As filed with the Securities and Exchange Commission on October 19, 2001
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LABORATORY CORPORATION OF AMERICA HOLDINGS
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3757370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
358 South Main Street
Burlington, NC 27215
(336) 229-1127
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Bradford T. Smith
Executive Vice President,
Chief Legal Counsel and Secretary
Laboratory Corporation of America Holdings
358 South Main Street
Burlington, NC 27215
(336) 229-1127
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Deanna Kirkpatrick
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
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, please 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. |_|
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class Amount to be Offering Price Aggregate Offering Amount of
of Securities to be Registered Registered(1) Per Unit(2) Price(2) Registration Fee
------------------------------------------------------------------------------------------------------------------------------------
Liquid Yield Option(TM)Notes
due 2021 ("LYONs") (Zero Coupon
- Subordinated)....................... $744,000,000 $731.88 $544,518,720 $136,130
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.10 per share (3) (3) (3) (4)
====================================================================================================================================
(TM) Trademark of Merrill Lynch & Co., Inc.
(1) The LYONs were issued at an original price of $671.65 per $1,000
principal amount at maturity, representing an aggregate initial issue
price of $436,572,500 and an aggregate principal amount at maturity of
$650,000,000. An additional $94,000,000 aggregate principal amount at
maturity of the LYONs was issued pursuant to the exercise in full by
Merrill Lynch, Pierce, Fenner & Smith Incorporated of its over-allotment
option.
(2) This estimate is made pursuant to Rule 457(c) of the Securities Act
solely for the purpose of calculating the registration fee. The above
calculation is based on the average of the bid and asked prices for the
LYONs in the PORTAL System on October 17, 2001.
(3) This includes 4,988,817 shares of common stock issuable upon conversion
of the LYONs at the conversion rate of 6.7054 shares per $1,000 principal
amount at maturity. Pursuant to Rule 416 of the Securities Act, such
number of shares of common stock registered hereby shall include an
indeterminate number of shares of common stock that may be issued in
connection with a stock split, stock dividend, recapitalization or
similar event.
(4) Pursuant to Rule 457(i) of the Securities Act, there is no additional
filing fee with respect to the shares of common stock issuable upon
conversion of the LYONs because no additional consideration will be
received in connection with the exercise of the conversion privilege.
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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
The information in this prospectus is not complete and may be changed. The
selling securityholders 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 is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 19, 2001
PROSPECTUS
LABORATORY CORPORATION OF AMERICA HOLDINGS
$744,000,000
Aggregate Principal Amount at Maturity of
Liquid Yield Option(TM) Notes due 2021
(Zero Coupon - Subordinated) and
Common Stock issuable upon
Conversion or Purchase of the LYONs
-----------------------
The Offering:
We issued $650,000,000 aggregate principal amount at maturity of the LYONs
in a private placement in September 2001 at an issue price of $671.65 per LYON
(67.165% of the principal amount at maturity). An additional $94,000,000
aggregate principal amount at maturity of the LYONs was issued in October 2001
pursuant to the exercise in full by the initial purchaser of its over-allotment
option. Selling securityholders will use this prospectus to resell their LYONs
and the shares of common stock issuable upon conversion or purchase by us of
their LYONs. We will not pay interest on the LYONs prior to maturity unless
contingent cash interest becomes payable as described below. Instead, on
September 11, 2021, the maturity date of the LYONs, for each LYON, a holder
will receive $1,000 plus contingent additional principal (and accrued original
issue discount thereon), if any, as described below. The issue price of the
LYONs represents a yield to maturity of 2.0% per year, calculated from
September 11, 2001, assuming contingent cash interest is not paid and
contingent additional principal does not accrue. The LYONs are subordinated in
right of payment to all of our existing and future senior indebtedness and will
be effectively subordinated to all existing and future liabilities of our
subsidiaries.
Convertibility of LYONs:
Holders may convert each LYON into 6.7054 shares of our common stock,
subject to adjustment, which we refer to as the conversion rate, only (1) if
the sale price of our common stock reaches specified thresholds, (2) during any
period in which the credit rating assigned to the LYONs by Standard & Poor's
Ratings Services is at or below a specified level, (3) if the LYONs are called
for redemption, or (4) if specified corporate transactions have occurred. Our
common stock is listed on the New York Stock Exchange under the symbol "LH." On
October 17, 2001, the last reported sale price of our common stock on the NYSE
was $83.75 per share.
Contingent Cash Interest:
We will pay contingent cash interest on the LYONs for the six-month period
commencing after September 11, 2006 and for any six-month period thereafter if
the average market price of a LYON for a five trading day measurement period
preceding the applicable six-month period equals 120% or more of the sum of the
issue price, accrued original issue discount and contingent additional
principal, if any, for such LYON. The contingent cash interest payable per LYON
in respect of any quarterly period will equal the greater of 0.0625% of the
average market price of a LYON for the five trading day measurement period or
any regular cash dividends paid by us per share on our common stock during that
quarterly period multiplied by the then applicable conversion rate, provided
that if we do not pay cash dividends during a semi-annual period, we will pay
contingent cash interest semi-annually at a rate of 0.125% of the average
market price of a LYON for the five trading day measurement period. For U.S.
federal income tax purposes, we intend to treat the LYONs as contingent payment
debt instruments. You should read the discussion of selected U.S. federal
income tax considerations relevant to the LYONs beginning on page 30.
Contingent Additional Principal:
On September 11, 2004, if our stock price factor is at or below specified
thresholds based on a measurement period prior to that date, then contingent
additional principal and original issue discount will accrue at an aggregate
adjusted rate of accrual determined as set forth in this prospectus. No
contingent additional principal will accrue after September 11, 2006, but
thereafter original issue discount will continue to accrue at a rate of 2.0%
per year.
Purchase of LYONs by LabCorp at the Option of the Holder:
Holders may require us to purchase all or a portion of their LYONs on
September 11, 2004, 2006 and 2011 at the prices set forth in "Description of
LYONs--Purchase of LYONs by LabCorp at the Option of the Holder." These prices
would be increased by accrued contingent additional principal (and accrued
original issue discount thereon), if any. We may choose to pay the purchase
price in cash or common stock or a combination of cash and common stock. In
addition, if a change in control occurs on or before September 11, 2006,
holders may require us to purchase for cash all or a portion of their LYONs.
Redemption of LYONs at the Option of LabCorp:
We may redeem for cash all or a portion of the LYONs at any time on or
after September 11, 2006, at the prices set forth in "Description of
LYONs--Redemption of LYONs at the Option of LabCorp." These prices would be
increased by accrued contingent additional principal (and accrued original
issue discount thereon), if any.
-----------------------
Investing in the LYONs involves risks that are described in "Risk Factors
Relating to the LYONs" beginning on page 8 of this prospectus.
-----------------------
We will not receive any of the proceeds from the sale of the LYONs or the
underlying shares of common stock by any of the selling securityholders. The
LYONs and shares of common stock may be offered in negotiated transactions or
otherwise, at market prices prevailing at the time of sale or at negotiated
prices. In addition, shares of common stock may be offered from time to time
through ordinary brokerage transactions on the New York Stock Exchange.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2001
(TM)Trademark of Merrill Lynch & Co., Inc.
-----------------------
TABLE OF CONTENTS
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Page
----
Summary...............................................................1
Risk Factors Relating to the LYONs....................................8
Special Note Regarding Forward Looking Statements.....................9
Use of Proceeds......................................................10
Ratio of Earnings to Fixed Charges...................................10
Price Range of Common Stock and Dividend History.....................10
Description of Credit Agreement......................................11
Description of LYONs.................................................12
Description of Capital Stock.........................................29
Certain U.S. Federal Income Tax Considerations.......................30
Selling Securityholders..............................................35
Plan of Distribution.................................................37
Legal Matters........................................................39
Experts..............................................................39
Where You Can Find More Information..................................39
-----------------------
References in this prospectus to "LabCorp," "we," "us" and "our" refer to
Laboratory Corporation of America Holdings and its consolidated subsidiaries,
except in "Summary--The Offering" and "Description of LYONs," where such terms
refer only to Laboratory Corporation of America Holdings, unless otherwise
specified.
ii
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere or incorporated by reference in this prospectus.
Because this is a summary, it may not contain all the information that may be
important to you. You should read the entire prospectus, as well as the
information incorporated by reference, before making an investment decision.
LabCorp
We are the second largest independent clinical laboratory company in the
United States, based on 2000 net revenues. Through a national network of
laboratories, we offer more than 4,000 different clinical laboratory tests
which are used by the medical profession in routine testing, patient diagnosis,
and in the monitoring and treatment of disease. We have developed specialty and
niche businesses based on certain types of specialized testing capabilities and
client requirements, such as HIV genotyping and phenotyping, diagnostic
genetics, clinical research trials and oncology testing.
Since our founding in 1971, we have grown into a network of 24 primary
testing facilities and approximately 1,200 service sites, consisting of
branches, patient service centers and STAT laboratories, which are laboratories
that have the ability to perform certain routine tests quickly and report the
results to the physician immediately. With over 18,000 employees, we processed
tests on more than 260,000 patient specimens daily in 2000 and provided
clinical laboratory testing services to clients in 50 states. Our clients
include physicians, hospitals, HMOs and other managed care organizations,
governmental agencies, large employers and other independent clinical
laboratories that do not have the breadth of our testing capabilities. Several
hundred of our 4,000 tests are frequently used in general patient care by
physicians to establish or support a diagnosis, to monitor treatment, or to
search for an otherwise undiagnosed condition. The most frequently requested of
these routine tests include blood chemistry analyses, urinalyses, blood cell
counts, pap smears and HIV tests. We perform this core group of routine tests,
which constitutes a majority of the testing conducted, in each of our major
laboratories using sophisticated and computerized instruments, with most
results reported within 24 hours.
We continually seek new and improved technologies for early diagnosis. For
example, our Center for Molecular Biology and Pathology is a leader in
molecular diagnostics and polymerase chain reaction, or PCR, technologies which
are often able to provide earlier and more reliable information regarding HIV,
genetic diseases, cancer and many other viral and bacterial diseases. We
believe these technologies may represent a significant savings to managed care
organizations by increasing the detection of early stage (treatable) diseases.
In June 2001, we acquired Viro-Med Inc., a national leader in high-end
virologic infectious disease testing, based in Minneapolis, Minnesota. With its
centralized location, proprietary molecular technologies and state-of-the-art
facility, Viro-Med provides significant, additional capacity to support the
continued expansion of our esoteric and genomic testing business. In April
2001, we acquired Path Lab Holdings, a regional esoteric lab company serving
the New England area. We believe this acquisition will leverage our expertise
in the area of esoteric testing and will enable us to expand our presence in
New England. In August 2000, we acquired Los Angeles-based National Genetics
Institute, Inc., a leader in the development of PCR assays for Hepatitis C. As
part of our strategic approach, we plan to continue to evaluate appropriate
acquisition candidates.
One of our primary growth strategies is the continued expansion of our
specialty and niche businesses. In general, the specialty and niche businesses
are designed to serve two market segments: (i) markets which are not served by
the routine clinical testing laboratory and therefore are often subject to less
stringent regulatory and reimbursement constraints; and (ii) markets which are
served by the routine testing laboratory and offer the possibility of adding
related services from the same supplier.
Another of our primary growth strategies is to develop an increasing
number of hospital and other provider alliances. These alliances can take
several different forms, including laboratory technical support (management)
contracts, reference agreements and cooperative testing arrangements. We have
and will continue to focus on developing cooperative testing relationships that
capitalize on hospitals' ability to perform rapid response testing and our
ability to provide high quality routine and esoteric testing.
Our principal executive office is located at 358 South Main Street,
Burlington, North Carolina 27215 and our telephone number at that location is
(336) 229-1127. Our website is located at www.labcorp.com. The information
contained on our website is not part of this prospectus.
1
The Offering
LYONs............................... $744,000,000 aggregate principal amount
at maturity of LYONs due September 11,
2021. We will not pay any interest on
the LYONs prior to maturity unless
contingent cash interest becomes
payable. Each $1,000 principal amount at
maturity of LYONs (which we refer to in
this prospectus as a "LYON"), will pay
the principal amount at maturity of
$1,000 plus any accrued contingent
additional principal (and accrued
original issue discount thereon) at
maturity.
Maturity of LYONs.................... September 11, 2021.
Yield to Maturity of LYONs........... 2.0% per year, computed on a semi-annual
bond equivalent basis and calculated
from September 11, 2001, assuming no
contingent cash interest is paid and
contingent additional principal does not
accrue.
Subordination........................ The LYONs are subordinated in right of
payment to all of our existing and
future senior indebtedness. As of June
30, 2001, we had approximately $474.1
million of senior indebtedness
outstanding. The LYONs are also
effectively subordinated to all of our
subsidiaries' liabilities, including
trade payables. The term "senior
indebtedness" is defined in the
"Description of LYONs--Subordination"
section of this prospectus.
Original Issue Discount.............. We issued the LYONs at an issue price
significantly below the principal amount
at maturity of the LYONs. This original
issue discount accrues daily at a rate
of 2.0% per year beginning on September
11, 2001, calculated on a semi-annual
bond equivalent basis, using a 360-day
year comprised of twelve 30-day months.
Original issue discount also accrues at
that rate on any accrued contingent
additional principal.
The accrual of imputed interest income,
also referred to as tax original issue
discount, as calculated for U.S. federal
income tax purposes, will exceed the
initial yield to maturity of 2.0% and
any adjusted yield resulting from the
accrual of contingent additional
principal. See "Certain U.S. Federal
Income Tax Considerations."
Conversion Rights.................... For each LYON surrendered for
conversion, if the conditions for
conversion are satisfied, a holder will
receive 6.7054 shares of our common
stock. This conversion rate will be
adjusted for the reasons specified in
the indenture but will not be adjusted
for accrued original issue discount or
contingent additional principal, if any.
Holders may surrender LYONs for
conversion in any calendar quarter
commencing after December 31, 2001, if
the closing sale price of our common
stock for at least 20 trading days in a
period of 30 consecutive trading days
ending on the last trading day of the
preceding calendar quarter is more than
a specified percentage, beginning at
2
120% and declining 0.1282% per calendar
quarter thereafter until it reaches 110%
for the calendar quarter beginning July
1, 2021, of the accreted conversion
price per share of common stock on the
last trading day of such preceding
calendar quarter. The accreted
conversion price per share as of any day
will equal the issue price of a LYON
plus accrued original discount and any
accrued contingent additional principal
as of such day, divided by the
conversion rate on that day. Upon
conversion, the holder will not receive
any cash payment representing accrued
original issue discount or contingent
additional principal, if any; accrued
original issue discount and contingent
additional principal, if any, will be
deemed paid by the shares of common
stock received by the holder of LYONs on
conversion.
Holders may also surrender a LYON for
conversion during any period in which
the rating assigned to the LYONs by
Standard & Poor's Ratings Services is
BB- or lower.
