing California
operations. Upon completion of the Unilab integration, we expect to realize
approximately $25 million to $30 million of annual synergies. We expect to
achieve this annual rate of synergies by the end of 2005.
In connection with the acquisition of Unilab, as part of a settlement
agreement with the United States Federal Trade Commission, we entered into an
agreement to sell to Laboratory Corporation of America Holdings, Inc., or
LabCorp, certain assets in northern California, including the assignment of
agreements with four independent physician associations ("IPA") and leases for
46 patient service centers (five of which also served as rapid response
laboratories), for $4.5 million. Approximately $27 million in annual net
revenues were generated by capitated fees under the IPA contracts and associated
fee-for-service testing for physicians whose patients used these patient service
centers, as well as from specimens received directly from the IPA physicians. We
completed the assignment of these assets to LabCorp by August 2003.
Following an acquisition, the integration process requires the
dedication of significant management resources, which could result in a loss of
momentum in the activities of our business and may cause an interruption of, or
deterioration in, our services. Since most of our clinical laboratory testing is
performed under arrangements that are terminable at will or on short notice, any
interruption of, or deterioration in, our services may also result in a
customer's decision to stop using us for clinical laboratory testing. These
events could have a material adverse impact on our business. However, management
believes that the successful implementation of our integration plans and our
value proposition based on expanded patient access, our broad testing
capabilities and most importantly, the quality of the services we provide, will
mitigate customer attrition.
iii
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 operations may be difficult and, if unsuccessfully executed, may
have a material adverse impact on our business.
In February 2003, we acquired Unilab Corporation, which has annual net
revenues of approximately $425 million and has an extensive network of
laboratories in California. The process of integrating the operations of Unilab
with our California operations at the same time that we are standardizing our
existing operations, systems and processes will be difficult and will require
the dedication of significant management resources. The acquisition involves the
integration of a separate company that previously operated independently and has
different systems, processes and cultures. The process of combining Unilab with
our California operations may be disruptive to both of our 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 Unilab and our California operations 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 the company has
historically provided;
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 foregoing
disruptions and difficulties; and
o the added costs of dealing with such disruptions.
In addition, because 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. We cannot assure you
that we will be able to retain key technical and management personnel or that we
will realize the anticipated benefits of the Unilab acquisition, either at all
or in a timely manner. As part of our growth strategy, we may in the future
acquire additional clinical laboratories or other healthcare-related businesses.
The acquisition of Unilab may not produce the anticipated benefits.
Even if we are able to successfully complete the integration of the
operations of Unilab, we may not be able to realize all or any of the benefits
that we expect to result from such integration, either in monetary terms or in a
timely manner. We expect to incur up to $20 million of costs through 2005 to
integrate Unilab and our existing California operations. Upon completion of the
Unilab integration, we expect to realize approximately $25 million to $30
million of annual synergies. We expect to achieve this annual rate of synergies
by the end of 2005. However, there can be no assurance that such synergies will
be realized and, if realized at all, in such amounts.
1
We may not be able to achieve the anticipated benefits of our Six Sigma and
standardization initiatives.
We are implementing a Six Sigma initiative throughout our
organization. Six Sigma is a management approach that requires a thorough
understanding of customer needs and requirements, process discipline, rigorous
tracking and measuring of services, and training of employees in methodologies
so that they can be held accountable for improving results. We have integrated
our Six Sigma initiative with our initiative to standardize operations and
processes across all of our company by adopting identified company best
practices. We plan to continue these initiatives during the next several years
and expect that successful implementation of these initiatives will result in
measurable improvements in customer satisfaction as well as significant economic
benefits. However, we cannot assure you we will be able to realize the
anticipated benefits of our Six Sigma and standardization initiatives, 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. We provide
testing services to a broad range of healthcare providers. We consider a "payer"
as the party that pays for the test and a "customer" as the party who refers
tests to us. Depending on the billing arrangement and applicable law, we must
bill various payers, such as patients, insurance companies, Medicare, Medicaid,
doctors and employer groups, all of which have different billing requirements.
Additionally, auditing for compliance with applicable laws and regulations as
well as internal compliance policies and procedures add 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 and information requirements among various
carriers.
We incur significant additional costs as a result of our participation
in Medicare and Medicaid programs, as billing and reimbursement for clinical
laboratory testing is subject to considerable and complex federal and state
regulations. These additional costs include those related to: (1) complexity
added to our billing processes; (2) training and education of our employees and
customers; (3) compliance and legal costs; and (4) costs related to, among other
factors, medical necessity denials and advanced beneficiary notices. Compliance
with applicable laws and regulations, as well as internal compliance policies
and procedures, adds further complexity and costs to the billing process.
Changes in laws and regulations could negatively impact our ability to bill our
clients. The Center for Medicare and Medicaid Services, or CMS (formerly the
Health Care Financing Administration), establishes procedures and continuously
evaluates and implements changes in the reimbursement process.
We believe that most of our bad debt expense, which was 4.8% of our
net revenues for the quarter ended September 30, 2003, is primarily the result
of missing or incorrect billing information on requisitions received from
healthcare providers rather than credit related issues. 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 and 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.
2
Regulations requiring the use of "standard transactions" for health care
services issued under the Health Insurance Portability and Accountability Act of
1996, or HIPAA, may negatively impact our profitability and cash flows.
Pursuant to the Health Insurance Portability and Accountability Act of
1996, or HIPAA, the Secretary of the Department of Health and Human Services, or
HHS, has issued final regulations designed to improve the efficiency and
effectiveness of the health care system by facilitating the electronic exchange
of information in certain financial and administrative transactions while
protecting the privacy and security of the information exchanged. Three
principal regulations have been issued in final form: standards for electronic
transactions, security regulations and privacy regulations.
The regulations on electronic transactions, which we refer to as the
transaction standards, establish uniform standards for electronic transactions
and code sets, including the electronic transactions and code sets used for
claims, remittance advices, enrollment and eligibility. The transaction
standards became effective in October 2002, although covered entities were
eligible to obtain a one-year extension if approved through an application to
the Secretary of HHS. We received this one-year extension through October 16,
2003 from HHS.
HHS issued Guidance on July 24, 2003 stating that it will not penalize
a covered entity for post-implementation date transactions that are not fully
compliant with the transactions standards, if the covered entity can demonstrate
its good faith efforts to comply with the standards. HHS' stated purpose for
this flexible enforcement position was to "permit health plans to mitigate
unintended adverse effects on covered entities' cash flow and business
operations during the transition to the standards, as well as on the
availability and quality of patient care."
On September 23, 2003, CMS announced that it would implement a
contingency plan for the Medicare program to accept electronic transactions that
are not fully compliant with the transaction standards after the October 16,
2003 compliance deadline. CMS' contingency plan, as announced, allows Medicare
carriers to continue to accept and process Medicare claims in the pre-October 16
electronic formats to give healthcare providers additional time to complete the
testing process, provided that they continue to make a good faith effort to
comply with the new standards. As part of its plan, CMS is expected to regularly
reassess the readiness of its healthcare providers to determine how long the
contingency plan will remain in effect.
In its announcement, CMS encouraged other payers to assess the
readiness of their trading partners and to implement contingency plans, if
appropriate. A number of other major payers have announced they intend to follow
CMS' lead, but we cannot assure you that all payers will develop similar
contingency plans. Many of our payers were not ready to implement the
transaction standards by the October 2003 compliance deadline or were not ready
to test or trouble-shoot claims submissions. We are working with our payers in
good faith to reach agreement on each payer's data requirements and to test
claims submissions, while, at the same time, implementing contingency plans to
minimize the potential impact in cases where payers did not convert to the new
standards as of the October 2003 compliance deadline.
The HIPAA transaction standards are complex, and subject to
differences in interpretation by payers. For instance, some payers may interpret
the standards to require us to provide certain types of information, including
demographic information not usually provided to us by physicians. As a result of
inconsistent application of transaction standards by payers or our inability to
obtain certain billing information not usually provided to us by physicians, we
could face increased costs and complexity, a temporary disruption in receipts
and ongoing reductions in reimbursements and net revenues. We are working
closely with our payers to establish acceptable protocols for claims submissions
and with our trade association and an industry coalition to present issues and
problems as they arise to the appropriate regulators and standards setting
organizations. At this time, we cannot estimate the potential impact of
implementing (or failing to implement) the HIPAA transaction standards on our
cash flows and results of operations.
Compliance with the HIPAA security regulations and privacy regulations may
increase our costs.
The final HIPAA security regulations, which establish detailed
requirements for safeguarding electronic patient information, were published on
February 20, 2003 and became effective on April 21, 2003, although healthcare
providers have until April 20, 2005 to comply. We are conducting an analysis to
determine the proper security measures to reasonably and appropriately comply
with the standards and implementation specifications of the security regulations
by the compliance deadline of April 20, 2005.
The HIPAA privacy regulations, which fully came into effect in April
2003, establish comprehensive federal standards with respect to the uses and
disclosures of protected health information by health plans, healthcare
providers and healthcare clearinghouses. We have implemented the HIPAA privacy
regulations, as required by law.
The privacy regulations establish a "floor" and do not supersede state
laws that are more stringent. Therefore, we are required to comply with both
federal privacy regulations and varying state privacy laws. In addition, for
healthcare data transfers from other countries relating to citizens of those
countries, we must comply with the laws of those other countries. The federal
privacy regulations restrict our ability to use or disclose our laboratory data,
without patient authorization, to provide medical information for purposes other
than payment, treatment or healthcare operations (as defined by HIPAA), except
for disclosures for various public policy purposes and other permitted purposes
outlined in the final privacy regulations and except for information that does
not
3
specifically identify a patient. The privacy regulations provide for significant
fines and other penalties for wrongful use or disclosure of protected health
information, including potential loss of licensure and criminal penalties.
Although the HIPAA statute and regulations do not expressly provide for a
private right of damages, we also could incur damages under state laws to
private parties for the wrongful use or disclosure of confidential health
information or other private personal information.
Compliance with the HIPAA requirements requires significant capital
and personnel resources from all healthcare organizations, not just Quest
Diagnostics. While we believe our total costs to comply with HIPAA will not be
material to our operations or cash flow, additional customer requirements
resulting from different interpretations of the current regulations could impose
significant additional costs on us.
Failure in our information technology systems, including failures resulting from
our systems conversions, could significantly increase turnaround time and
otherwise disrupt our operations, which could reduce our customer base and
result in lost net revenues.
Information systems are used extensively in virtually all aspects of
our business, including laboratory testing, billing, customer service, logistics
and management of medical data. Our success depends, in part, on the continued
and uninterrupted performance of our information technology, or IT, systems.
Computer systems are vulnerable to damage from a variety of sources, including
telecommunications or network 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 precautionary measures we have taken to
prevent unanticipated problems that could affect 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 could adversely affect
our reputation and result in a loss of customers and net revenues.
During 2002, we began implementation of a standard laboratory
information system and a standard billing system. We expect that deployment of
the standardized systems will take several years to complete and will result in
significantly more centralized systems than we have today. Failure to properly
implement this standardization process could materially adversely impact us.
During system conversions of this type, workflow may be re-engineered to take
advantage of enhanced system capabilities, which may cause temporary disruptions
in service. In addition, the implementation process, including the transfer of
databases and master files to new data centers, presents significant conversion
risks that need to be managed carefully.
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 or by physicians in their offices. Development of such technology and
its use by our customers would reduce the demand for our laboratory testing
services and negatively impact our net revenues. Currently, most of our 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. 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. Diagnostic tests approved or cleared
by the Food and Drug Administration, or FDA, for home use are automatically
deemed to be "waived" tests under CLIA and may be performed in physician office
laboratories with minimal regulatory oversight as well as by patients in their
homes. The FDA has regulatory responsibility over instruments, test kits,
reagents and other devices used by clinical laboratories and recently has taken
responsibility from the 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 net revenues.
4
FDA regulation of laboratory-developed genetic testing could lead to increased
costs and delay in introducing new genetic tests.
The FDA has regulatory responsibility over instruments, test kits,
reagents and other devices used by clinical laboratories. In the past, the FDA
has claimed regulatory authority over laboratory-developed tests, but has
exercised enforcement discretion in not regulating tests performed by high
complexity CLIA-certified laboratories. In December 2000, the HHS Secretary's
Advisory Committee on Genetic Testing recommended that the FDA be the lead
federal agency to regulate genetic testing. In late 2002, a new HHS Secretary's
Advisory Committee on Genetics, Health and Society was appointed to replace the
prior Advisory Committee, but it has not yet made any recommendations. In the
meantime, the FDA is considering revising its regulations on analyte specific
reagents, which are used in laboratory-developed tests, including laboratory
developed genetic testing. Representatives of clinical laboratories (including
Quest Diagnostics) and the American Clinical Laboratory Association (our
industry trade association) have met with representatives of the FDA to
address industry issues pertaining to potential FDA regulation of genetic
testing in general and issues with regard to increased oversight over the
analyte specific reagents used in laboratory-developed tests in particular. We
expect those discussions to continue. Increased FDA regulation of the reagents
used in laboratory-developed testing could lead to increased costs and delays in
introducing new tests, including genetic tests.