LYONs or portions of LYONs in integral
multiples of $1,000 principal amount at
maturity called for redemption may also
be surrendered for conversion until the
close of business on the second business
day prior to the redemption date. In
addition, if we make certain
distributions to our stockholders or if
we are a party to certain
consolidations, mergers, transfers of
all or substantially all of our assets
or binding share exchanges, LYONs may be
surrendered for conversion, as provided
in "Description of LYONs--Conversion
Rights." The ability to surrender LYONs
for conversion expires at the close of
business on September 11, 2021.
Contingent Cash Interest............. We will pay contingent cash interest to
the holders of LYONs during any
six-month period from September 12 to
March 11, and from March 12 to September
11, with the initial six-month period
commencing after September 11, 2006, if
the average market price of a LYON for
the five trading days ending on the
third trading day immediately preceding
the first day of the applicable
six-month period equals 120% or more of
the sum of the issue price, accrued
original issue discount and contingent
additional principal, if any, for a LYON
as of the day immediately preceding the
relevant six-month period.
The contingent cash interest payable per
LYON in respect of any quarterly period
will equal the greater of 0.0625% of the
average market price of a LYON for the
five trading day measurement period or
any regular cash dividends paid by us
per share on our common stock during
that quarterly period multiplied by the
then applicable conversion rate,
provided that if we do not pay cash
dividends during a semi- annual period,
we will pay contingent cash interest
semi- annually at a rate of 0.125% of
the average market price of a LYON for
the five trading day measurement period.
Notwithstanding the above, if we declare
a dividend for which the record date
falls prior to the first day of a six-
3
month period but the payment date falls
within that six- month period, then the
five trading day period for determining
the average market price of a LYON will
be the five trading days ending on the
third trading day immediately preceding
such record date.
Contingent cash interest, if any, will
accrue and be payable to holders of
LYONs as of the 15th day preceding the
last day of the relevant six-month
period, or, if we pay a regular cash
dividend on our common stock during a
quarter within the relevant six-month
period, to holders of LYONs as of the
record date for the related common stock
dividend. If we only pay a regular cash
dividend on our common stock during one
quarter within the relevant six-month
period, the remaining contingent cash
interest, if any, will accrue and be
payable as of the 15th day preceding the
last day of the relevant six-month
period. We will make contingent cash
interest payments on the last day of the
relevant six-month period or, if we pay
a regular cash dividend on our common
stock during the relevant six-month
period, on the payment date for the
related common stock dividend. The
payment of contingent cash interest will
not affect the accrual of original issue
discount.
Contingent Additional Principal...... On September 11, 2004, the rate of
accrual on the LYONs will be reset for
two years if our stock price factor is
at or below the thresholds set forth in
the table below. We refer to the amount
that accrues as a result of the adjusted
rate of accrual on the LYONs, other than
original issue discount, as contingent
additional principal. If contingent
additional principal accrues, the
adjusted rate of accrual will be
calculated by deducting from our two
year unsecured subordinated debt rate at
that time an amount set forth in the
table below, except that the adjusted
rate of accrual may not be greater than
9.0% or less than the initial yield to
maturity of 2.0%. Contingent additional
principal will accrue on a semi-annual
bond equivalent basis for a period of
two years. No contingent additional
principal will accrue after September
11, 2006, but thereafter original issue
discount will continue to accrue at a
rate of 2.0% per year.
Our stock price factor is the average of
the closing prices of our common stock
for the 20 consecutive trading days
ending on the third trading day prior to
September 11, 2004, expressed as a
percentage of the accreted conversion
price of the LYONs as of September 11,
2004.
The table below shows the amount to be
deducted from our applicable two year
unsecured subordinated debt rate, as
determined by our bid solicitation agent
prior to September 11, 2004. The
resulting percentage is the aggregate
adjusted rate of accrual at which
original issue discount and contingent
additional principal will accrue on the
LYONs during the two years commencing
September 11, 2004.
4
Stock Price Factor Threshold
If Two Year Unsecured Subordinated Debt Rate at September 11, 2004 is:
-----------------------------------------------------------------------------------------
Amount to be Deducted from
Two Year Unsecured 4.50% >5.00% >5.50% >6.00% >6.50% >7.00% 7.50% >8.00%
Subordinated Debt Rate to to to to to to to to to
Determine the Adjusted Rate: <=4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50% >8.50%
---------------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
-6.00% <=74%
-5.50% <=73% <=71%
-5.00% <=72% <=70% <=69%
-4.50% <=69% <=69% <=68% <=66%
-4.00% <=67% <=67% <=67% <=65% <=64%
-3.50% <=66% <=65% <=64% <=64% <=63% <=62%
-3.00% <=64% <=64% <=63% <=61% <=61% <=61% <=59%
-2.50% <=62% <=61% <=60% <=60% <=59% <=58% <=58% <=57%
-2.00% <=59% <=58% <=58% <=57% <=56% <=55% <=55% <=54% <=53%
-1.50% <=56% <=55% <=54% <=54% <=53% <=53% <=53% <=52% <=51% <=51%
-1.00% <=52% <=51% <=51% <=51% <=50% <=49% <=49% <=48% <=48% <=48%
-0.50% <=47% <=46% <=45% <=45% <=44% <=44% <=44% <=43% <=43% <=43%
0.00% <=40% <=40% <=39% <=38% <=38% <=38% <=37% <=37% <=37% <=36%
U.S. Federal Income Taxation......... Under the indenture, we and every holder
are required to agree (in the absence of
an administrative pronouncement or
judicial ruling to the contrary), for
U.S. federal income tax purposes, to
treat the LYONs as contingent payment
debt instruments that are subject to the
special regulations that govern such
instruments. Under these regulations,
even if we do not pay any contingent
cash interest on the LYONs, you are
required to include interest at the rate
described below in your gross income for
U.S. federal income tax purposes. This
imputed interest, also referred to as
tax original issue discount, accrues at
a rate equal to 8.68% per year, computed
on a semi-annual bond equivalent basis,
which represents the yield on our
non-contingent, non- convertible,
fixed-rate debt with terms otherwise
similar to the LYONs. The rate at which
the tax original issue discount accrues
for U.S. federal income tax purposes
exceeds the initial yield to maturity of
2.0% and any adjusted yield to maturity
resulting from the accrual of contingent
additional principal.
You will also recognize gain or loss on
the sale, exchange, conversion or
retirement of a LYON in an amount equal
to the difference between the amount
realized on the sale, exchange,
conversion or retirement, including the
fair market value of any common stock
received upon conversion or otherwise,
and your adjusted tax basis in the LYON.
Any gain recognized by you on the sale,
exchange, conversion or retirement of a
LYON generally will be ordinary interest
income; any loss will be ordinary loss
to the extent of the interest previously
included in income, and thereafter,
capital loss. See "Certain U.S. Federal
Income Tax Considerations."
Sinking Fund......................... None.
5
Redemption of LYONs at the
Option of LabCorp............... We may redeem for cash all or a portion
of the LYONs at any time on or after
September 11, 2006, at specified
redemption prices. These prices would be
increased by accrued contingent
additional principal (and accrued
original issue discount thereon), if
any. See "Description of
LYONs--Redemption of LYONs at the Option
of LabCorp."
Purchase of LYONs by LabCorp at the
Option of the Holder............ Holders may require us to purchase all
or a portion of their LYONs on each of
the following dates at the following
prices (these prices would be increased
by accrued contingent additional
principal (and accrued original issue
discount thereon), if any):
o on September 11, 2004 at a price of
$712.97 per LYON;
o on September 11, 2006 at a price of
$741.92 per LYON; and
o on September 11, 2011 at a price of
$819.54 per LYON.
We may pay the purchase price in cash or
shares of our common stock (based on the
prevailing market price thereof) or in a
combination of cash and shares of our
common stock. See "Description of
LYONs--Purchase of LYONs by LabCorp at
the Option of the Holder."
Change in Control.................... Upon a change in control of LabCorp
occurring on or before September 11,
2006, each holder may require us to
purchase for cash all or a portion of
such holder's LYONs at a price equal to
the sum of the issue price plus accrued
original issue discount and contingent
additional principal, if any, for the
LYONs to the date of purchase.
Use of Proceeds...................... We will not receive any of the proceeds
from the sale by the selling
securityholders of the LYONs or the
underlying common stock. See "Use of
Proceeds."
DTC Eligibility...................... The LYONs have been issued in fully
registered book-entry form and are
represented by permanent global LYONs
without coupons deposited with a
custodian for and registered in the name
of a nominee of The Depository Trust
Company in New York, New York.
Beneficial interests in global LYONs are
shown on, and transfers thereof are
effected only through, records
maintained by DTC and its direct and
indirect participants, and your interest
in any global LYON may not be exchanged
for certificated LYONs, except in
limited circumstances described herein.
6
Trading.............................. The LYONs issued in the initial private
placement are eligible for trading in
the PORTAL system. LYONs resold using
this prospectus, however, will no longer
be eligible for trading in the PORTAL
system. We do not intend to list the
LYONs on any national securities
exchange. Our common stock is traded on
the NYSE under the symbol "LH."
Ratio of Earnings to Fixed Charges... The ratios of earnings to fixed charges
for fiscal 1998, 1999, 2000 and the six
months ended June 30, 2001 were 2.14,
2.65, 4.33 and 7.01, respectively.
7
RISK FACTORS RELATING TO THE LYONs
Prospective investors should carefully consider the following information
with the other information contained, or incorporated by reference in this
prospectus, before purchasing the LYONs.
An active trading market for LYONs may not develop.
Despite the fact that resales of the LYONs will be registered transactions
under the Securities Act, we cannot assure you that an active trading market
for the LYONs will develop or as to the liquidity or sustainability of any such
market, your ability to sell your LYONs or the price at which you will be able
to sell your LYONs. Future trading prices of the LYONs will depend on many
factors, including, among other things, prevailing interest rates, our
operating results, the market price of our common stock and the market for
similar securities in general. In addition, a holder's right to convert LYONs
into shares of our common stock is subject to conditions which, if not
satisfied, could result in a holder receiving less than the value of the common
stock into which a LYON is otherwise convertible. These features could
adversely affect the value and the trading prices for the LYONs.
We may not have the ability to raise the funds necessary to finance the
purchase of LYONs at the option of the holders.
On September 11, 2004, 2006 and 2011 and upon the occurrence of specific
kinds of change in control events occurring on or before September 11, 2006,
holders of LYONs may require us to purchase their LYONs. However, it is
possible that we would not have sufficient funds at that time to make the
required purchase of LYONs. In addition, certain important corporate events,
such as leveraged recapitalizations that would increase the level of our
indebtedness, would not constitute a change in control under the indenture. See
"Description of LYONs--Purchase of LYONs by LabCorp at the Option of the
Holder" and "--Change in Control Permits Purchase of LYONs at the Option of the
Holder."
You should consider the U.S. federal income tax consequences of owning LYONs.
Under the indenture, every holder is required to agree with us to treat
its LYONs as contingent payment debt instruments for U.S. federal income tax
purposes. As a result, despite some uncertainty as to the proper application of
the applicable Treasury regulations, you are required to include in your gross
income each year amounts of interest in excess of the initial yield to maturity
of the LYONs and any adjusted yield to maturity resulting from accrued
contingent additional principal. You will recognize gain or loss upon the sale,
exchange, conversion or retirement of a LYON in an amount equal to the
difference between the amount realized on the sale, exchange, conversion or
retirement, including the fair market value of any of our common stock
received, and your adjusted tax basis in the LYON. Any gain recognized by you
on the sale, exchange, conversion or retirement of a LYON generally will be
ordinary interest income; any loss will be ordinary loss to the extent of the
interest previously included in income, and capital loss thereafter. See
"Certain U.S. Federal Income Tax Considerations."
The LYONs are subordinated in right of payment to other indebtedness.
The LYONs are unsecured obligations subordinated in right of payment to
all of our existing and future senior indebtedness. As a result, our assets are
available to pay obligations on the LYONs only after all senior indebtedness
has been paid in full, and we may not have sufficient assets remaining to repay
in full all of the LYONs then outstanding if we become insolvent or are forced
to liquidate our assets, we default on our senior indebtedness, or the LYONs
are accelerated due to any other event of default. The LYONs are also
effectively subordinated in right of payment to all of our subsidiaries'
indebtedness and other liabilities, including trade payables. The LYONs are
exclusively obligations of LabCorp. Our subsidiaries have no obligation to pay
any amounts due on the LYONs. Our subsidiaries are not required to provide us
with funds for our payment obligations, whether by dividends, distributions,
loans or other payments. In addition, any payment of dividends, distributions,
loans or advances by our subsidiaries to us could be subject to statutory or
contractual restrictions. Payments to us by our subsidiaries are also
contingent upon our subsidiaries' earnings and business considerations. The
incurrence of additional indebtedness and other liabilities could materially
and adversely affect our ability to pay our obligations on the LYONs. The terms
of the LYONs do not limit our ability to incur senior indebtedness, and do not
limit our ability or the ability of our subsidiaries to incur other
indebtedness or other liabilities. As of June 30, 2001, we had senior
indebtedness outstanding (including a $412.5 million term loan under our credit
agreement) of approximately $474.1 million. See "Description of
LYONs--Subordination."
7
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
We have made or incorporated by reference in this prospectus forward
looking statements concerning our operations, performance and financial
condition, as well as our strategic objectives. Some of these forward looking
statements can be identified by the use of forward looking words such as
"believe", "expect", "may", "will", "should", "seek", "approximately",
"intend", "plan", "estimate" or "anticipate" or the negative of those words or
other comparable terminology. Such forward looking statements are subject to
various risks and uncertainties and we claim the protection afforded by the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially from
those currently anticipated due to a number of factors in addition to those
discussed elsewhere or incorporated by reference in this prospectus, including:
o future changes in federal, state, local and third-party payor
regulations or policies (or in the interpretation of current
regulations) affecting governmental and third-party reimbursement for
clinical laboratory testing.
o adverse results from investigations of clinical laboratories by the
government, which may include significant monetary damages and/or
exclusion from the Medicare and Medicaid programs.
o loss or suspension of a license or imposition of a fine or penalties
under, or future changes in, the law or regulations of the Clinical
Laboratory Improvement Act of 1967, and the Clinical Laboratory
Improvement Amendments of 1988, or those of Medicare, Medicaid or
other federal, state or local agencies.
o failure to comply with the Federal Occupational Safety and Health
Administration requirements and the recently passed Needlestick
Safety and Prevention Act which may result in penalties and loss of
licensure.
o increased competition, including price competition.
o changes in payor mix, including an increase in capitated managed-cost
health care.
o our failure to obtain and retain new customers and alliance partners,
or a reduction in tests ordered or specimens submitted by existing
customers.
o our failure to integrate newly acquired businesses and the cost
related to such integration.
o adverse results in litigation matters.
o our ability to attract and retain experienced and qualified
personnel.
o failure to maintain our days sales outstanding levels.