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 and larger employers have taken steps and may continue to take steps to
control the cost, utilization and delivery of healthcare services, including
clinical laboratory services. Principally as a result of reimbursement rate
reductions and measures adopted by CMS to control utilization, the percentage of
our consolidated net revenues derived from Medicare and Medicaid programs
declined from approximately 20% in 1995 to approximately 15% in 2002. This
percentage increased to approximately 16% for the nine months ended September
30, 2003 as a result of our acquisition of Unilab. 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 November 2003, the House of Representatives
and the United States Senate passed a Medicare reform bill that includes a five
year freeze on adjustments to the Medicare national fee schedule based on the
consumer price index.
In addition to changes in government reimbursement programs, private
payers, including managed care organizations, demand that clinical laboratory
service providers accept discounted fee structures or assume all or a portion of
the financial risk associated with providing testing services to their members
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
regardless of the number or cost of the tests actually performed. For the nine
months ended September 30, 2003, we derived approximately 14% of our volume and
8% of our net revenues from capitated payment contracts with managed care
organizations. If we are unable to agree on pricing with a managed care
organization, we would become a "non-participating" provider and could then only
bill the ordering physician or the patient rather than the managed care
organization. This "non-participating" status could lead to loss of business
since the physician is likely to refer testing to a participating provider whose
testing is covered by the patient's managed care benefit plan. We cannot assure
investors that we will continue to be successful in negotiating contracts with
major managed care organizations. Loss of multiple major managed care agreements
could have a material adverse effect on our financial condition, results of
operations and cash flow.
Efforts to impose reduced reimbursements and more stringent cost
controls by government and other payers may 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.
A proposed rule released in September 1997 would have authorized the
Office of the Inspector General, or OIG, of HHS to exclude providers from
participation in the Medicare program, including clinical laboratories, that
charge Medicare and other programs fees that are "substantially in excess of ...
usual charges...to any of [their] customers, clients or patients." This
proposal was withdrawn by the OIG in 1998. In November 1999, the OIG issued an
advisory opinion which indicated that a clinical laboratory offering discounts
on client bills may violate the "usual charges" regulation if the "charge to
Medicare substantially exceeds the amount the laboratory most frequently charges
or has contractually agreed to accept from non-Federal payers." The OIG
subsequently issued a letter clarifying that the usual charges regulation is not
a blanket prohibition on discounts to private pay customers.
In September 2003, the OIG published a Notice of Proposed Rulemaking
that would amend the OIG's exclusion regulations addressing excessive claims.
Under the exclusion rule, the OIG has the authority to exclude a provider for
submitting claims to Medicare that contain charges that are substantially in
excess of the provider's usual charges. The proposal would define "substantially
in excess" and "usual charges" and clarify the "good cause" exception to the
existing exclusion rule. We believe that the proposed regulation is flawed and
are working with our industry trade association and a coalition of other
healthcare providers to oppose this proposed regulation as drafted. If this
regulation is adopted as proposed, it could potentially reduce the amounts
reimbursed to us by Medicare and other federal payers or affect the fees charged
to other payers by us. For additional information, see our most recent annual
report on Form 10-K incorporated by reference into this prospectus.
Failure to provide a higher quality of service than that of our competitors
could have a material adverse impact on our net revenues and profitability.
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. Hospitals generally maintain an on-site
laboratory to perform testing on their patients. In addition, many hospitals
compete with independent clinical laboratories for outreach (non-hospital
patients) testing. Most physicians have admitting privileges or other
relationships with hospitals as part of their medical practice. Many hospitals
leverage their relationships with community physicians and encourage the
physicians to send their outreach testing to the hospital's laboratory. In
addition, hospitals that own physician practices generally require the
physicians to refer tests to the hospital's laboratory. 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 and
profitability.
If we fail to comply with extensive laws and regulations, we could suffer fines
and 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 fines and 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 SmithKline Beecham
Clinical Laboratories, Inc., or SBCL, which we acquired in 1999, 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 and Medicaid programs, which represented
approximately 16% of our consolidated net revenues for the nine months ended
September 30, 2003.
Although management believes that established reserves for claims are
sufficient, it is possible that additional information may become available that
may cause the final resolution of these matters to exceed established reserves
by an amount which could be material to our results of operations and cash flows
in the period in which such claims are settled. We do not believe that these
issues will have a material adverse effect on our overall financial condition.
However, we understand that there may be pending qui tam claims brought by
former employees or other "whistle blowers" as to which we have not been
provided with a copy of the complaint and accordingly cannot determine the
extent of any potential liability. For additional information, see our most
recent annual report on Form 10-K incorporated by reference into this
prospectus.
6
As an integral part of our compliance program, we investigate all
reported or suspected failures to comply with federal healthcare reimbursement
requirements. Any non-compliance that results in Medicare or Medicaid
overpayments is reported to the government and reimbursed by us. As a result of
these efforts, we have periodically identified and reported overpayments. While
we have reimbursed these overpayments and have taken corrective action where
appropriate, we cannot assure investors that in each instance the government
will necessarily accept these actions as sufficient.
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 certain of 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 to an infringement claim. Thus, even 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, regardless of
their 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 financial impact and 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 various liability insurance programs for claims that
could result from providing or failing to provide clinical laboratory testing
services, including inaccurate testing results and other exposures. Our
insurance coverage limits our maximum exposure on individual claims; however, we
are essentially self-insured for a significant portion of these claims. The
basis for claims reserves incorporates actuarially determined losses based upon
our historical and projected loss experience. Management believes that present
insurance coverage and reserves are sufficient to cover currently estimated
exposures. Although management cannot predict the outcome of any claims made
against us, management does not anticipate that the ultimate outcome of any such
proceedings or claims will have a material adverse effect on our financial
position but may be material to our results of operations and cash flows in the
period in which such claims are resolved.
7
Similarly, although we believe that we will be able to obtain adequate insurance
coverage in the future at acceptable costs, we cannot assure you that we will be
able to do so.
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 and preferred stock 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 or preferred stock 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 or preferred stock would cease to have any claim
against the subsidiary and would be creditors solely of Quest Diagnostics and
any other subsidiary guarantor that was not found to have made a fraudulent
conveyance. See "Description of Senior Debt Securities" and "Description of
Subordinated Debt Securities" and "Description of the Preferred Stock and the
Depositary Shares Representing Fractional Shares of Preferred Stock."
Our outstanding debt may impair our financial and operating flexibility.
As of September 30, 2003, we had approximately $1,121 million of debt
outstanding. Other than the reduction for outstanding letters of credit, which
approximated $50 million at September 30, 2003, all of our $325 million
unsecured revolving credit facility and all of our $250 million secured
receivables credit facility remained available to us for future borrowing at
September 30, 2003. Except for outstanding letters of credit and operating
leases, we do not have any off-balance sheet financing arrangements in place or
available. Set forth in the table below, for each of the next five years, is the
aggregate amount of principal, estimated interest and total payments with
respect to our debt outstanding as of September 30, 2003, including capital
leases.