9
USE OF PROCEEDS
We will not receive any of the proceeds from the resale of the LYONs by
the selling securityholders or from the common stock issuable upon conversion
or purchase of the LYONs.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
each of the calendar periods indicated:
Fiscal Years Ended December 31,
-------------------------------- Six-Months-Ended
1996 1997 1998 1999 2000 June 30, 2001
---- ---- ---- ---- ---- -------------
Ratio of earnings
to fixed charges... N/A N/A 2.14 2.65 4.33 7.01
These computations include us and our consolidated subsidiaries. For
purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before provision for income taxes, plus fixed charges. Fixed
charges include interest expense on debt and one-third of rental expense which
is deemed representative of the interest factor. After giving effect to the
offering of the LYONs and the application of the net proceeds from the
offering, the pro forma ratios of earnings to fixed charges for the year ended
December 31, 2000 and the six months ended June 30, 2001 would have been 6.11
and 10.56.
For the years ended December 31, 1997 and 1996, earnings were insufficient
to cover fixed charges by $161.3 million and $188.3 million, respectively.
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY
Our common stock trades on the New York Stock Exchange under the symbol
"LH."
The following table sets forth for the calendar periods indicated the high
and low intraday sales prices for our common stock reported on the NYSE
Composite Tape:
High Low
---- ---
1999
1st Quarter................................................... $11.56 $6.25
2nd Quarter................................................... 14.69 8.44
3rd Quarter................................................... 16.25 11.25
4th Quarter................................................... 19.38 12.19
2000
1st Quarter................................................... 23.44 15.63
2nd Quarter................................................... 40.50 19.69
3rd Quarter................................................... 66.25 38.13
4th Quarter................................................... 91.50 54.13
2001
1st Quarter................................................... 87.50 49.75
2nd Quarter................................................... 82.50 56.45
3rd Quarter................................................... 91.35 66.84
4th Quarter (through October 17, 2001)........................ 84.41 78.30
The last reported sale price on the New York Stock Exchange for our common
stock was $83.75 per share on October 17, 2001.
During May 2000, our stockholders approved a 1-for-10 reverse stock split.
Our stockholders subsequently approved a 2-for-1 stock split in May 2001 which
was paid in the form of a stock dividend on June 11, 2001. The reported sales
prices reflect such reverse stock split and 2-for-1 stock split. On July 31,
2001 there were 663 holders of record of our common stock.
It is currently our policy not to pay dividends on our common stock in
order to increase our flexibility with respect to our acquisition strategy. In
addition, our revolving credit facility places certain restrictions on the
payment of dividends.
10
DESCRIPTION OF CREDIT AGREEMENT
The following summary of the material provisions of our credit agreement
is subject to, and is qualified in its entirety by reference to, the terms of
our credit agreement.
We are a party to an Amended and Restated Credit Agreement dated as of
March 31, 1997, as amended, with the banks named therein and Credit Suisse
First Boston, as Administrative Agent. The terms of the credit agreement
provided for a term loan of $693.8 million and a revolving credit facility
commitment of up to $450 million. As of June 30, 2001 there was $412.5 million
outstanding under the term loan and $50.0 million drawn under the revolving
credit facility. We used the net proceeds from the private placement of the
LYONs to repay the then outstanding term loan in full.
Amounts under the revolving credit facility may be borrowed, prepaid and
reborrowed from time to time. The weighted average interest rate on our
revolving credit facility as of June 30, 2001 was approximately 5.0%. The
revolving credit facility expires on March 31, 2002. While there can be no
assurance that we will be successful, we plan to renegotiate the credit
agreement later this year to, among other things, reduce our cost of borrowing.
The credit agreement contains negative covenants limiting our ability to,
among other things:
o create liens;
o engage in sale leaseback transactions;
o engage in mergers or acquisitions;
o sell assets;
o declare or pay dividends, or make distributions on, or repurchase or
redeem capital stock or options, warrants or rights to receive
capital stock;
o issue capital stock or options, warrants or rights to receive capital
stock;
o make investments;
o change the nature of our business;
o incur debt;
o prepay, redeem or repurchase debt;
o limit our subsidiaries ability to pay dividends or create liens on
their assets; and
o make capital expenditures.
We amended our credit agreement to amend the limitation on our ability to
incur debt and the limitation on our ability to issue capital stock, options,
warrants or rights to receive capital stock to expressly permit us to issue the
LYONs and the shares of common stock issuable upon conversion or repurchase of
the LYONs.
The credit agreement requires us to comply with certain financial ratios
and tests relating to leverage, interest coverage, minimum stockholders' equity
and certain other affirmative covenants relating to, among other things,
reporting requirements and transactions with affiliates.
The credit agreement also requires all of our material subsidiaries to
guarantee amounts outstanding thereunder. Laboratory Corporation of America is
currently the only guarantor under the credit agreement.
11
DESCRIPTION OF LYONs
We issued the LYONs under an indenture, dated as of September 11, 2001,
between us and The Bank of New York, as trustee. The following summary does not
purport to be complete and is subject to, and qualified by reference to, all of
the provisions of the indenture, which we urge you to read because they define
your rights as a LYONs holder. As used in this description of LYONs, the words
"we," "us," "our" or "LabCorp" refer only to LabCorp and do not include any
current or future subsidiary of LabCorp.
General
We issued $650,000,000 aggregate principal amount at maturity of the LYONs
in a private placement in September 2001, and an additional $94,000,000
aggregate principal amount at maturity of the LYONs pursuant to the exercise in
full by the initial purchaser of its over-allotment option in October 2001. The
LYONs will mature on September 11, 2021. Each $1,000 principal amount at
maturity of LYONs (a "LYON") will pay the principal amount at maturity of
$1,000 plus contingent additional principal (and accrued original issue
discount thereon), if any, at maturity. When used herein, principal amount at
maturity means the amount payable on the LYONs at maturity as determined on
September 11, 2001 and consequently does not include any contingent additional
principal (and accrued original issue discount thereon) that may become payable
at maturity as described below under "--Contingent Additional Principal." The
LYONs will be payable at the principal corporate trust office of the paying
agent, which initially will be an office or agency of the trustee, or an office
or agency maintained by us for such purpose, in the Borough of Manhattan, The
City of New York.
Each LYON was issued at a substantial discount from its principal amount
at maturity. Except as described below under "Contingent Cash Interest," we
will not make periodic payments of interest on the LYONs. The LYONs accrue
original issue discount while they remain outstanding. Original issue discount
accrues on a semi-annual bond equivalent basis at the initial yield to maturity
of the LYONs of 2.0% using a 360-day year composed of twelve 30-day months.
Original issue discount also accrues at that rate on any accrued contingent
additional principal. The commencement date for the accrual of original issue
discount is September 11, 2001.
We are treating the LYONs as debt instruments subject to the Treasury
regulations that provide special rules for contingent payment debt instruments.
The LYONs are issued with original issue discount for U.S. federal income tax
purposes. You agree in the indenture to treat your LYONs as contingent payment
debt instruments for U.S. federal income tax purposes and to be bound by our
application of the Treasury regulations that govern contingent payment debt
instruments, including our determination of the rate at which interest, also
referred to herein as tax original issue discount, is considered to accrue for
U.S. federal income tax purposes. Under the contingent payment debt
regulations, even if we do not pay any contingent cash interest on the LYONs,
holders are required to include accrued tax original issue discount in their
gross income for U.S. federal income tax purposes. The rate at which the tax
original issue discount accrues exceeds the initial yield to maturity and any
adjusted yield to maturity resulting from the accrual of contingent additional
principal. See "Certain U.S. Federal Income Tax Considerations."
Original issue discount, contingent cash interest, if any, and contingent
additional principal, if any, ceases to accrue on a LYON upon its maturity,
conversion, purchase by us at the option of a holder or redemption. We may not
reissue a LYON that has matured or been converted, purchased by us at your
option, redeemed or otherwise cancelled, except for registration of transfer,
exchange or replacement of such LYON.
LYONs may be presented for conversion at the office of the conversion
agent and for exchange or registration of transfer at the office of the
registrar. The conversion agent and the registrar shall initially be the
trustee. No service charge will be made for any registration of transfer or
exchange of LYONs. However, we may require the holder to pay any tax,
assessment or other governmental charge payable as a result of such transfer or
exchange.
Subordination
Payment on the LYONs is, to the extent provided in the indenture,
subordinated in right of payment to the prior payment in full of all of our
existing and future senior indebtedness. Payment on the LYONs is also
effectively subordinated to all of our subsidiaries' existing and future
indebtedness and other liabilities, including trade payables.
12
Upon any payment or distribution of assets of LabCorp to its creditors
upon any dissolution, winding up, liquidation or reorganization, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other
similar proceedings, the holders of all senior indebtedness shall first be
entitled to receive payment in full of all amounts due or to become due
thereon, or payment of such amounts shall have been provided for, before the
holders of the LYONs shall be entitled to receive any payment or distribution
with respect to any LYONs.
By reason of this subordination, in the event of our bankruptcy,
dissolution or reorganization, holders of senior indebtedness may receive more,
ratably, and holders of the LYONs may receive less, ratably, than our other
creditors.
In addition, no payment of the principal amount at the maturity of the
LYONs, issue price, accrued original issue discount, redemption price, change
in control purchase price, contingent cash interest, if any, and contingent
additional principal, if any, with respect to any LYONs may be made by us, nor
may we pay cash with respect to the purchase price of any LYONs (other than for
fractional shares) or acquire any LYONs for cash or property (except as set
forth in the indenture) if:
(1) any payment default on any senior indebtedness has occurred and is
continuing beyond any applicable grace period; or
(2) any default, other than a payment default with respect to senior
indebtedness, occurs and is continuing that permits the acceleration of the
maturity thereof and such default is either the subject of judicial proceedings
or we receive a written notice of such default from the holders of such senior
indebtedness.
Notwithstanding the foregoing, the payment blockage period shall end and
we may resume payments with respect to the LYONs and may acquire LYONs:
o when the default with respect to the senior indebtedness is cured or
waived; or
o in the case of a default described in (2) above, 179 or more days
pass after we receive notice of the default, provided that the terms
of the indenture otherwise permit the payment or acquisition of the
LYONs at that time.
No new period of payment blockage may be commenced pursuant to a similar notice
relating to the same default on the same issue of senior indebtedness unless
nine months have elapsed since we received the notice of default as provided
above.
In addition, no payment may be made on the LYONs if any LYONs are declared
due and payable prior to their stated maturity by reason of the occurrence of
an event of default until the earlier of 120 days after the date of such
acceleration or the payment in full of all senior indebtedness, but only if
such payment is then otherwise permitted under the terms of the indenture.
Notwithstanding the foregoing, upon the expiration of any payment blockage
period described above, holders of the LYONs are required to pay over any
amounts collected by such holders to the holders of senior indebtedness to the
extent necessary to pay all holders of senior indebtedness in full.
The term "senior indebtedness" of LabCorp means the principal, premium (if
any) and unpaid interest on all present and future:
(1) indebtedness of LabCorp for borrowed money;
(2) obligations of LabCorp evidenced by bonds, debentures, notes or
similar instruments;
(3) obligations of LabCorp under (a) interest rate swaps, caps, collars,
options, and similar arrangements, (b) any foreign exchange contract,
currency swap contract, futures contract, currency option contract,
or other foreign currency hedge, and (c) credit swaps, caps, floors,
collars and similar arrangements;
(4) indebtedness incurred, assumed or guaranteed by LabCorp in connection
with the acquisition by it or a subsidiary of LabCorp of any
business, properties or assets (except purchase money indebtedness
classified as accounts payable under generally accepted accounting
principles);
13
(5) all obligations and liabilities, contingent or otherwise, in respect
of leases of LabCorp required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease
obligations on the balance sheet of LabCorp and all obligations and
liabilities, contingent or otherwise, under any lease or related
document, including a purchase agreement, in connection with the
lease of real property which provides that LabCorp is contractually
obligated to purchase or cause a third party to purchase the leased
property and thereby guarantee a minimum residual value of the leased
property to the lessor and the obligations of LabCorp under such
lease or related document to purchase or to cause a third party to
purchase such leased property;
(6) reimbursement obligations of LabCorp in respect of letters of credit
relating to indebtedness or other obligations of LabCorp that qualify
as indebtedness or obligations of the kind referred to in clauses (1)
through (5) above; and
(7) obligations of LabCorp under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (1) through (6) above,
in each case unless in the instrument creating or evidencing the indebtedness
or obligation or pursuant to which the same is outstanding it is provided that
such indebtedness or obligation is not senior in right of payment to the LYONs
or that such indebtedness or obligation is subordinated to any other
indebtedness or obligation of LabCorp, unless such indebtedness or obligation
expressly provides that such indebtedness or obligations are to be senior in
right of payment to the LYONs. At June 30, 2001, LabCorp had approximately
$474.1 million of senior indebtedness outstanding.
The LYONs are effectively subordinated to all existing and future
liabilities of LabCorp's subsidiaries. Any right of LabCorp to participate in
any distribution of the assets of any of its subsidiaries upon the liquidation,
reorganization or insolvency of such subsidiary (and the consequent right of
the holders of the LYONs to participate in those assets) will be subject to the
claims of the creditors (including trade creditors) of such subsidiary, except
to the extent that claims of LabCorp itself as a creditor of such subsidiary
may be recognized, in which case the claims of LabCorp would still be
subordinate to any security interest in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by LabCorp. The indenture
does not restrict LabCorp from incurring additional indebtedness, including
senior indebtedness.
Conversion Rights
Holders may surrender LYONs for conversion into shares of our common stock
only if at least one of the conditions described below is satisfied. In
addition, a LYON for which a holder has delivered a purchase notice or a change
in control purchase notice requiring us to purchase the LYONs may be
surrendered for conversion only if such notice is withdrawn in accordance with
the indenture.
The initial conversion rate is 6.7054 shares of common stock per LYON,
subject to adjustment upon the occurrence of certain events described below. A
holder of a LYON otherwise entitled to a fractional share will receive cash
equal to the applicable portion of the then current sale price of our common
stock on the trading day immediately preceding the conversion date.
The ability to surrender LYONs for conversion will expire at the close of
business on September 11, 2021.
The conversion agent will, on our behalf, determine if the LYONs are
convertible and notify the trustee and us accordingly. If one or more of the
conditions to the conversion of the LYONs has been satisfied, we will promptly
notify the holders of the LYONs thereof and use our reasonable best efforts to
post this information on our website or otherwise publicly disclose this
information.
Conversion Based on Common Stock Price. Holders may surrender LYONs for
conversion in any calendar quarter commencing after December 31, 2001, if the
sale price (as defined below) of our common stock for at least 20 trading days
in a period of 30 consecutive trading days ending on the last trading day of
the preceding calendar quarter is more than a specified percentage, beginning
at 120% and declining 0.1282% per calendar quarter thereafter until it reaches
approximately 110% for the calendar quarter beginning July 1, 2021, of the
accreted conversion price per share of common stock on the last day of such
preceding calendar quarter. The accreted conversion price per share as of any
day
14
will equal the issue price of a LYON plus the accrued original issue discount
and any accrued contingent additional principal as of such day, divided by the
number of shares of common stock issuable upon conversion of a LYON on that
day.