Twelve Months
Ended December 31, Principal Interest Total
------------------ --------- -------- -----
(in thousands)
Remainder of 2003..................................... $18,609 $ 13,279 $ 31,888
8
2004.................................................. 74,249 51,905 126,154
2005.................................................. 72,958 50,351 123,309
2006.................................................. 352,543 38,644 391,187
2007.................................................. 81,919 26,381 108,300
2008.................................................. - 25,555 25,555
The foregoing table assumes that the holders of our $250 million 1.75%
contingent convertible debentures due 2021 will not exercise their option on
November 30, 2004, 2005 and 2008 to require us to repurchase the holders'
debentures. If these options are exercised by the holders, we may choose to
repurchase the debentures with cash or our common stock or a combination of cash
and common stock, at a purchase price equal to the principal amount plus accrued
and unpaid interest. We may not have the financial resources, or be able to
arrange financing, to pay in cash for all of the debentures that might be
delivered by holders of debentures seeking to exercise their options. As a
result, any payment to the holders in common stock will be dilutive to our
existing stockholders.
Since no amounts were outstanding under our $325 million unsecured
revolving credit facility and $250 million secured receivables credit facility
at September 30, 2003, the foregoing table does not reflect any principal and
interest payments associated with these facilities. If we are not able to roll
over any amounts borrowed under our secured receivables credit facility, which
matures in April 2004, we will need to refinance the borrowings under the
secured receivables credit facility with cash on-hand, our unsecured revolving
credit agreement or a new financing agreement. If we are not able to roll over
any amounts borrowed under our unsecured revolving credit facility, which
matures in June 2006, we will need to refinance the borrowings under the
unsecured revolving credit facility with cash on-hand or a new financing
agreement.
Our debt portfolio is sensitive to changes in interest rates. Interest
rates on our unsecured revolving credit facility and term loan are also subject
to a pricing schedule that fluctuates based on changes in our credit rating. As
of September 30, 2003, we had approximately $323 million of floating rate debt.
If the applicable interest rate fluctuates by 1%, interest expense will
fluctuate by approximately $3 million annually, assuming no changes to the debt
outstanding at September 30, 2003. In addition, any future borrowings by us
under the unsecured revolving credit facility, the secured receivables credit
facility or the issuance of other floating rate debt will expose us to
additional interest rate risk.
Our debt agreements contain various restrictive covenants. These
restrictions could 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.
We have obtained ratings on our debt from Standard and Poor's and
Moody's Investors Service. There can be no assurance that any rating so assigned
will remain for any given period of time or that a rating will not be lowered or
withdrawn entirely by a rating agency if in that rating agency's judgment future
circumstances relating to the basis of the rating, such as adverse changes in
our company or our industry, so warrant.
We, or our subsidiaries, may incur additional indebtedness in the
future. Our ability to make principal and interest payments depends on our
ability to generate cash in the future. If additional debt is added to our
current debt, a greater portion of our cash flows will be needed to satisfy our
debt service obligations, and if we do not generate sufficient cash 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. As a result, we would be more vulnerable to general adverse
economic, industry and capital markets conditions as well as the other risks
associated with indebtedness.
Future sales of our stock could adversely affect our common stock price.
As of September 30, 2003, 10.9 million shares of our common stock are
issuable upon exercise of outstanding stock options under our employee stock
option plans and non-employee director stock option plan, and an additional 4.8
million shares of our common stock are reserved for the issuance of additional
options and shares under these plans. We also issue shares of our common stock
under our employee stock purchase plan. In addition, up to an additional 2.9
million shares of our common stock could be issued upon conversion of our 1.75%
contingent convertible debentures due 2021 in accordance with the terms of the
indenture governing the debentures.
9
GlaxoSmithKline, which owns about 22.1 million shares of our common
stock or about 21% of our outstanding common stock as of October 28, 2003, is
entitled to demand up to four times that we register its shares of our common
stock and has its three million shares of our common stock registered in a shelf
registration statement. Also, GlaxoSmithKline is entitled to participate in
registered offerings initiated by us or a third party and may sell shares of our
common stock pursuant to Rule 144 under the Securities Act.
Future sales of our common stock and instruments convertible or
exchangeable into our common stock and transactions involving equity derivatives
relating to our common stock, including sales or transactions by
GlaxoSmithKline, or the perception that such sales or transactions could occur,
could adversely affect the market 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 proposal regarding a change of control of our
company. These provisions include a staggered or classified 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 stockholder 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 also could 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.
Secured indebtedness and existing and future obligations of and preferred stock
issued by our subsidiaries that are not guarantors will be effectively senior to
our senior debt securities, subordinated debt securities and preferred stock.
Our senior debt securities and the guarantees thereof by our
subsidiary guarantors are senior unsecured obligations and therefore will be
effectively subordinated to any of our or our subsidiary guarantors' secured
obligations to the extent of the value of the assets securing such obligations.
The indenture governing our senior debt securities does not limit the amount of
indebtedness that we and any of our subsidiary guarantors can incur but does
limit the amount of secured indebtedness pursuant to the covenant described
under the heading "Description of Senior Debt Securities -- Covenants --
Limitation on Liens" in this prospectus. This covenant is subject to important
exceptions described under such heading. Any subordinated debt securities or
preferred stock and any guarantees thereof by our subsidiary guarantors will
also be senior unsecured obligations which will also be effectively subordinated
to any of our or our subsidiary guarantors' secured obligations to the extent of
the value of the assets securing such obligations. As of September 30, 2003, we
and our subsidiary guarantors would have had outstanding approximately $2
million of secured long-term debt (including the current portion thereof) and
$250 million of secured borrowing capacity under our secured receivables credit
facility.
We conduct our operations through subsidiaries, which generate a
substantial portion of our operating income and cash flow. As a result,
distributions or advances from our subsidiaries are a major source of funds
necessary to meet our debt service and other obligations, including with respect
to preferred stock. Contractual provisions, laws or regulations, as well as any
subsidiary's financial condition and operating requirements, may limit our
ability to obtain cash required to pay our debt service and other obligations.
Our senior debt securities, subordinated debt securities and preferred stock
will be structurally subordinated to all existing and future obligations of and
preferred stock issued by our 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 and preferred stock
issued by the subsidiary guarantors' subsidiaries (unless such subsidiaries are
also subsidiary guarantors), including claims with respect to trade payables.
This means that holders of our senior debt securities, subordinated debt
securities and preferred stock that are guaranteed by our subsidiary guarantors
will have a junior position with respect to such obligations of and
10
preferred stock issued by our direct and indirect subsidiaries that are not
subsidiary guarantors on the assets and earnings of such subsidiaries.