The table below shows the conversion trigger price per share of our common
stock in respect of each of the first 20 calendar quarters following September
11, 2001. These conversion trigger prices reflect the accreted conversion price
per share of common stock multiplied by the applicable percentage for the
respective calendar quarter. Thereafter, the accreted conversion price per
share of common stock increases each calendar quarter by the accreted original
issue discount and any contingent additional principal for the calendar quarter
and the applicable percentage declines by 0.1282% per calendar quarter. The
conversion trigger price for the calendar quarter beginning July 1, 2021 is
$163.42 assuming no contingent additional principal accrues.
(1) (3)
Accreted (2) Conversion
Conversion Applicable Trigger-Price
Price Percentage (1) x (2)
---------- ---------- --------------
Quarter*
2002
1st Quarter....................... 100.78 120.0000% 120.93
2nd Quarter....................... 101.28 119.8718% 121.41
3rd Quarter....................... 101.79 119.7436% 121.88
4th Quarter....................... 102.29 119.6154% 122.36
2003
1st Quarter....................... 102.80 119.4872% 122.84
2nd Quarter....................... 103.32 119.3590% 123.32
3rd Quarter....................... 103.83 119.2308% 123.80
4th Quarter....................... 104.35 119.1026% 124.28
2004
1st Quarter....................... 104.87 118.9744% 124.77
2nd Quarter....................... 105.39 118.8462% 125.25
3rd Quarter....................... 105.92 118.7180% 125.74
4th Quarter....................... 106.45 118.5898% 126.23
2005
1st Quarter....................... 106.98 118.4616% 126.73
2nd Quarter....................... 107.51 118.3334% 127.22
3rd Quarter....................... 108.05 118.2052% 127.72
4th Quarter....................... 108.59 118.0770% 128.21
2006
1st Quarter....................... 109.13 117.9488% 128.72
2nd Quarter....................... 109.67 117.8206% 129.22
3rd Quarter....................... 110.22 117.6924% 129.72
4th Quarter....................... 110.77 117.5642% 130.22
-------------------
* This table assumes no events have occurred that would require an
adjustment to the conversion rate. This table also assumes that no
contingent additional principal has accrued.
Conversion Based on Credit Rating Downgrade. Holders may also surrender a
LYON for conversion during any period that the rating assigned to the LYONs by
Standard & Poor's Ratings Services is BB- or lower.
Conversion Based upon Notice of Redemption. A holder may surrender for
conversion a LYON called for redemption at any time prior to the close of
business on the second business day immediately preceding the redemption date,
even if it is not otherwise convertible at such time. A LYON for which a holder
has delivered a purchase notice or a change in control purchase notice, as
described below, requiring us to purchase such LYON, may be surrendered for
conversion only if such notice is withdrawn in accordance with the indenture.
A "business day" is any weekday that is not a day on which banking
institutions in The City of New York are authorized or obligated to close. A
"trading day" is any day on which the NYSE is open for trading or, if the
applicable
15
security is quoted on the Nasdaq National Market, a day on which trades may be
made on such market or, if the applicable security is not so listed, admitted
for trading or quoted, any business day.
Conversion Upon Occurrence of Certain Corporate Transactions. If we are
party to a consolidation, merger or binding share exchange or a transfer of all
or substantially all of our assets, a LYON may be surrendered for conversion at
any time from and after the date which is 15 days prior to the anticipated
effective date of the transaction until 15 days after the actual effective date
of such transaction, and at the effective date, the right to convert a LYON
into common stock will be changed into a right to convert it into the kind and
amount of securities, cash or other assets of LabCorp or another person which
the holder would have received if the holder had converted the holder's LYONs
immediately prior to the transaction. If such transaction also constitutes a
change in control of LabCorp, as defined in the indenture, the holder will be
able to require us to purchase all or a portion of such holder's LYONs as
described under "--Change in Control Permits Purchase of LYONs at the Option of
the Holder."
Conversion Adjustments and Delivery of Common Stock. On conversion of a
LYON, a holder will not receive any cash payment representing accrued original
issue discount, contingent additional principal, if any, or, except as
described below, contingent cash interest. Delivery to the holder of the full
number of shares of common stock into which the LYON is convertible, together
with any cash payment of such holder's fractional shares, will be deemed:
o to satisfy our obligation to pay the principal amount at maturity of
the LYON; and
o to satisfy our obligation to pay accrued original issue discount and
contingent additional principal, if any, attributable to the period
from September 11, 2001 through the conversion date.
As a result, accrued original issue discount and contingent additional
principal, if any, are deemed paid in full rather than cancelled, extinguished
or forfeited.
We and each holder of a LYON also agree that delivery to the holder of the
full number of shares of common stock into which the LYON is convertible,
together with any cash payment of such holder's fractional shares will be
treated as a payment (in an amount equal to the sum of the then fair market
value of such shares and such cash payment, if any) on the LYON for purposes of
the Treasury regulations applicable to debt instruments with contingent
payments. See "Certain U.S. Federal Income Tax Considerations."
If contingent cash interest is payable to holders of LYONs during any
particular six-month period, and such LYONs are converted after the applicable
record date therefor and prior to the next succeeding interest payment date,
holders of such LYONs at the close of business on the record date will receive
the contingent cash interest payable on such LYONs on the corresponding
interest payment date notwithstanding the conversion. Such LYONs, upon
surrender for conversion, must be accompanied by funds equal to the amount of
contingent cash interest payable on the LYONs so converted, unless such LYONs
have been called for redemption, in which case no such payment shall be
required.
The conversion rate will not be adjusted for accrued original issue
discount, or contingent additional principal, if any, or any contingent cash
interest. A certificate for the number of full shares of common stock into
which any LYON is converted, together with any cash payment for fractional
shares, will be delivered through the conversion agent as soon as practicable
following the conversion date. For a discussion of the tax treatment of a
holder receiving shares of our common stock upon surrendering LYONs for
conversion, see "Certain U.S. Federal Income Tax Considerations--Tax
Consequences to United States Holders--Sale, Exchange, Conversion or Retirement
of LYONs."
We will adjust the conversion rate for:
o dividends or distributions on our common stock payable in our common
stock or our other capital stock;
o subdivisions, combinations or certain reclassifications of our common
stock;
o distributions to all holders of our common stock of certain rights to
purchase our common stock for a period expiring within 60 days at
less than the then current sale price; and
o distributions to the holders of our common stock of our assets
(including shares of capital stock of a subsidiary) or debt
securities or certain rights to purchase our securities (excluding
cash dividends or other
16
cash distributions from current or retained earnings, unless the
amount thereof, together with all other cash dividends paid in the
preceding 12 month period, per share exceeds the sum of (i) 5% of the
sale price of our common stock on the day preceding the date of
declaration of such dividend or other distribution and (ii) the
quotient of the amount of any contingent interest paid during such
period divided by the number of shares of common stock issuable upon
conversion of a LYON at the conversion rate in effect on the
contingent interest payment date).
In the event that we pay a dividend or make a distribution on shares of
our common stock consisting of capital stock of, or similar equity interests
in, a subsidiary or other business unit of ours, the conversion rate will be
adjusted based on the market value of the securities so distributed relative to
the market value of our common stock, in each case based on the average closing
prices of those securities for the 10 trading days commencing on and including
the fifth trading day after the date on which "ex-dividend trading"commences
for such dividend or distribution on the NYSE or such other national or
regional securities exchange or market on which the securities are then listed
or quoted.
In the event we elect to make a distribution described in the third or
fourth bullet of the preceding paragraph which, in the case of the fourth
bullet, has a per share value equal to more than 15% of the sale price of our
shares of common stock on the day preceding the declaration date for such
distribution, we will be required to give notice to the holders of LYONs at
least 20 days prior to the ex-dividend date for such distribution and, upon the
giving of such notice, the LYONs may be surrendered for conversion at any time
until the close of business on the business day prior to the ex- dividend date
or until we announce that such distribution will not take place.
No adjustment to the conversion rate need be made if holders of the LYONs
may participate in the transaction or in certain other cases.
If we were to implement a stockholders' rights plan providing that, upon
conversion of the LYONs, the holders of such LYONs will receive, in addition to
the shares of common stock issuable upon such conversion, the rights related to
such common stock, there shall not be any adjustment to the conversion
privilege or conversion rate as a result of:
o the issuance of the rights;
o the distribution of separate certificates representing the rights;
o the exercise or redemption of such rights in accordance with any
rights agreement; or
o the termination or invalidation of the rights.
The indenture permits us to increase the conversion rate from time to
time. We are not required to adjust the conversion rate until adjustments
greater than 1% have occurred.
Holders of the LYONs may, in certain circumstances, be deemed to have
received a distribution subject to federal income tax as a dividend upon:
o a taxable distribution to holders of common stock which results in an
adjustment of the conversion rate;
o an increase in the conversion rate at our discretion; or
o failure to adjust the conversion rate in some instances.
See "Certain U.S. Federal Income Tax Considerations--Tax Consequences to
United States Holders--Constructive Dividends."
Contingent Cash Interest
Subject to the record date provisions described below, we will pay
contingent cash interest to the holders of LYONs during any six-month period
from September 12 to March 11 and from March 12 to September 11, with the
initial six- month period commencing after September 11, 2006, if the average
market price of a LYON for the five trading days ending on the third trading
day immediately preceding the first day of the applicable six-month period
equals 120% or
17
more of the sum of the issue price, accrued original issue discount and
contingent additional principal, if any, for such LYON as of the day
immediately preceding the first day of the applicable six-month period. See
"--Redemption of LYONs at the Option of LabCorp" for some of these values.
Notwithstanding the above, if we declare a dividend for which the record date
falls prior to the first day of a six-month period but the payment date falls
within such six-month period, then the five trading day period for determining
the average market price of a LYON will be the five trading days ending on the
third trading day immediately preceding such record date.
During any period when contingent cash interest shall be payable, the
contingent cash interest payable per LYON in respect of any quarterly period
will equal the greater of 0.0625% of the average market price of a LYON for the
five trading day measurement period or any regular cash dividends paid by us
per share on our common stock during that quarterly period multiplied by the
then applicable conversion rate, provided that if we do not pay cash dividends
during a semi-annual period, we will pay contingent cash interest semi-annually
at a rate of 0.125% of the average market price of a LYON for the measurement
period.
Contingent cash interest, if any, will accrue and be payable to holders of
LYONs as of the record date, which shall be the 15th day preceding the last day
of the relevant six-month period, or, if we pay a regular cash dividend on our
common stock during a quarter within the relevant six-month period, to holders
of LYONs as of the record date for the related common stock dividend. If we
only pay a regular cash dividend on our common stock during one quarter within
the relevant six-month period, the remaining contingent cash interest, if any,
will accrue and be payable as of the 15th day preceding the last day of the
relevant six-month period. We will make contingent cash interest payments on
the last day of the relevant six-month period or, if we pay a regular cash
dividend on our common stock during the relevant six- month period, on the
payment date for the related common stock dividend. The payment of contingent
cash interest will not affect the accrual of original issue discount.
Regular cash dividends mean quarterly or other periodic cash dividends on
our common stock as declared by our Board of Directors as part of its cash
dividend payment practices and that are not designated by it as extraordinary
or special or other nonrecurring dividends.
The market price of a LYON on any date of determination means the average
of the secondary market bid quotations per LYON obtained by the bid
solicitation agent for $10 million principal amount at maturity of LYONs at
approximately 4:00 p.m., New York City time, on such determination date from
three independent nationally recognized securities dealers we select, provided
that if:
o At least three such bids are not obtained by the bid solicitation
agent; or
o In our reasonable judgment, the bid quotations are not indicative of
the secondary market value of the LYONs.
then the market price of a LYON will equal (a) the then applicable conversion
rate of the LYONs multiplied by (b) the average sale price of our common stock
on the five trading days ending on such determination date, appropriately
adjusted.
The bid solicitation agent will initially be The Bank of New York. We may
change the bid solicitation agent, but the bid solicitation agent will not be
our affiliate. The bid solicitation agent will solicit bids from securities
dealers that are believed by us to be willing to bid for the LYONs.
Upon determination that LYON holders will be entitled to receive
contingent cash interest during a relevant six- month period, we will issue a
press release and publish such information on our website or through such other
public medium as we may use at that time as soon as practicable.
Contingent Additional Principal
On September 11, 2004, the rate of accrual on the LYONs will be reset for
two years if our stock price factor is at or below the thresholds set forth in
the table below. We refer to the amount that accrues as a result of the
adjusted rate of accrual on the LYONs, other than original issue discount, as
contingent additional principal. If contingent additional principal accrues,
the adjusted rate of accrual will be calculated by deducting from our two year
unsecured subordinated debt rate at that time an amount set forth in the table
below, except that the adjusted rate of accrual may not be greater than 9.0% or
less than the initial yield to maturity of 2.0%. Contingent additional
principal will accrue
18
on a semi-annual bond equivalent basis for a period of two years. No contingent
additional principal will accrue after September 11 , 2006, but thereafter
original issue discount will continue to accrue at a rate of 2.0% per year. If
our stock price factor is above the highest stock price factor threshold in the
applicable column set forth in the table below, then no contingent additional
principal will accrue on the LYONs and only original issue discount will
continue to accrue. Where we refer to "subordinated debt" in this prospectus,
we mean our current or future indebtedness with subordination provisions
substantially similar to those contained in the LYONs.
Our stock price factor is the average of the closing prices of our common
stock for the 20 consecutive trading days ending on the third trading day prior
to September 11, 2004 expressed as a percentage of the accreted conversion
price as of September 11, 2004.
Our "subordinated debt rate" means the average of the interest rate
quotations for a new issuance of our two year semi-annual cash-pay unsecured
subordinated debt obtained by the rate solicitation agent for an issuance in an
amount equal to the issue price of the LYONs plus any accrued original issue
discount through September 11, 2004 at approximately 4:00 p.m., New York City
time, on the day three trading days prior to September 11, 2004 from three
independent nationally recognized securities dealers we select. If three such
quotations are not obtained by the rate solicitation agent, then we will use
the average of two quotations obtained. If only one such quotation is obtained,
we will use such quotation. In the event that no quotations are obtained, our
subordinated debt rate will be determined by the good faith determination of
our board of directors. The rate solicitation agent will initially be The Bank
of New York. We may change the rate solicitation agent, but the rate
solicitation agent will not be our affiliate. The rate solicitation agent will
solicit rate quotations from securities dealers that are believed by us to be
willing to provide a quote for our subordinated debt.
The table below shows the amount to be deducted from our applicable
subordinated debt rate to determine the aggregate adjusted rate of accrual at
which original issue discount and contingent additional principal will accrue
on the LYONs during the two years commencing September 11, 2004.
Stock Price Factor Threshold
If Two Year Unsecured Subordinated Debt Rate at September 11, 2004 is:
-----------------------------------------------------------------------------------------
Amount to be Deducted from
Two Year Unsecured 4.50% >5.00% >5.50% >6.00% >6.50% >7.00% 7.50% >8.00%
Subordinated Debt Rate to to to to to to to to to
Determine the Adjusted Rate: <=4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50% >8.50%
---------------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
-6.00% <=74%
-5.50% <=73% <=71%
-5.00% <=72% <=70% <=69%
-4.50% <=69% <=69% <=68% <=66%
-4.00% <=67% <=67% <=67% <=65% <=64%
-3.50% <=66% <=65% <=64% <=64% <=63% <=62%
-3.00% <=64% <=64% <=63% <=61% <=61% <=61% <=59%
-2.50% <=62% <=61% <=60% <=60% <=59% <=58% <=58% <=57%
-2.00% <=59% <=58% <=58% <=57% <=56% <=55% <=55% <=54% <=53%
-1.50% <=56% <=55% <=54% <=54% <=53% <=53% <=53% <=52% <=51% <=51%
-1.00% <=52% <=51% <=51% <=51% <=50% <=49% <=49% <=48% <=48% <=48%
-0.50% <=47% <=46% <=45% <=45% <=44% <=44% <=44% <=43% <=43% <=43%
0.00% <=40% <=40% <=39% <=38% <=38% <=38% <=37% <=37% <=37% <=36%
To determine the adjusted rate of accrual on the LYONs, once our two year
subordinated debt rate and stock price factor have been determined, identify
the column in the table above that corresponds to our two year subordinated
debt rate. Then, identify the row in that column of the table that corresponds
to our stock price factor. Locate the percentage in the left most column of the
table in that row. Our two year subordinated debt rate minus that percentage
equals the adjusted rate of accrual.
For example, if, according to the procedures described above, our
subordinated debt rate is determined to be 6.25% and the average of the closing
prices of our common stock for the 20 consecutive trading days ending on the
third trading day prior to September 11, 2004 is $66.99, which is 63% of
$106.33, the accreted conversion price (assuming no adjustments) of the LYONs,
then we will deduct 3.00% from 6.25% to determine the adjusted rate of accrual
for the two year period ending September 11, 2006 of 3.25%. In the event that
any contingent additional principal accrues on
19
the LYONs, the amount we will pay at maturity of the LYONs will equal the
principal amount at maturity of $1,000 per LYON plus contingent additional
principal (and accrued original issue discount thereon). Contingent additional
principal will accrue on a semi-annual bond equivalent basis, using a 360-day
year composed of twelve 30-day months. The prices and percentages in the
example above are for illustration only. There can be no assurance that the
actual prices and percentages will correspond to the range of prices and
percentages shown.
In the event that any contingent additional principal accrues on the
LYONs, we will disseminate a press release containing this information,
including the aggregate adjusted rate of accrual at which original issue
discount and contingent additional principal will accrue, revised redemption
prices, revised prices at which we will purchase the LYONs at the option of the
holders and the amount payable upon maturity of the LYONs. In addition, we will
publish this information on our website or through such other public medium as
we may use at that time. We will also notify the trustee under the indenture of
any accrual of contingent additional principal (and accrued original issue
discount thereon) on a periodic basis. Following receipt of such notice, the
trustee will provide such information to The Depository Trust Company for
dissemination to its participants.
Redemption of LYONs at the Option of LabCorp
No sinking fund is provided for the LYONs. Prior to September 11, 2006, we
cannot redeem the LYONs at our option. Beginning on September 11, 2006, we may
redeem the LYONs for cash, as a whole at any time or from time to time in part.
We will give not less than 30 days' or more than 60 days' notice of redemption
by mail to holders of LYONs.
If redeemed at our option, the LYONs will be redeemed at a price equal to
the sum of the issue price plus accrued original issue discount and contingent
additional principal, if any, on such LYONs as of the applicable redemption
date. The table below shows the redemption prices (assuming no contingent
additional principal accrues) of a LYON on September 11, 2006, on each
September 11 thereafter prior to maturity and at maturity on September 11,
2021. In addition, the redemption price of a LYON that is redeemed between the
dates listed below would include an amount reflecting the additional accrued
original issue discount that has accrued on such LYON since the immediately
preceding date in the table below. In addition, if contingent additional
principal accrues, these prices will be increased to include such contingent
additional principal (and any original issue discount accrued thereon).
(2)
(1) Accrued (3)
LYON Original Redemption
Issue Issue Price
Redemption Date Price Price (1)+(2)
--------------- ----- ----- -------
September 11,
2006................................... 671.65 70.27 741.92
2007................................... 671.65 85.18 756.83
2008................................... 671.65 100.40 772.05
2009................................... 671.65 115.91 787.56
2010................................... 671.65 131.74 803.39
2011................................... 671.65 147.89 819.54
2012................................... 671.65 164.37 836.02
2013................................... 671.65 181.17 852.82
2014................................... 671.65 198.31 869.96
2015................................... 671.65 215.80 887.45
2016................................... 671.65 233.64 905.29
2017................................... 671.65 251.83 923.48
2018................................... 671.65 270.39 942.04
2019................................... 671.65 289.33 960.98
2020................................... 671.65 308.65 980.30
At stated maturity..................... 671.65 328.35 1,000.00
If less than all of the outstanding LYONs are to be redeemed, the trustee
will select the LYONs to be redeemed in principal amounts at maturity of $1,000
or integral multiples of $1,000. In this case, the trustee may select the LYONs
by lot, pro rata or by any other method the trustee considers fair and
appropriate. If a portion of a holder's LYONs is
20
selected for partial redemption and the holder converts a portion of the LYONs,
the converted portion will be deemed to be the portion selected for redemption.
Purchase of LYONs by LabCorp at the Option of the Holder
On September 11, 2004, September 11, 2006 and September 11, 2011, we may,
at the option of the holder, be required to purchase any outstanding LYON for
which a written purchase notice has been properly delivered by the holder and
not withdrawn, subject to certain additional conditions. Holders may submit
their LYONs for purchase to the paying agent at any time from the opening of
business on the date that is 20 business days prior to such purchase date until
the close of business on the first business day immediately preceding the
purchase date.
The purchase price of a LYON will be as set forth below, plus, if
applicable, accrued contingent additional principal (and any accrued original
discount thereon):
o $712.97 per LYON on September 11, 2004;
o $741.92 per LYON on September 11, 2006; and
o $819.54 per LYON on September 11, 2011.
The above purchase prices reflect a price equal to the sum of the issue
price and accrued original issue discount on such LYONs as of the applicable
purchase date.
We may, at our option, elect to pay the purchase price in cash or shares
of common stock, or any combination thereof. For a discussion of the tax
treatment of a holder receiving cash, common stock or any combination thereof,
see "Certain U.S. Federal Income Tax Considerations--Tax Consequences to United
States Holders--Sale, Exchange, Conversion or Retirement of the LYONs."
We are required to give notice on a date not less than 20 business days
prior to each purchase date to all holders at their addresses shown in the
register of the registrar, and to beneficial owners as required by applicable
law, stating among other things:
o the amount of the purchase price;
o whether we will pay the purchase price of LYONs in cash or common
stock or any combination thereof, specifying the percentages of each;
o if we elect to pay in common stock, the method of calculating the
market price of the common stock; and
o the procedures that holders must follow to require us to purchase
their LYONs.
The purchase notice given by each holder electing to require us to
purchase LYONs shall state:
o the certificate numbers of the holder's LYONs to be delivered for
purchase;
o the portion of the principal amount at maturity of LYONs to be
purchased, which must be $1,000 or an integral multiple of $1,000;
o that the LYONs are to be purchased by us pursuant to the applicable
provisions of the LYONs; and
o in the event we elect, pursuant to the notice that we are required to
give, to pay the purchase price in common stock, in whole or in part,
but the purchase price is ultimately to be paid to the holder
entirely in cash because any of the conditions to payment of the
purchase price or a portion of the purchase price in common stock is
not satisfied prior to the close of business on the purchase date, as
described below, whether the holder elects:
(1) to withdraw the purchase notice as to some or all of the LYONs
to which it relates, or
21
(2) to receive cash in respect of the entire purchase price for all
LYONs or portions of LYONs subject to such purchase notice.
If the purchase price for the LYONs subject to the purchase notice is
ultimately to be paid to a holder entirely in cash because we have not
satisfied one or more of the conditions to payment of the purchase price in
common stock prior to the close of business on the purchase date, a holder
shall be deemed to have elected to receive cash in respect of the entire
purchase price for all such LYONs unless such holder has properly notified us
of its election to withdraw the purchase notice. For a discussion of the tax
treatment of a holder receiving cash instead of common stock, see "Certain U.S.
Federal Income Tax Considerations--Tax Consequences to United States
Holders--Sale, Exchange, Conversion or Retirement of the LYONs."
Any purchase notice may be withdrawn by the holder by a written notice of
withdrawal delivered to the paying agent prior to the close of business on the
first business day immediately preceding the purchase date.
o The notice of withdrawal shall state:
o the principal amount at maturity being withdrawn;
o if certificated LYONs have been issued, the certificate numbers of
the LYONs being withdrawn, or if not certificated, such notice must
comply with appropriate DTC procedures; and
o the principal amount at maturity, if any, of the LYONs that remains
subject to the purchase notice.
If we elect to pay the purchase price, in whole or in part, in shares of
our common stock, the number of such shares we deliver shall be equal to the
portion of the purchase price to be paid in common stock divided by the market
price of a share of common stock.
We will pay cash based on the market price for all fractional shares of
common stock in the event we elect to deliver common stock in payment, in whole
or in part, of the purchase price. See "Certain U.S. Federal Income Tax
Considerations--Tax Consequences to United States Holders--Sale, Exchange,
Conversion or Retirement of LYONs."
The market price of our common stock shall be an amount equal to the
average of the sale prices of our common stock for the five-trading-day period
ending on the third business day prior to the applicable purchase date, or, if
such business day is not a trading day, then on the last trading day prior to
such business day, appropriately adjusted to take into account the occurrence,
during the period commencing on the first of the trading days during the five
day trading period and ending on the purchase date, of events that would result
in an adjustment of the conversion rate with respect to the common stock. See
"--Conversion Rights" for a description of the manner in which the sales price
of our common stock is determined.
The sale price of our common stock on any date means the closing per share
sale price (or if no closing sale price is reported, the average of the bid and
ask prices or, if more than one in either case, the average of the average bid
and the average ask prices) on such date as reported in composite transactions
for the principal United States securities exchange on which the common stock
is traded or, if the common stock is not listed on a United States national or
regional securities exchange, as reported by the National Association of
Securities Dealers Automated Quotation System or by the National Quotation
Bureau Incorporated. In the absence of a quotation, we will determine the sale
price on the basis of such quotations as we consider appropriate.
Because the market price of our common stock is determined prior to the
applicable purchase date, holders of LYONs bear the market risk with respect to
the value of the common stock to be received from the date such market price is
determined to such purchase date. We may pay the purchase price or any portion
of the purchase price in common stock only if the information necessary to
calculate the market price is published in a daily newspaper of national
circulation.
Upon determination of the actual number of shares of common stock in
accordance with the foregoing provisions, we will promptly issue a press
release and publish such information on our website or through such other
public medium as we may use at that time.
21
Our right to purchase LYONs, in whole or in part, with common stock is
subject to our satisfying various conditions, including:
o listing the common stock on the principal United States securities
exchange on which our common stock is then listed or, if not so
listed, on Nasdaq;
o the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration.
If such conditions are not satisfied with respect to a holder prior to the
close of business on the purchase date, we will pay the purchase price of the
LYONs of the holder entirely in cash. See "Certain U.S. Federal Income Tax
Considerations--Tax Consequences to United States Holders--Sale, Exchange,
Conversion or Retirement of the LYONs." We may not change the form or
components or percentages of components of consideration to be paid for the
LYONs once we have given the notice that we are required to give to holders of
LYONs, except as described in the first sentence of this paragraph.
In connection with any purchase offer, we will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be
applicable; and
o file Schedule TO or any other required schedule under the Exchange
Act.
Payment of the purchase price for a LYON for which a purchase notice has
been delivered and not validly withdrawn is conditioned upon delivery of the
LYON, together with necessary endorsements, to the paying agent at any time
after delivery of the purchase notice. Payment of the purchase price for the
LYON will be made as soon as practicable following the later of the purchase
date or the time of delivery of the LYON.
If the paying agent holds money or securities sufficient to pay the
purchase price of the LYON on the business day following the purchase date in
accordance with the terms of the indenture, then, immediately after the
purchase date, the LYON will cease to be outstanding and accrued original issue
discount on such LYON will cease to accrue, whether or not the LYON is
delivered to the paying agent. Thereafter, all other rights of the holder shall
terminate, other than the right to receive the purchase price upon delivery of
the LYON.
No LYONs may be purchased for cash at the option of holders if there has
occurred and is continuing an event of default with respect to the LYONs, other
than a default in the payment of the purchase price with respect to such LYONs.
Change in Control Permits Purchase of LYONs at the Option of the Holder
In the event of a change in control (as defined below) occurring on or
prior to September 11, 2006 with respect to LabCorp, each holder will have the
right, at the holder's option, subject to the terms and conditions of the
indenture, to require us to purchase for cash all or any portion of the
holder's LYONs in integral multiples of $1,000 principal amount at maturity, at
a price for each $1,000 principal amount at maturity of such LYONs equal to the
issue price plus accrued original issue discount and contingent additional
principal, if any, to the purchase date. We are required to purchase the LYONs
as of a date no later than 35 business days after the occurrence of such change
in control, but in no event prior to the date on which such change in control
occurs. We refer to this date in this prospectus as the "change in control
purchase date."
Within 15 days after the occurrence of a change in control, we are
obligated to mail to the trustee and to all holders of LYONs at their addresses
shown in the register of the registrar and to beneficial owners as required by
applicable law a notice regarding the change in control, which notice shall
state, among other things:
o the events causing a change in control;
23
o the date of such change in control;
o the last date on which the purchase right may be exercised;
o the change in control purchase price;
o the change in control purchase date;
o the name and address of the paying agent and the conversion agent;
o the conversion rate and any adjustments to the conversion rate
resulting from such change in control;
o that LYONs with respect to which a change in control purchase notice
is given by the holder may be converted only if the change in control
purchase notice has been withdrawn in accordance with the terms of
the indenture; and
o the procedures that holders must follow to exercise these rights.
To exercise this right, the holder must deliver a written notice to the
paying agent prior to the close of business on the business day prior to the
change in control purchase date. The required purchase notice upon a change in
control shall state:
o the certificate numbers of the LYONs to be delivered by the holder;
o the portion of the principal amount at maturity of LYONs to be
purchased, which portion must be $1,000 or an integral multiple of
$1,000; and
o that we are to purchase such LYONs pursuant to the applicable
provisions of the LYONs.
Any such change in control purchase notice may be withdrawn by the holder
by a written notice of withdrawal delivered to the paying agent prior to the
close of business on the business day prior to the change in control purchase
date.
The notice of withdrawal shall state:
o the principal amount at maturity of the LYONs being withdrawn;
o the certificate numbers of the LYONs being withdrawn; and
o the principal amount at maturity, if any, of the LYONs that remains
subject to a change in control purchase notice.