With respect to our senior debt securities, our non-guarantor
subsidiaries are limited in the amount of indebtedness they are permitted to
incur pursuant to the covenant described under "Description of Senior Debt
Securities -- Covenants -- Limitation on Subsidiary Indebtedness and Preferred
Stock" in this prospectus. This covenant is subject to important exceptions
described under such heading. In addition, the guarantees of our senior debt
securities by our subsidiary guarantors may be released in certain
circumstances, which are described under the heading "Description of the Senior
Debt Securities -- Guarantees" or may be avoided or subordinated in favor of the
subsidiary guarantors' other creditors as described in this prospectus under the
heading "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."
11
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.
Nine Months
Ended September 30, Year Ended December 31,
------------------- -----------------------------------------------
2003 2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges.......... 8.5x 7.2x 4.2x 2.4x 1.2x 2.0x
Ratio of earnings to combined fixed charges
and preferred stock dividends.......... 8.5x 7.2x 4.2x 2.4x 1.3x 2.0x
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, investments 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 GlaxoSmithKline.
12
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 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 operations
and cash flows are consolidated into our financial statements. Summarized
financial information illustrating our subsidiary guarantors' financial
condition, results of operations and cash flows, on a combined basis, is
disclosed in the notes to our consolidated 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 January 24, 2003, on
March 13, 2003, as amended on May 1, 2003 and as further amended
on November 20, 2003, and on October 31, 2003;
2. Our quarterly reports on Form 10-Q for the quarters ended March
31, 2003, June 30, 2003 and September 30, 2003;
3. Our annual report on Form 10-K for the fiscal year ended December
31, 2002;
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 10/A filed on November 26, 1996; and
5. The section entitled "Executive Compensation" in our proxy
statement filed on April 2, 2003.
Our filings with the SEC, including our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports, are available free of charge on our website as soon as reasonably
practicable after they are filed with, or furnished to, the SEC. Our Internet
website is located at http://www.questdiagnostics.com. You also may request a
copy of these filings, at no cost, by writing or telephoning our Investor
Relations Department at the following address:
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, New Jersey 07608
Attention: Investor Relations
(201) 393-5000
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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.
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.
14
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 and
competition from physicians. See "Business -- Competition" in our
Form 10-K for the year ended December 31, 2002, 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 -- Customers --
Managed Care Organizations and Other Insurance Providers" in our
Form 10-K for the year ended December 31, 2002, 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 negotiating for exclusive
contracts that involve aggressively priced capitated payments by
managed care organizations. See "Business -- Regulation of
Reimbursement for Clinical Laboratory Services" and "Business --
Payers and Customers -- Customers -- Managed Care Organizations
and Other Insurance Providers" in our Form 10-K for the year
ended December 31, 2002, 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 CMS 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 applying the definition of "usual charges" in determining
the amounts which can be charged to Medicare and other
federal payers without subjecting a provider to sanction
by the OIG.
See "Business -- Regulation of Reimbursement for Clinical
Laboratory Services" and "Business -- Billing" in our Form 10-K
for the year ended December 31, 2002, which is incorporated by
reference into this prospectus.
(e) Adverse results from pending or future government investigations
or lawsuits or private actions. These include, in particular,
significant monetary damages and/or exclusion from the Medicare
and Medicaid programs
15
and/or other significant litigation matters. See "Business --
Government Investigations and Related Claims" in our Form 10-K
for the year ended December 31, 2002, which is incorporated by
reference into this prospectus.
(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, including Unilab, or to efficiently integrate
clinical laboratory businesses from joint ventures and alliances
with hospitals, and to manage the costs related to any such
integration, or to retain key technical and management personnel.
See "Business -- Recent Acquisitions" in our Form 10-K for the
year ended December 31, 2002, 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 or reserves for
self-insurance. See "Business -- Insurance" in our Form 10-K for
the year ended December 31, 2002, 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 CMS 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,
2002, which is incorporated by reference into this prospectus.
(j) Increased federal or state regulation of independent clinical
laboratories, including regulation by the FDA.
(k) Inability to achieve expected synergies from the acquisition of
Unilab. See "Business -- Recent Acquisitions" in our Form 10-K
for the year ended December 31, 2002, which is incorporated by
reference into this prospectus.
(l) Inability to achieve additional benefits from our Six Sigma and
Standardization initiatives.
(m) Adverse publicity and news coverage about us or the clinical
laboratory industry.
(n) 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 Unilab, 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, 2002, which is incorporated by reference into this
prospectus.
(o) 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. See "Business --
Competition" and "Business -- Regulation of Clinical Laboratory
Operations" in our Form 10-K for the year ended December 31,
2002, which is incorporated by reference into this prospectus.
(p) 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.
(q) Development of tests by our competitors or others that we may not
be able to license, usage of our technology or similar
technologies or our trade secrets by competitors, any of which
could negatively affect our competitive position.
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(r) Development of an Internet-based electronic commerce business
model that does not require an extensive logistics and laboratory
network.
(s) The impact of the electronic transaction standards 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 "Business -- Privacy and Security of Health
Information; Standard Transactions" in our Form 10-K for the year
ended December 31, 2002, which is incorporated by reference into
this prospectus.
(t) Changes in interest rates and changes in our credit ratings from
Standard & Poor's and Moody's Investor Services causing an
unfavorable impact on our cost of and access to capital.
(u) An ability to hire and retain qualified personnel or the loss of
the services of one or more of our key senior management
personnel.
(v) Terrorist and other criminal activities, which could affect our
customers, transportation or power systems, or our facilities,
and for which insurance may not adequately reimburse us.
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."
17
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.
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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,
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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.
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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.
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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 of the definitions, you will need
to read the indenture. We have filed the indenture as an exhibit to our
Securities Act filings 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, each among Quest Diagnostics, as issuer, the Initial Subsidiary
Guarantors, as guarantors, and The Bank of New York, as trustee, as further
supplemented by a second supplemental indenture, dated as of November 26, 2001,
among Quest Diagnostics, the Subsidiary Guarantors and The Bank of New York, as
further supplemented by a third supplemental indenture, dated as of April 4,
2002, among Quest Diagnostics, the additional Subsidiary Guarantors and The Bank
of New York and as further supplemented by a fourth supplemental indenture,
dated as of March 19, 2003, among Quest Diagnostics, the additional Subsidiary
Guarantors and The Bank of New York (collectively, the "Indenture"). On June 27,
2001, we completed a $550 million senior notes offering under the Indenture. On
November 26, 2001, we completed a $250 million contingent convertible debentures
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.
We 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."
22
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.
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 DTC, 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 U.S. dollars, the currency or currencies of such
senior debt securities.
23
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 a 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
24
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 United States federal income tax
consequences and other considerations applicable to original issue discount
securities in any prospectus supplement relating to them.
Guarantees
The terms set forth in this section will apply to the senior debt
securities unless otherwise specified in a prospectus supplement. 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 that 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 U.S. 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 SEC rules and regulations, we present, among other
things, condensed financial information with respect to the Subsidiary
Guarantors on a combined basis in a footnote to our consolidated financial
statements in lieu of providing separate financial statements for each such
subsidiary.
25
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 and preferred stock issued by 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 and preferred stock issued by 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 with respect to such obligations of an preferred stock issued by
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 and preferred stock
issued by any of our 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 obligations of and preferred stock issued by
the subsidiary guarantor. 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."
Sinking Fund
The senior debt securities will not be entitled to the benefit of any
sinking fund unless otherwise specified in a prospectus supplement.
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:
26
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, 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 that 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
27
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:
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 permitted 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;
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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;
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
that is permitted by the "-- Limitation on Sale and Leaseback
Transactions" covenant (other than any Sale and Leaseback
Transaction that 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 that 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;
29
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.
Events of Default
The following Events of Default will apply unless otherwise specified
in a prospectus supplement. 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.
30
Unless otherwise specified in a prospectus supplement, 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 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:
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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 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 2-- 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, 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
32
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 also may
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.
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, 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 also may 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 U.S. 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
U.S. 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 also may arrange for additional payment offices and may cancel or
change these offices, including our use of the trustee's corporate trust office.
We also may 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
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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.
Book Entry, Delivery and Form
The senior debt securities of a series will be issued in one or more
fully registered global securities which will be deposited with, or on behalf
of, DTC and registered in the name of Cede & Co., DTC's nominee. We 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 DTC. Investors may elect to hold interests in the global
securities through the DTC. 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 that
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
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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
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 also will 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),
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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 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
United States 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 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 United States federal income tax law we may make
the above deposit without causing you to be taxed on the senior
debt
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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 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 also will 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 our 1.75% contingent convertible debentures due 2021.
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
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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 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 SEC, 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 Amended and Restated Credit and Security
Agreement, dated as of September 28, 2001 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 that 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
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Diagnostics LLC (IL), 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., Diagnostic Reference Services Inc.,
Laboratory Holdings Incorporated, Pathology Building Partnership, Quest
Diagnostics Investments Incorporated and Quest Diagnostics Finance Incorporated.
On August 24, 2001, Quest Diagnostics Incorporated (OH) merged into Quest
Diagnostics of Pennsylvania Inc. On April 9, 2002, Quest Diagnostics
Incorporated (CT) was dissolved. On April 1, 2002, Quest Diagnostics
Incorporated (MA) merged into Quest Diagnostics LLC (MA). On January 11, 2002,
Laboratory Holdings Incorporated was dissolved.
"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 SEC, or (2) the net book value of which at the time of
the determination exceeds 1% of the Consolidated Total Assets of Quest
Diagnostics.
"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
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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 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.
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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 a subordinated
indenture (the "Subordinated 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 subsidiary guarantors party
thereto. The terms of the subordinated debt securities will include those stated
in the Subordinated Indenture and those made part of the Subordinated Indenture
by reference to the Trust Indenture Act of 1939. A copy of the Subordinated
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.
We 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 Subordinated 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.
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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 Subordinated 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 DTC, 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.
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o If other than U.S. 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 in which 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 United States 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 Subordinated 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 Subordinated Indenture does not limit the amount of subordinated
debt securities that we are authorized to issue from time to time. The
Subordinated 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 Subordinated 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 Subordinated 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
Subordinated Indenture, then the subordinated debt securities for which each
trustee is acting would be treated as if issued under separate subordinated
indentures.
We may issue subordinated debt securities with terms different from
those of subordinated debt securities that already may 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 subordinated indenture, and we may use other subordinated
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 United States federal
income tax consequences and other considerations applicable to original issue
discount securities in any prospectus supplement relating to them.
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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 (IL), Quest
Diagnostics Incorporated (MI), Quest Diagnostics of Pennsylvania Inc., MetWest
Inc., Nichols Institute Diagnostics, DPD Holdings, Inc., Diagnostic Reference
Services Inc., Pathology Building Partnership, Quest Diagnostics Investments
Incorporated, Quest Diagnostics Finance Incorporated, American Medical
Laboratories Incorporated, AML Inc., Quest Diagnostics Nichols Institute, Inc.,
Quest Diagnostics Incorporated (NV), APL Properties Limited Company, Quest
Diagnostics LLC (CT), Quest Diagnostics LLC (MA), Unilab Corporation and Unilab
Acquisition Corporation.
The Subordinated 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 U.S. 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 and
supplemental subordinated indenture, 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 that 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 and preferred stock
issued by Quest Diagnostics' subsidiaries (unless such subsidiaries are
subsidiary guarantors), including claims with respect to trade payables. In
44
addition, the subordinated guarantees of our subsidiary guarantors will be
structurally subordinated to all existing and future obligations (whether senior
or subordinated) of and preferred stock issued by 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 with respect to such obligations of and preferred stock
issued by direct and indirect subsidiaries of Quest Diagnostics that 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 and preferred stock
issued by any of our non-guarantor subsidiaries and would be so subordinated if
a guarantee issued by any of our subsidiary guarantors were avoided or
subordinated in favor of obligations of and preferred stock issued by the
subsidiary guarantor. 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 applicable prospectus supplement or the supplemental
subordinated indenture 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 also are 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.
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"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 Subordinated Indenture, Quest Diagnostics is
generally permitted to consolidate or merge with another entity. Quest
Diagnostics also is permitted to sell all or substantially all of its assets to
another entity. However, Quest Diagnostics may not take any of these actions
unless all the following conditions are met:
o either Quest Diagnostics will be the surviving corporation or, if
Quest Diagnostics merges out of existence or sells assets, the
entity into which Quest Diagnostics merges or to which Quest
Diagnostics sells 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 Quest Diagnostics must deliver certain certificates and documents
to the trustee; and
o Quest Diagnostics 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 following Events of Default will
apply unless otherwise specified in a prospectus supplement. The term "Event of
Default" in respect of the subordinated debt securities of your series means any
of the following:
o Quest Diagnostics and any of its subsidiary guarantors do not pay
the principal of or any premium on a subordinated debt security
of such series on its due date.
o Quest Diagnostics and any of its 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.