Payment of the change in control purchase price for a LYON for which a
change in control purchase notice has been delivered and not validly withdrawn
is conditioned upon delivery of the LYON, together with necessary endorsements,
to the paying agent at any time after the delivery of such change in control
purchase notice. Payment of the change in control purchase price for such LYON
will be made promptly following the later of the change in control purchase
date or the time of delivery of such LYON.
If the paying agent holds money sufficient to pay the change in control
purchase price of the LYON on the business day following the change in control
purchase date in accordance with the terms of the indenture, then, immediately
after the change in control purchase date, accrued original issue discount,
contingent additional principal and contingent cash interest, if any, on the
LYON will cease to accrue, whether or not the LYON is delivered to the paying
agent. Thereafter, all other rights of the holder shall terminate, other than
the right to receive the change in control purchase price upon delivery of the
LYON.
Under the indenture, a "change in control" of LabCorp is deemed to have
occurred at such time as:
24
o any person, including its affiliates and associates, other than
LabCorp or its subsidiaries, files a Schedule 13D or Schedule TO (or
any successor schedule, form or report under the Exchange Act)
disclosing that such person has become the beneficial owner of 50% or
more of the aggregate voting power of our common stock and other
capital stock with equivalent voting rights, or other capital stock
into which the common stock is reclassified or changed, with certain
exceptions; or
o there shall be consummated any share exchange, consolidation or
merger of LabCorp pursuant to which the common stock would be
converted into cash, securities or other property, in each case other
than a share exchange, consolidation or merger of LabCorp in which
the holders of the common stock and other capital stock with
equivalent voting rights, immediately prior to the share exchange,
consolidation or merger have, directly or indirectly, at least a
majority of the total voting power in the aggregate of all classes of
capital stock of the continuing or surviving corporation immediately
after the share exchange, consolidation or merger.
The indenture does not permit our board of directors to waive our
obligation to purchase LYONs at the option of holders in the event of a change
in control.
In connection with any purchase offer in the event of a change in control,
we will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be
applicable; and
o file Schedule TO or any other required schedule under the Exchange
Act.
The change in control purchase feature of the LYONs may, in certain
circumstances, make more difficult or discourage a takeover of LabCorp. The
change in control purchase feature, however, is not the result of our knowledge
of any specific effort:
o to accumulate shares of common stock;
o to obtain control of us by means of a merger, tender offer,
solicitation or otherwise; or
o part of a plan by management to adopt a series of anti-takeover
provisions.
Instead, the change in control purchase feature is a standard term
contained in other LYONs offerings that have been marketed by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). The terms of the change
in control purchase feature resulted from negotiations between Merrill Lynch
and us.
We could, in the future, enter into certain transactions, including
certain recapitalizations, that would not constitute a change in control with
respect to the change in control purchase feature of the LYONs but that would
increase the amount of our or our subsidiaries' outstanding indebtedness.
No LYONs may be purchased at the option of holders upon a change in
control if there has occurred and is continuing an event of default with
respect to the LYONs, other than a default in the payment of the change in
control purchase price with respect to the LYONs.
Events of Default and Acceleration
The following are events of default under the indenture:
o default in the payment of any principal amount at maturity, accrued
original issue discount, any contingent additional principal,
redemption price, purchase price and change in control purchase
price, if any, with respect to the LYONs, whether or not such payment
is prohibited by the provisions of the indenture;
o default in payment of any contingent cash interest, which default
continues for 30 days;
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o default in the performance or breach of any covenant or warranty of
LabCorp in the indenture, which default continues uncured for a
period of 60 days after written notice to LabCorp by the trustee or
to LabCorp and the trustee by the holders of at least 25% in
principal amount at maturity of the outstanding LYONs;
o (A) our failure to make any payment by the end of any applicable
grace period after maturity of indebtedness, which term as used in
the indenture means obligations (other than nonrecourse obligations)
of LabCorp for borrowed money or evidenced by bonds, debentures,
notes or similar instruments in an aggregate principal amount in
excess of $25 million ("Indebtedness") and continuance of such
failure, or (B) the acceleration of Indebtedness because of a default
with respect to such Indebtedness without such Indebtedness having
been discharged or such acceleration having been cured, waived,
rescinded or annulled in case of (A) above, for a period of 30 days
after written notice to us by the trustee or to us and the trustee by
the holders of not less than 25% in aggregate principal amount at
maturity of the LYONs then outstanding. However, if such failure or
acceleration referred to in (A) or (B) above shall cease or be cured,
waived, rescinded or annulled, then the event of default by reason
thereof shall be deemed not to have occurred; or
o our failure to comply with any of our other agreements in the LYONs
or the indenture upon our receipt of notice of such default from the
trustee or from holders of not less than 25% in aggregate principal
amount at maturity of the LYONs, and our failure to cure (or obtain a
waiver of) such default within 60 days after we receive such notice;
or
o certain events of bankruptcy, insolvency or reorganization affecting
LabCorp or our significant subsidiaries.
If an event of default shall have occurred and be continuing, either the
trustee or the holders of not less than 25% in aggregate principal amount at
maturity of the LYONs then outstanding may declare the issue price of the LYONs
plus the original issue discount on the LYONs accrued through the date of such
declaration, and any accrued and unpaid contingent cash interest through the
date of such declaration and any accrued contingent additional principal
through the date of such declaration, to be immediately due and payable. In the
case of certain events of bankruptcy or insolvency of LabCorp, the issue price
of the LYONs plus the original issue discount, any contingent cash interest and
any accrued contingent additional principal through the occurrence of such
event shall automatically become and be immediately due and payable.
Mergers and Sales of Assets
The indenture provides that we may not consolidate with or merge into any
person or convey, transfer or lease our properties and assets substantially as
an entirety to another person, unless, among other items:
o the resulting, surviving or transferee person is a corporation
organized and existing under the laws of the United States, any state
thereof or the District of Columbia and such corporation (if other
than us) assumes all our obligations under the LYONs and the
indenture; and
o we or such successor corporation shall not immediately thereafter be
in default under the indenture.
Upon the assumption of our obligations by such corporation in such
circumstances, subject to certain exceptions, we shall be discharged from all
obligations under the LYONs and the indenture. Although such transactions are
permitted under the indenture, certain of the foregoing transactions occurring
on or prior to September 11, 2006 could constitute a change in control in
LabCorp, permitting each holder to require us to purchase the LYONs of such
holder as described above.
Modification
We and the trustee may modify or amend the indenture or the LYONs with the
consent of the holders of not less than a majority in aggregate principal
amount at maturity of the LYONs then outstanding. However, the consent of the
holders of each outstanding LYON would be required to:
o alter the manner of calculation or rate of accrual of original issue
discount, contingent cash interest or contingent additional principal
on any LYON or extend the time of payment;
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o make any LYON payable in money or securities other than that stated
in the LYON;
o change the stated maturity of any LYON;
o reduce the amount of principal payable upon acceleration of maturity
of the LYONs following a default;
o make any change that adversely affects the rights of a holder to
convert any LYON;
o make any change that adversely affects the right to require us to
purchase a LYON;
o impair the right to institute suit for the enforcement of any payment
with respect to, or conversion of, the LYONs; and
o change the provisions in the indenture that relate to modifying or
amending the indenture.
Without the consent of any holder of LYONs, we and the trustee may enter
into supplemental indentures for any of the following purposes:
o to evidence a successor to us and the assumption by that successor of
our obligations under the indenture and the LYONs;
o to add to our covenants for the benefit of the holders of the LYONs
or to surrender any right or power conferred upon us;
o to secure our obligations in respect of the LYONs;
o to make any changes or modifications to the indenture necessary in
connection with the registration of the LYONs under the Securities
Act and the qualifications of the LYONs under the Trust Indenture Act
as contemplated by the indenture;
o to cure any ambiguity or inconsistency in the indenture; provided,
however, that such amendment does not materially adversely affect the
rights of any holder of the LYONs; or
o to make any change that does not adversely affect the rights of any
holder of the LYONs.
The holders of a majority in principal amount at maturity of the
outstanding LYONs may, on behalf of all the holders of all LYONs:
o waive compliance by us with restrictive provisions of the indenture,
as detailed in the indenture; and
o waive any past default under the indenture and its consequences,
except a default in the payment of the principal amount at maturity,
issue price, accrued and unpaid interest, accrued original issue
discount, redemption price, purchase price or change in control
purchase price or obligation to deliver common stock upon conversion
with respect to any LYON or in respect of any provision which under
the indenture cannot be modified or amended without the consent of
the holder of each outstanding LYON affected.
Discharge of the Indenture
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancellation all outstanding LYONs or by
depositing with the trustee, the paying agent or the conversion agent, if
applicable, after the LYONs have become due and payable, whether at stated
maturity or any redemption date, or any purchase date, or a change in control
purchase date, or upon conversion or otherwise, cash or shares of common stock
(as applicable under the terms of the indenture) sufficient to pay all of the
outstanding LYONs and paying all other sums payable under the indenture.
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Calculations in Respect of LYONs
We are responsible for making all calculations called for under the LYONs.
These calculations include, but are not limited to, determination of the market
prices of our common stock. We will make all these calculations in good faith
and, absent manifest error, our calculations will be final and binding on
holders of LYONs. We will provide a schedule of our calculations to the
trustee, and the trustee is entitled to rely upon the accuracy of our
calculations without independent verification.
Limitations of Claims in Bankruptcy
If a bankruptcy proceeding is commenced in respect of LabCorp, the claim
of the holder of a LYON is, under Title 11 of the United States Code, limited
to the issue price of the LYON plus the portion of the accrued original issue
discount, any contingent cash interest and any contingent additional principal
that has accrued from September 11, 2001 to the commencement of the proceeding.
In addition, the holders of the LYONs will be subordinated in right of payment
to senior indebtedness and effectively subordinated to the indebtedness and
other liabilities of our subsidiaries.
Governing Law
The indenture and the LYONs are governed by, and construed in accordance
with, the laws of the State of New York.
Information Concerning the Trustee
The Bank of New York is the trustee, registrar, paying agent and
conversion agent under the indenture for the LYONs.
Book-Entry System
The LYONs have been issued only in the form of global securities held in
book-entry form. DTC or its nominee is the sole registered holder of the LYONs
for all purposes under the indenture. Owners of beneficial interests in the
LYONs represented by the global securities hold their interests pursuant to the
procedures and practices of DTC. As a result, beneficial interests in any such
securities are shown on, and may only be transferred through, records
maintained by DTC and its direct and indirect participants and any such
interest may not be exchanged for certificated securities, except in limited
circumstances. Owners of beneficial interests must exercise any rights in
respect of their interests, including any right to convert or require purchase
of their interests in the LYONs, in accordance with the procedures and
practices of DTC. Beneficial owners are not holders and are not entitled to any
rights under the global securities or the indenture. LabCorp and the trustee,
and any of their respective agents, may treat DTC as the sole holder and
registered owner of the global securities.
Exchange of Global Securities
LYONs represented by a global security are exchangeable for certificated
securities with the same terms only if:
o DTC is unwilling or unable to continue as depositary or if DTC ceases
to be a clearing agency registered under the Exchange Act and a
successor depositary is not appointed by us within 90 days;
o we decide to discontinue use of the system of book-entry transfer
through DTC (or any successor depositary); or
o a default under the indenture occurs and is continuing.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
facilitates the settlement of transactions among its participants through
electronic computerized book-entry changes in participants' accounts,
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, including Merrill Lynch,
banks, trust companies, clearing corporations and other organizations, some of
whom and/or whose representatives, own DTC. Access to DTC's book-entry system
is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is not complete and is
qualified in its entirety by reference to our amended and restated certificate
of incorporation.
Our authorized capital stock consists of 265,000,000 shares of common
stock, par value $0.10 per share, and 30,000,000 shares of preferred stock, par
value $0.10 per share. As of October 16, 2001, 70,242,018 shares of common
stock and no shares of preferred stock were issued and outstanding.
Common Stock
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders. The holders of outstanding
shares of common stock, subject to any preferences that may be applicable to
any outstanding series of preferred stock, are entitled to receive ratably such
dividends out of assets legally available therefor at such times and in such
amounts as our board of directors may from time to time determine. Upon our
liquidation or dissolution, the holders of our common stock will be entitled to
share ratably in our assets legally available for distribution to shareholders
after payment of liabilities and subject to the prior rights of any holders of
preferred stock then outstanding. Holders of common stock generally have no
conversion, sinking funds, redemption, preemptive or subscription rights. In
addition, the common stock does not have cumulative voting rights. Shares of
common stock are not liable to further calls or assessments by us and holders
of common stock are not liable for any of our liabilities.
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
Preferred Stock
On June 6, 2000, we called for redemption all of our outstanding Series A
Convertible Exchangeable Preferred Stock and Series B Convertible Pay-in-Kind
Preferred Stock. Conversion of these shares into common stock following such
announcement resulted in the issuance of approximately 21.2 million additional
shares of common stock.
By resolution of our board of directors and without any further vote or
action by our shareholders, we have the authority to issue preferred stock in
one or more series and to fix from time to time the number of shares to be
included in each such series and the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
such series. Our ability to issue preferred stock, while providing flexibility
in connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power of the holders of the common stock and could
have the effect of making it more difficult for a person to acquire, or of
discouraging a person from attempting to acquire, control of us.
29
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax
consequences of the ownership and disposition of the LYONs and, to the extent
described below, our common stock received upon conversion or repurchase of the
LYONs. This discussion applies only to LYONs or shares of our common stock that
are held as capital assets within the meaning of Section 1221 of the Code.
This discussion does not address the U.S. federal income tax consequences
of the ownership or disposition of our common stock, nor does it describe all
of the tax consequences that may be relevant to a holder in light of its
particular circumstances or to holders subject to special rules, such as:
o certain financial institutions;
o insurance companies;
o dealers in securities or foreign currencies;
o persons holding LYONs as part of a "straddle," "hedge," "conversion"
or other integrated transaction;
o United States Holders (as defined below) whose functional currency is
not the U.S. dollar;
o certain former citizens or residents of the United States;
o partnerships or other entities classified as partnerships for U.S.
federal income tax purposes; or
o persons subject to the alternative minimum tax.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), administrative pronouncements, judicial decisions and existing
and proposed Treasury regulations, changes to any of which subsequent to the
date of this prospectus may affect the tax consequences described herein,
possibly with retroactive effect.
Prospective purchasers of LYONs should consult their tax advisers with
regard to the application of the U.S. federal income tax laws to their
particular situations as well as the tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
Classification of the LYONs
We are treating the LYONs as indebtedness of LabCorp that is subject to
the Treasury regulations governing contingent payment debt instruments (the
"contingent debt regulations"). Pursuant to the terms of the indenture, we and
every holder agree (in the absence of an administrative pronouncement or
judicial ruling to the contrary) to treat the LYONs as debt instruments that
are subject to the contingent debt regulations and to be bound by our
application of the contingent debt regulations to the LYONs, including
generally our determination of the rate at which interest will be deemed to
accrue on the LYONs (and the related "projected payment schedule" determined by
us as described below) for U.S. federal income tax purposes.