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o Quest Diagnostics does not deposit any sinking fund payment in
respect of subordinated debt securities of such series on its due
date.
o Quest Diagnostics or any of its subsidiary guarantors remains in
breach of a covenant in respect of subordinated debt securities
of such series for 60 days after Quest Diagnostics receives a
written notice of default stating Quest Diagnostics is in breach
and requiring that Quest Diagnostics remedies 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 Quest Diagnostics or any of its subsidiary guarantors files for
bankruptcy or certain other events in bankruptcy, insolvency or
reorganization occur.
o Any of Quest Diagnostics' subsidiary guarantors repudiates its
obligations under any subsidiary guarantee or, except to the
extent contemplated by the related subordinated 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 a subordinated
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 that 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 Subordinated 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 right,
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 fights
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.
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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 Subordinated 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
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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, 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 also may 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, 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 also may 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
49
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 U.S. 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
U.S. 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 also may arrange for additional payment offices and may cancel or
change these offices, including our use of the trustee's corporate trust office.
We also may 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
Subordinated Indenture;
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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 Subordinated
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
Subordinated 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 subordinated
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 Subordinated 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 Subordinated 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 subordinated indenture
securities that are entitled to vote or take other action under the Subordinated
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.
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"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 Subordinated Indenture or the debt securities or request a waiver.
Satisfaction and Discharge
The Subordinated Indenture will cease to be of further effect, and we
and our subsidiary guarantors will be deemed to have satisfied and discharged
the Subordinated 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 Subordinated 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
United States 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.
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o We must comply with any additional provisions set forth in the
prospectus supplement.
If we accomplish 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 United States 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
Subordinated 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.
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The Trustee
The initial trustee under the Subordinated 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 also is the trustee and
note registrar for our 6 3/4% senior notes due 2006, our 7 1/2% senior notes due
2011 and our 1.75% contingent convertible debentures due 2021.
The Subordinated Indenture provides that, except during the
continuance of an event of default under the Subordinated Indenture, the trustee
under the Subordinated Indenture will perform only such duties as are
specifically set forth in the Subordinated Indenture. Under the Subordinated
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 Subordinated Indenture, subject to certain exceptions. If an
event of default has occurred and is continuing, the trustee under the
Subordinated Indenture will exercise such rights and powers vested in it under
the Subordinated 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 Subordinated Indenture and provisions of the Trust Indenture Act
incorporated by reference in the Subordinated Indenture contain limitations on
the rights of the trustee under such Subordinated 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 Subordinated Indenture is permitted
to engage in other transactions. However, if the trustee under the Subordinated
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 Subordinated
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 Subordinated 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.
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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 October 28, 2003, we had previously authorized:
o 1,000 shares of voting cumulative preferred stock, par value
$1.00 per share, none 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."
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;
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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
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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
non-assessable. 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.
Guarantees
Each subsidiary guarantor may fully and unconditionally guarantee on a
joint and several basis the payment obligations on the preferred stock
including, but not limited to, dividend payments, redemption payments and
liquidation payments.
To the extent that our preferred stock is guaranteed, the preferred
stock 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 (IL), Quest Diagnostics Incorporated
(MI), Quest Diagnostics of Pennsylvania Inc., MetWest Inc., Nichols Institute
Diagnostics, DPD Holdings, Inc., Diagnostic Reference Services Inc., Pathology
Building Partnership, Quest Diagnostics Investments Incorporated, Quest
Diagnostics Finance Incorporated, American Medical Laboratories Incorporated,
AML Inc., Quest Diagnostics Nichols Institute, Inc., Quest Diagnostics
Incorporated (NV), APL Properties Limited Company, Quest Diagnostics LLC (CT),
Quest Diagnostics LLC (MA), Unilab Corporation and Unilab Acquisition
Corporation.
The form of guarantee for the preferred stock will provide 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."
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
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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
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.
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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 United States federal income tax purposes
as if they were owners of the shares of preferred stock represented by the
depositary shares. Accordingly, for United States 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 United States federal
income tax purposes upon withdrawal of preferred stock in
exchange for depositary shares as provided in the depositary
agreement.
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
59
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 also may 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.
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DESCRIPTION OF COMMON STOCK
Our certificate of incorporation permits us to issue up to 300,000,000
shares of common stock, par value $0.01 per share. As of October 28, 2003, there
were 103,953,001 shares of common stock outstanding held of record by
approximately 6,000 stockholders. The following description of our common stock
and provisions of our certificate of incorporation and bylaws is only a summary,
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 that resulted in
the stockholder becoming an interested stockholder;
o upon consummation of the transaction that 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 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.
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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 are
sold or transferred, each right will thereafter entitle the holder thereof to
receive, upon the exercise of such right, 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:
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;
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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.
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SELLING STOCKHOLDER
We have previously registered 3,000,000 shares of our common stock
that may be offered by GlaxoSmithKline using this prospectus. As of October 28,
2003, these shares represented about 2.9% of the outstanding shares of our
common stock, and GlaxoSmithKline held approximately 22.1 million shares of our
common stock, representing approximately 21% of the outstanding shares of our
common stock.
In a letter agreement dated as of January 22, 2001, GlaxoSmithKline
has agreed that (1) it will not offer or sell any shares of common stock
pursuant to this prospectus other than as part of an underwritten public
offering; (2) the maximum number of shares of common stock that it will sell
pursuant to this prospectus 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 this prospectus. Since GlaxoSmithKline may
sell all or some of its shares of common stock that have been previously
registered by us, no estimate can be made of the aggregate number of shares of
common stock that will be owned by GlaxoSmithKline upon completion of any such
sale.
64
PLAN OF DISTRIBUTION
We may sell the securities and GlaxoSmithKline 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 GlaxoSmithKline 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, GlaxoSmithKline 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 GlaxoSmithKline also may, from time to
time, authorize dealers, acting as our agents, to offer and sell the securities,
and in the case of GlaxoSmithKline, 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 GlaxoSmithKline in the form of underwriting discounts or commissions and
also may 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 GlaxoSmithKline
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. GlaxoSmithKline, 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 GlaxoSmithKline, 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 also may 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
65
agents and their associates may engage in transactions with, and perform
services for, our company, GlaxoSmithKline and certain of our affiliates and
GlaxoSmithKline'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 LLP, 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, 2002 and 2001, and for each of
the years in the three-year period ended December 31, 2002, 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 consolidated financial statements of Unilab Corporation
incorporated in this prospectus by reference from Quest Diagnostics
Incorporated's Current Report on Form 8-K filed on March 13, 2003 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets), which is incorporated
herein by reference, and has been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
66
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....... $ 52,585
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............................................. $ 1,402,585
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.
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 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;
(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the
registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue; and
(d) 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.