However, the proper application of the contingent debt regulations to the
LYONs is uncertain in a number of respects, and no assurance can be given that
the Internal Revenue Service ("IRS") will not assert that the LYONs should be
treated differently. A different treatment from that described below could
affect the amount, timing, source and character of income, gain or loss with
respect to an investment in the LYONs. In particular, it might be determined
that a holder should not accrue interest income in excess of the initial yield
to maturity, should not recognize income or gain upon the conversion of a LYON
and should recognize capital gain or loss upon a taxable disposition of a LYON.
Accordingly, holders are urged to consult their tax advisors regarding the U.S.
federal income tax consequences of an investment in the LYONs (including
alternative characterizations of the LYONs) and with respect to any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
The remainder of this discussion assumes that the LYONs are treated as
indebtedness subject to the contingent debt regulations.
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Tax Consequences to United States Holders
As used herein, the term "United States Holder" means a beneficial owner
of a LYON that is for U.S. federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the
laws of the United States or of any political subdivision thereof; or
o an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source.
Interest Accruals on the LYONs
Under the contingent debt regulations, a United States Holder, regardless
of its method of accounting for U.S. federal income tax purposes, is required
to accrue interest income on the LYONs on a constant yield basis at an assumed
yield (the "comparable yield") determined on September 11, 2001, subject to
certain adjustments as described below. The comparable yield is based on the
yield at which we could issue a non-convertible, fixed-rate debt instrument
with no contingent payments, but with terms similar to those of the LYONs. We
have determined the comparable yield to be 8.68% compounded semi-annually,
which is higher than the initial yield to maturity of the LYONs. Accordingly,
in each year, United States Holders are required to include in income an amount
of interest in excess of accruals based on the initial yield to maturity of the
LYONs and in excess of any contingent cash interest payments actually received
in that year.
Solely for purposes of determining the amount of interest income that a
United States Holder is required to accrue, we are required to construct a
"projected payment schedule" in respect of the LYONs representing a series of
payments the amount and timing of which would produce a yield to maturity on
the LYONs equal to the comparable yield. The projected payment schedule for the
LYONs includes estimates for payments of contingent interest and an estimate
for a payment at maturity taking into account the conversion feature. United
States Holders may obtain the projected payment schedule by submitting a
request for it to us at: 358 South Main Street, Burlington, North Carolina
27215. Attention: Bradford T. Smith, Executive Vice President, Chief Legal
Counsel and Secretary.
Neither the comparable yield nor the projected payment schedule
constitutes a representation by us regarding the actual amounts that the LYONs
will pay, or the value at any time of the common stock into which the LYONs may
be converted.
Based on the comparable yield and the issue price of the LYONs, a United
States Holder of a LYON (regardless of its accounting method) is required to
accrue as interest the sum of the daily portions of interest on the LYON for
each day in the taxable year on which the holder holds the LYON, adjusted
upward or downward to reflect the difference, if any, between the actual and
the projected amount of any contingent payments on the LYON (as described
below).
The daily portions of interest in respect of a LYON are determined by
allocating to each day in an accrual period the ratable portion of interest on
the LYON that accrues in the accrual period. The amount of interest on a LYON
that accrues in an accrual period is the product of the comparable yield on the
LYON (adjusted to reflect the length of the accrual period) and the adjusted
issue price of the LYON. The adjusted issue price of a LYON at the beginning of
the first accrual period equals its issue price. For any accrual periods
thereafter, the adjusted issue price will equal (x) the sum of the issue price
of such LYON and any interest previously accrued thereon by a holder
(disregarding any positive or negative adjustments, both as defined below)
minus (y) the amount of any projected payments on the LYONs for previous
accrual periods.
In addition to the interest accrual discussed above, a United States
Holder is required to recognize interest income equal to the amount of the
excess of actual payments over projected payments (a "positive adjustment") in
respect of a LYON for a taxable year. For this purpose, the payments in a
taxable year include the fair market value of property received (including, as
discussed below, common stock received upon conversion or repurchase of a LYON)
in that year. If a United States Holder receives actual payments that are less
than the projected payments in respect of a LYON for a taxable year, the United
States Holder will incur a "negative adjustment" equal to the amount of the
difference. This negative adjustment will (i) first reduce the amount of
interest in respect of the LYON that a United States Holder would otherwise be
required to include in the taxable year and (ii) to the extent of any excess,
will give rise to an ordinary loss equal to that portion of such excess as does
not exceed the excess of (x) the amount of all previous inclusions under the
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LYON over (y) the total amount of the United States Holder's negative
adjustments treated as ordinary loss on the LYON in prior taxable years. A
negative adjustment is not subject to the two percent floor limitation imposed
on miscellaneous deductions under Section 67 of the Code. Any negative
adjustment in excess of the amounts described in (i) and (ii) will be carried
forward to offset future interest income in respect of the LYONs or to reduce
the amount realized on a sale, exchange, conversion or retirement of the LYONs.
A United States Holder that purchases LYONs for more or less than the
adjusted issue price of the LYONs on the acquisition date must, upon acquiring
the debt instrument, reasonably allocate the difference between the Holder's
tax basis and the adjusted issue price to daily portions of interest or
projected payments over the remaining term of the LYONs. United States Holders
should consult their tax advisors regarding these allocations.
If a United States Holder's basis is greater than the adjusted issue
price, the amount of the difference allocated to a daily portion of interest or
to a projected payment is treated as a negative adjustment on the date the
daily portion accrues or the payment is made. On the date of the adjustment,
the Holder's adjusted basis in the debt instrument is reduced by the amount the
Holder treats as a negative adjustment.
If a United States Holder's basis is less than the adjusted issue price,
the amount of the difference allocated to a daily portion of interest or to a
projected payment is treated as a positive adjustment on the date the daily
portion accrues or the payment is made. On the date of the adjustment, the
Holder's adjusted basis in the debt instrument is increased by the amount the
Holder treats as a positive adjustment.
Sale, Exchange, Conversion or Retirement of the LYONs
Upon a sale, exchange or retirement of a LYON for cash, a United States
Holder will generally recognize gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement and such holder's
adjusted tax basis in the LYON. A holder's adjusted tax basis in a LYON will
generally be equal to the holder's original purchase price for the LYON,
increased by any interest income previously accrued by the United States Holder
(determined without regard to any adjustments to interest accruals described
above) and decreased by the amount of any projected payments on the LYON for
previous accrual periods. A United States Holder generally will treat any gain
as interest income and any loss as ordinary loss to the extent of the excess of
previous interest inclusions over the total negative adjustments previously
taken into account as ordinary loss, and the balance as capital loss. The
deductibility of capital losses is subject to limitations.
In addition, as described above, our calculation of the comparable yield
and the projected payment schedule for the LYONs includes the receipt of stock
upon conversion of a LYON as a contingent payment in respect of the LYON.
Accordingly, we intend to treat the receipt of common stock upon conversion of
a LYON as a contingent payment. As described above, holder's are generally
bound by our determination of the comparable yield and the projected payment
schedule. Under this treatment, a conversion of a LYON into common stock, or a
repurchase where we elect to pay in common stock, will also result in taxable
gain or loss to the United States Holder under the rules described in the
previous paragraph. For this purpose, the amount realized by a United States
Holder will equal the fair market value of the common stock received upon
conversion or repurchase, plus any cash received.
A United States Holder's tax basis in common stock received upon a
conversion of a LYON or upon the holder's exercise of a repurchase option that
we elect to satisfy in common stock will equal the then current fair market
value of such common stock. The United States Holder's holding period for the
common stock received will commence on the day immediately following the date
of conversion or repurchase.
Constructive Dividends
If at any time we make a distribution of property to our stockholders that
would be taxable to stockholders as a dividend for U.S. federal income tax
purposes and, in accordance with the anti-dilution provisions of the LYONs, the
conversion rate of the LYONs is increased, such increase may be deemed to be
the payment of a taxable dividend to the United States Holders of the LYONs to
the extent of our current or accumulated earnings and profits. For example, an
increase in the conversion rate in the event of distributions of our evidences
of indebtedness or our assets will generally result in deemed dividend
treatment to United States Holders of the LYONs. In general, an increase in the
conversion rate in the event of stock dividends or distributions of rights to
subscribe for common stock will not be a taxable dividend.
32
Backup Withholding and Information Reporting
Information returns may be filed with the IRS in connection with payments
on the LYONs and the proceeds from a sale or other disposition of the LYONs. A
United States Holder may be subject to U.S. backup withholding tax at the rates
specified in the Code on these payments if it fails to provide its taxpayer
identification number to the paying agent and comply with certain certification
procedures or otherwise establish an exemption from backup withholding. The
amount of any backup withholding from a payment will be allowed as a credit
against the holder's U.S. federal income tax liability and may entitle the
holder to a refund, provided that the required information is furnished to the
IRS.
Tax Consequences to Non-United States Holders
As used herein, the term "Non-United States Holder" means a beneficial
owner of a LYON that is, for U.S. federal income tax purposes:
o an individual who is classified as a nonresident for U.S. federal
income tax purposes;
o a foreign corporation; or
o a nonresident alien fiduciary of a foreign estate or trust.
LYONs
We are treating payments of contingent interest made to a Non-United
States Holder (other than (i) the receipt of common stock upon conversion or
repurchase of a LYON and (ii) any payment of contingent cash interest made in
any period where such payment is based on the average market price of the LYON)
as subject to U.S. federal withholding tax. Therefore, Non-United States
Holders are subject to withholding on such payments of contingent interest at a
rate of 30%, subject to reduction by an applicable treaty or upon the receipt
of a Form W-8ECI from a Non-United States Holder claiming that the payments are
effectively connected with the conduct of a U.S. trade or business. A
Non-United States Holder that is subject to withholding tax should consult its
own tax advisors as to whether it can obtain a refund for all or a portion of
the withholding tax.
Assuming that the common stock and the LYONs continue to be actively
traded, all other payments on the LYONs made to a Non-United States Holder,
including a payment in our common stock pursuant to a conversion or repurchase,
and any gain realized on a sale or exchange of the LYONs (other than gain
attributable to accrued contingent interest payments), will be exempt from U.S.
federal income or withholding tax, provided that: (i) the Non-United States
Holder does not own, actually or constructively, 10 percent or more of the
total combined voting power of all classes of our stock entitled to vote and is
not a controlled foreign corporation related, directly or indirectly, to us
through stock ownership and is not a bank receiving certain types of interest,
(ii) the certification requirement described below has been fulfilled with
respect to the Non-United States Holder and (iii) such payments and gain are
not effectively connected with the conduct by such Non-United States Holder of
a trade or business in the United States. However, if a Non-United States
Holder were deemed to have received a constructive dividend (see "Tax
Consequences to United States Holders--Constructive Dividends" above), the
Non-United States holder will generally be subject to U.S. withholding tax at a
30% rate, subject to a reduction by an applicable treaty, on the taxable amount
of such dividend.
The certification requirement referred to in the preceding paragraph will
be fulfilled if the beneficial owner of a LYON certifies on IRS Form W-8BEN,
under penalties of perjury, that it is not a U.S. person and provides its name
and address.
If a Non-United States Holder of a LYON is engaged in a trade or business
in the United States, and if payments on the LYON are effectively connected
with the conduct of this trade or business, the Non-United States Holder,
although exempt from the withholding tax discussed above, will generally be
taxed in the same manner as a United States Holder (see "Tax Consequences to
United States Holders" above), except that the Non-United States Holder will be
required to provide to us or our paying agent a properly executed IRS Form
W-8ECI in order to claim an exemption from withholding tax. These holders
should consult their own tax advisors with respect to other U.S. tax
consequences of the ownership and disposition of LYONs including the possible
imposition of a 30% branch profits tax.
33
Common Stock
Dividends paid to a Non-United States Holder of our common stock generally
will be subject to withholding tax at a 30% rate or a reduced rate specified by
an applicable income tax treaty. In order to obtain a reduced rate of
withholding, a Non-United States Holder will be required to provide an IRS Form
W-8BEN certifying its entitlement to benefits under a treaty. In addition,
where dividends are paid to a Non-United States Holder that is a partnership or
other pass-through entity, persons holding an interest in the entity may need
to provide the certification.
The withholding tax does not apply to dividends paid to a Non-United
States Holder who provides a Form W-8ECI, certifying that the dividends are
effectively connected with the Non-United States Holder's conduct of a trade or
business within the United States. Instead, the effectively connected dividends
will be subject to regular U.S. income tax as if the Non-United States Holder
were a U.S. resident. A non-U.S. corporation receiving effectively connected
dividends may also be subject to an additional "branch profits tax" imposed at
a rate of 30% (or a lower treaty rate) on an earnings amount that is net of the
regular tax.
A Non-United States Holder generally will not be subject to U.S. federal
income tax on gain realized on a sale or other disposition of our common stock
unless:
o the gain is effectively connected with a trade or business of the
Non-United States Holder in the United States,
o in the case of a Non-United States Holder who is a non-resident alien
individual, the individual is present in the United States for 183 or
more days in the taxable year of the disposition and certain other
conditions are met, or
o we are or have been a U.S. real property holding corporation at any
time within the five-year period preceding the disposition or the
Non-United States Holder's holding period, whichever period is
shorter.
We believe that we are not, and do not anticipate becoming, a U.S. real
property holding corporation for United States federal income tax purposes.
Backup Withholding and Information Reporting
Information returns may be filed with the IRS in connection with payments
on the LYONs or our common stock and the proceeds from their sale or other
disposition. A Non-United States Holder may be subject to U.S. backup
withholding tax on these payments unless the Non-United States Holder complies
with certification procedures to establish that it is not a U.S. person. The
amount of any backup withholding from a payment to the Non-United States Holder
will be allowed as a credit against the Non-United States Holder's U.S. federal
income tax liability and may entitle the Non-United States Holder to a refund,
provided that the required information is furnished to the IRS.
34
SELLING SECURITYHOLDERS
The LYONs were originally issued to, and resold by, Merrill Lynch in
transactions exempt from the registration requirements of the Securities Act to
persons reasonably believed by Merrill Lynch to be "qualified institutional
buyers" as defined in Rule 144A of the Securities Act. The selling
securityholders may from time to time offer and sell pursuant to this
prospectus any or all of the LYONs listed below and shares of common stock
issued upon conversion or purchase of such LYONs. When we refer to the "selling
securityholders" in this prospectus, we mean those persons listed in the table
below, as well as the pledgees, donees, assignees, transferees, successors and
others who later hold any of the selling securityholders' interests.
We are filing this registration statement pursuant to a registration
rights agreement that we entered into with Merrill Lynch whereby we agreed, at
our expense, and for the benefit of the holders of the LYONs, to file a shelf
registration statement covering resale of the LYONs and the shares of common
stock issuable upon conversion or purchase of the LYONs within 90 days after
September 11, 2001 and to cause the registration statement to become effective
within 180 days after September 11, 2001. We are also generally required to
keep the registration statement effective until September 11, 2003, subject to
certain black-out periods upon certain corporate events.
The table below sets forth the name of each selling securityholder, the
aggregate principal amount at maturity of LYONs held by each selling
securityholder and the number of shares of common stock into which such LYONs
are convertible, each of which may be offered pursuant to this prospectus.