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chairman of the Board and Chief Executive
- ------------------------------- Officer (principal executive officer)
Kenneth W. Freeman
* Director, President and Chief Operating
- ------------------------------- Officer
Surya N. Mohapatra
* Senior Vice President and Chief Financial
- ------------------------------- Officer (principal financial officer)
Robert A. Hagemann
* Vice President, Controller and Chief
- ------------------------------- Accounting Officer (chief accounting officer)
Thomas F. Bongiorno
* Director
- -------------------------------
Kenneth D. Brody
* Director
- -------------------------------
William F. Buehler
* Director
- -------------------------------
Mary A. Cirillo
* Director
- -------------------------------
James F. Flaherty III
* Director
- -------------------------------
William R. Grant
* Director
- -------------------------------
Rosanne Haggerty
* Director
- -------------------------------
Dan C. Stanzione
* Director
- -------------------------------
Gail R. Wilensky
* Director
- -------------------------------
John B. Ziegler
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
QUEST DIAGNOSTICS INCORPORATED (IL)
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
QUEST DIAGNOSTICS INCORPORATED OF 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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
DIAGNOSTIC REFERENCE SERVICES INC.
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 November 26, 2003.
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
PATHOLOGY BUILDING PARTNERSHIP
By: Quest Diagnostics Incorporated (MD),
General Partner
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 Wilmington, State of Delaware, on November 26, 2003.
QUEST DIAGNOSTICS INVESTMENTS
INCORPORATED
By: /s/ Steven A. Calamari
---------------------------------------------
Steven A. Calamari, Treasurer
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 November 26, 2003.
Signature Title
--------- -----
* Vice President and Director
- -------------------------------
Robert S. Galen
* Director
- -------------------------------
Louis Heidelberger
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 Wilmington, State of Delaware, on November 26, 2003.
QUEST DIAGNOSTICS FINANCE
INCORPORATED
By: /s/ Steven A. Calamari
---------------------------------------------
Steven A. Calamari, Treasurer
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 November 26, 2003.
Signature Title
--------- -----
* Vice President and Director
- -------------------------------
Robert S. Galen
* Director
- -------------------------------
Louis Heidelberger
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
AMERICAN MEDICAL LABORATORIES 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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
AML 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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
QUEST DIAGNOSTICS NICHOLS INSTITUTE, 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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
QUEST DIAGNOSTICS INCORPORATED (NV)
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
APL PROPERTIES LIMITED COMPANY
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
QUEST DIAGNOSTICS LLC (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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
QUEST DIAGNOSTICS LLC (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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
UNILAB CORPORATION
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
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 November 26,
2003.
UNILAB ACQUISITION CORPORATION
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 November 26, 2003.
Signature Title
--------- -----
* Chief Executive Officer
- ------------------------------- (principal executive officer)
Kenneth W. Freeman
* President and Director
- -------------------------------
Surya N. Mohapatra
* Senior Vice President and Director
- -------------------------------
Robert A. Hagemann
* By: /s/ Leo C. Farrenkopf, Jr.
----------------------------
Leo C. Farrenkopf, Jr.
Attorney-in-fact
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
*1.1 Underwriting Agreement for Common Stock.
*1.2 Underwriting Agreement for Debt Securities.
*1.3 Underwriting Agreement for Preferred Stock.
2.1 Agreement and Plan of Merger, dated as of April 2, 2002, as
amended, among the Company, Quest Diagnostics Newco
Incorporated and Unilab Corporation (filed as an annex to our
final prospectus, dated August 6, 2002, and incorporated herein
by reference).
2.2 Amendment to the Agreement and Plan of Merger, dated as of May
13, 2002, among the Company, Quest Diagnostics Newco
Incorporated and Unilab Corporation (filed as an annex to our
final prospectus, dated August 6, 2002, and incorporated herein
by reference).
2.3 Amendment No. 2 to the Agreement and Plan of Merger, dated as
of June 20, 2002, among the Company, Quest Diagnostics Newco
Incorporated and Unilab Corporation (filed as an annex to our
final prospectus, dated August 6, 2002, and incorporated herein
by reference).
2.4 Amendment No. 3 to the Agreement and Plan of Merger, dated as
of September 25, 2002, among the Company, Quest Diagnostics
Newco Incorporated and Unilab Corporation (incorporated herein
by reference to Exhibit (a)(11) of our Schedule TO Amendment
No. 12 filed with the Commission on September 26, 2002, file
No. 001-12215).
2.5 Amendment No. 4 to the Agreement and Plan of Merger, dated as
of January 4, 2003, among the Company, Quest Diagnostics Newco
Incorporated and Unilab Corporation (incorporated herein by
reference in Exhibit (a)(20) of our Schedule TO Amendment No.
20 filed with the Commission on January 6, 2003, file No.
001-12215).
2.6 Stockholders Agreement, dated as of April 2, 2002, as amended,
among Quest Diagnostics, Quest Diagnostics Newco Incorporated,
Kelso Investment Associates VI, L.P. and KEP VI, LLC (filed as
an annex to our final prospectus, dated August 6, 2002 and
incorporated herein by reference)
3.1 Restated Certificate of Incorporation of Quest Diagnostics
Incorporated (filed as an exhibit to our current report on Form
8-K dated May 31, 2001 and incorporated herein by reference).
3.2 Amended and Restated 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 Corning Clinical Laboratories Inc. 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 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).
4.5 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 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).
4.7 Second Supplemental Indenture for senior debt securities, dated
as of November 26, 2001 (filed as an exhibit to our current
report on Form 8-K dated November 27, 2001 and incorporated
herein by reference).
4.8 Third Supplemental Indenture for senior debt securities, dated
as of April 4, 2002 (filed as an exhibit to our current report
on Form 8-K dated April 1, 2002 and incorporated herein by
reference).
4.9 Fourth Supplemental Indenture for senior debt securities, dated
as of March 19, 2003 (filed as an exhibit to our quarterly
report on Form 10-Q for the quarter ended March 31, 2003 and
incorporated herein by reference).
4.10 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).
4.11 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).
*4.12 Certificate of Designation relating to preferred stock.
*4.13 Depositary Agreement relating to preferred stock.
*4.14 Depositary Receipt (included in the Depositary Agreement).
*4.15 Form of guarantee relating to the preferred stock.
+5.1 Opinion of Shearman & Sterling LLP.
*8.1 Opinion of Shearman & Sterling LLP 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 LLP (included in Exhibit 5.1).
*23.2 Consent of Shearman & Sterling LLP (included in Exhibit 8.1).
+23.3 Consent of PricewaterhouseCoopers LLP, as independent
accountants for Quest Diagnostics Incorporated.
+23.4 Consent of Deloitte & Touche LLP
++24.1 Powers of Attorney (included on signature page).
+24.2 Power of Attorney for Kenneth D. Brody.
+24.3 Power of Attorney for Mary A. Cirillo.
+24.4 Power of Attorney for Rosanne Haggerty.
++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.
++ Previously filed.