Unless set forth below, none of the selling securityholders has, or within the
past three years has had, any material relationship with us or any of our
predecessors or affiliates.
We have prepared the table below based on information given to us by the
selling securityholders on or prior to October 18, 2001. However, any or all of
the LYONs or shares of common stock listed below may be offered for sale
pursuant to this prospectus by the selling securityholders from time to time.
Accordingly, no estimate can be given as to the amounts of LYONs or shares of
common stock that will be held by the selling securityholders upon consummation
of any such sales. In addition, the selling securityholders listed in the table
below may have acquired, sold or transferred, in transactions exempt from the
registration requirements of the Securities Act, some or all of their LYONs
since the date as of which the information in the table is presented.
Information about the selling securityholders may change over time. Any
changed information will be set forth in prospectus supplements.
Aggregate Percentage of Percentage of
Principal Amount LYONs Number of Shares Common Stock
at Maturity of Outstanding of Common Stock Outstanding
LYONs Owned and Prior to the Owned and that Prior to the
Name that May be Sold Offering May be Sold(1) Offering(2)
--------------------------------------------- ---------------- -------- -------------- -----------
Black Diamond Capital I, Ltd. $ 524,000 * 3,513 *
Black Diamond Offshore Ltd. 1,873,000 * 12,559 *
Double Black Diamond Offshore LDC 9,647,000 1.30% 64,686 *
First Union Securities Inc. 19,850,000 2.67% 133,102 *
Lincoln National Convertible Securities Fund 2,500,000 * 16,763 *
MLQA Convertible Securities Arbitrage Ltd. 25,000,000 3.36% 167,635 *
Susquehanna Capital Group 21,000,000 2.82% 140,813 *
UBS AG London Branch 30,500,000 4.10% 204,514 *
Worldwide Transactions Ltd. 456,000 * 3,057 *
All Other Holders of LYONs or Future
Transferees, Pledgees, Donees, Assignees or
Successors of any such Holders(3)(4) $ 632,650,000 85.03% 4,242,171 6.04%
------------------------------------------------------------------------------------------------------------------
35
Aggregate Percentage of Percentage of
Principal Amount LYONs Number of Shares Common Stock
at Maturity of Outstanding of Common Stock Outstanding
LYONs Owned and Prior to the Owned and that Prior to the
Name that May be Sold Offering May be Sold(1) Offering(2)
--------------------------------------------- ---------------- -------- -------------- -----------
Total (5) $ 744,000,000 100% 4,988,817 7.10%
---------
* Less than 1%.
(1) Assumes conversion of all of the holder's LYONs at a conversion rate of
6.7054 shares of common stock per $1,000 principal amount at maturity of
the LYONs. This conversion rate is subject to adjustment, however, as
described under "Description of LYONs--Conversion Rights--Conversion
Adjustments and Delivery of Common Stock." As a result, the number of
shares of common stock issuable upon conversion of the LYONs may increase
or decrease in the future.
(2) Calculated based on Rule 13d-3(d)(1)(i) of the Exchange Act using
70,242,018 shares of common stock outstanding as of October 16, 2001. In
calculating this amount for each holder, we treated as outstanding the
number of shares of common stock issuable upon conversion of all of that
holder's LYONs, but we did not assume conversion of any other holder's
LYONs.
(3) Information about other selling securityholders will be set forth in
prospectus supplements, as required.
(4) Assumes that any other holders of LYONs, or any future pledgees, donees,
assignees, transferees or successors of or from any such other holders of
LYONs, do not beneficially own any shares of common stock other than the
shares of common stock issuable upon conversion of the LYONs at the
initial conversion rate.
(5) Total number of shares of common stock that may be sold and the related
percentage of common stock outstanding assumes the conversion in full of
all LYONs outstanding. However, as described under "Description of
LYONs--Conversion Rights", a holder of a LYON otherwise entitled to a
fractional share of our common stock will receive cash equal to the then
current sale price of the fractional share.
36
PLAN OF DISTRIBUTION
We are registering the LYONs and the underlying shares of common stock
covered by this prospectus to permit holders to conduct public secondary
trading of these securities from time to time after the date of this
prospectus. We have agreed, among other things, to bear all expenses, other
than underwriting discounts and selling commissions, in connection with the
registration and sale of the LYONs and shares of common stock covered by this
prospectus.
We will not receive any of the proceeds from the resale of the LYONs by
the selling securityholders or any common stock issuable upon conversion or
purchase of the LYONs. We have been advised by the selling securityholders that
the selling securityholders may sell all or a portion of the LYONs and the
underlying shares of common stock beneficially owned by them and offered hereby
from time to time:
o directly; or
o through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or concessions
from the selling securityholders or from the purchasers of the LYONs
and shares of common stock for whom they may act as agent.
The LYONs and the underlying shares of common stock may be sold from time
to time in one or more transactions at:
o fixed prices, which may be changed;
o prevailing market prices at the time of sale;
o varying prices determined at the time of sale; or
o negotiated prices.
These prices will be determined by the holders of the securities or by
agreement between these holders and underwriters or dealers who may receive
fees or commissions in connection with the sale. The aggregate proceeds to the
selling securityholders from the sale of the LYONs or the underlying shares of
common stock offered by them hereby will be the purchase price of the LYONs or
the underlying shares of common stock less discounts and commissions, if any.
The sales described in the preceding paragraph may be effected in
transactions:
o on any national securities exchange or quotation service on which the
LYONs and shares of common stock may be listed or quoted at the time
of sale, including the New York Stock Exchange in the case of shares
of common stock;
o in the over-the-counter market;
o in transactions otherwise than on such exchanges or services or in
the over-the-counter market; or
o through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the LYONs and the underlying shares of common
stock, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
LYONs and the underlying shares of common stock in the course of hedging their
positions. The selling securityholders may also sell the LYONs and the
underlying shares of common stock short and deliver such LYONs and shares of
common stock to close out short positions, or loan or pledge the LYONs and
shares of common stock to broker-dealers that in turn may sell the LYONs and
shares of common stock.
37
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the LYONs and the underlying
shares of common stock by the selling securityholders. Selling securityholders
may not sell any, or may not sell all, of the LYONs and the underlying shares
of common stock offered by them pursuant to this prospectus. In addition, we
cannot assure you that the selling securityholder will not transfer, devise or
gift the LYONs and the underlying shares of common stock by other means not
described in this prospectus. In addition, any securities covered by this
prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the
Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to
this prospectus.
Our outstanding shares of common stock are listed for trading on the New
York Stock Exchange under the symbol "LH".
The selling securityholders and any broker-dealers, agents or underwriters
that participate with the selling securityholders in the distribution of the
LYONs or the underlying shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act. In this case, any
commissions received by these broker-dealers, agents or underwriters and any
profit on the resale of the LYONs or the underlying shares of common stock
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. In addition, any profits realized by the selling
securityholders may be deemed to be underwriting commissions.
The LYONs were issued and sold in transactions exempt from the
registration requirements of the Securities Act to persons reasonably believed
by Merrill Lynch to be "qualified institutional buyers", as defined in Rule
144A of the Securities Act. We have agreed to indemnify Merrill Lynch and each
selling securityholder, and each selling securityholder has agreed to indemnify
us, Merrill Lynch and each other selling securityholder against specified
liabilities arising under the Securities Act.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of the
purchases and sales of any of the LYONs and the underlying shares of common
stock by the selling securityholders and any such other person. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the LYONs and the underlying shares of common stock to
engage in market-making activities with respect to the particular LYONs and the
underlying shares of common stock being distributed for a period of up to five
business days prior to the commencement of the distribution. This may affect
the marketability of the LYONs and the underlying shares of common stock and
the ability of any person or entity to engage in market-making activities with
respect to the LYONs and the underlying shares of common stock.
We will use our reasonable efforts to keep the registration statement to
which this prospectus relates effective until the earlier of:
o the sale, pursuant to the registration statement to which this
prospectus relates, of all the securities registered thereunder; and
o the expiration of the holding period applicable to such securities
held by persons that are not our affiliates under Rule 144(k) of the
Securities Act or any successor provision.
Our obligation to keep the registration statement to which this prospectus
relates effective is subject to specified, permitted exceptions. In these
cases, we may prohibit offers and sales of the LYONs and the underlying shares
of common stock pursuant to the registration statement to which this prospectus
relates.
38
LEGAL MATTERS
Certain legal matters regarding the LYONs and the shares of common stock
issuable upon conversion or purchase of the LYONs are being passed upon for us
by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements and financial statement schedule
incorporated in this registration statement on Form S-3 by reference to the
Annual Report on Form 10-K of Laboratory Corporation of America Holdings as of
December 31, 2000 and December 31, 1999 and for each of the three years in the
period ended December 31, 2000 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy this
information at the following locations of the SEC:
Public Reference Room Northeast Regional Office Midwest Regional Office
450 Fifth Street, N.W. 233 Broadway 500 West Madison Street
Room 1024 New York, NY 10279 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661
You may obtain information on the operation of the Public Reference Room
and the above regional offices by calling the SEC at 1-800-SEC-0330. You may
also obtain copies of the information by mail from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, DC 20549, at
prescribed rates.
The SEC also maintains a website that contains reports, proxy statements
and other information about issuers, like LabCorp, who file electronically with
the SEC. The address of the site is www.sec.gov.
You can also inspect reports, proxy statements and other information about
LabCorp at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
We are "incorporating by reference" into this prospectus certain
information we file with the SEC, which means that we are disclosing important
information to you by referring you to those documents. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus
or in subsequently filed documents incorporated by reference in this
prospectus. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the SEC. These documents contain
important information about us.
LabCorp SEC Filings (File No. 1-11353) Period
-------------------------------------- ------
Annual Report on Form 10-K............... Fiscal year ended December 31, 2000
Quarterly Report on Form 10-Q............ Quarter ended March 31, 2001
Quarterly Report on Form 10-Q............ Quarter ended June 30, 2001
Current Report on Form 8-K............... Filed February 14, 2001 containing the
press release regarding results for
the quarter and year ended December
31, 2000
Current Report on Form 8-K............... Filed March 26, 2001
Current Report on Form 8-K............... Filed April 23, 2001 containing the
press release regarding results for
the quarter ended March 31, 2001
Current Report on Form 8-K............... Filed May 1, 2001
Current Report on Form 8-K............... Filed May 11, 2001
Current Report on Form 8-K............... Filed June 4, 2001
Current Report on Form 8-K............... Filed June 12, 2001 containing the
amended and restated certificate
of incorporation
Current Report on Form 8-K............... Filed July 11, 2001
39
Current Report on Form 8-K............... Filed July 23, 2001 containing the
press release regarding results for
the quarter ended June 30, 2001
Current Report on Form 8-K............... Filed September 4, 2001
Current Report on Form 8-K............... Filed September 5, 2001
Current Reports on Form 8-K.............. Filed September 6, 2001 and each
containing the press release
regarding the private placement of
the LYONs
Current Report on Form 8-K............... Filed September 19, 2001
Current Report on Form 8-K............... Filed September 21, 2001
Registration Statement on Form 8-B, as
amended on April 27, 1995.............. Filed July 1, 1994
The information required by Part III,
Items 10 through 13, of Form 10-K is
incorporated by reference to our
definitive proxy statement for our
2000 annual meeting of stockholders.... Filed May 24, 2001
All documents we file with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this prospectus to the end of the
offering of the LYONs and common stock under this prospectus shall also be
deemed to be incorporated herein by reference and will automatically update
information in this prospectus.
You may request a copy of these filings at no cost by writing or calling
LabCorp at the following address or telephone number:
Laboratory Corporation of America Holdings
358 South Main Street
Burlington, NC 27215
Tel. (336) 229-1127
Attn: Bradford T. Smith
Exhibits to the filings will not be sent, however, unless those exhibits
have specifically been incorporated by reference in this document.
40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
We are paying all of the selling securityholders' expenses related to this
offering, except that the selling securityholders will pay any applicable
broker's commissions and expenses. The following table sets forth the
approximate amount of fees and expenses payable by us in connection with this
registration statement and the distribution of the LYONs and the underlying
shares of common stock registered hereby. Except for the SEC registration fee,
all of these fees and expenses have been estimated.
Amount to be
Paid
------------
SEC registration fee............................................ $136,130
Legal fees and expenses......................................... 150,000
Accounting fees and expenses.................................... 10,000
Miscellaneous................................................... 3,870
--------
TOTAL........................................................ $300,000
========
Item 15. Indemnification of Directors and Officers
As authorized by Section 145 of the General Corporation Law of the State
of Delaware ("Delaware Corporation Law"), each of our directors and officers
may be indemnified by us against expenses (including attorney's fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened,
pending or completed legal proceedings in which he or she is involved by reason
of the fact that he or she is or was our director or officer; provided that he
or she acted in good faith and in a manner that he or she reasonably believed
to be in or not opposed to the best interest of LabCorp; and, with respect to
any criminal action or proceeding, that he or she had no reasonable cause to
believe that his/her conduct was unlawful. If the legal proceeding, however, is
by or in the right of LabCorp, the director or officer may not be indemnified
in respect of any claim, issue, or matter as to which he or she shall have been
adjudged to be liable for negligence or misconduct in the performance of
his/her duty to us unless a court determines otherwise.
Article FIFTH (4) of our Amended and Restated Certificate of Incorporation
provides that no director shall be personally liable to us or our stockholders
for monetary damages for any breach of his or her fiduciary duty as director;
provided, however, that such clause shall not apply to any liability of a
director (i) for any breach of such director's duty of loyalty to LabCorp or
our stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the Delaware Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit. In addition, the provisions of
Article VII of our By-laws provide that it shall indemnify persons entitled to
be indemnified to the fullest extent permitted by the Delaware Corporation Law.
We maintain policies of officers' and directors' liability insurance in
respect of acts or omissions of (i) our current and former officers and
directors, (ii) our subsidiaries and (iii) "constituent" companies that have
been merged with LabCorp.
II-1
Item 16. Exhibits and Financial Statement Schedules
(a) The following exhibits are filed as part of this registration
statement:
Exhibit No. Document
----------- --------
3.1 Amended and Restated Certificate of Incorporation of LabCorp
dated as of May 24, 2001.
3.2 By-Laws of LabCorp dated as of April 28, 1995 (incorporated by
reference to Form 8-K filed on May 12, 1995).
4.1 Indenture dated as of September 11, 2001 between us and
The Bank of New York, as trustee.
4.2 Registration Rights Agreement dated as of September 11, 2001
between us and Merrill Lynch, Pierce Fenner & Smith Incorporated.
4.3 Form of Liquid Yield Option(TM)Notes due 2021 (included in
Exhibit 4.1).
5.1 Opinion of Davis Polk & Wardwell.
8.1 Opinion regarding tax matters (included in Exhibit 5.1).
12.1 Statement regarding computation of Ratio of Earnings to
Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature page of this
registration statement).
25.1 Form T-1 Statement of Eligibility of The Bank of New York pursuant
to the Trust Indenture Act of 1939 relating to Exhibit 4.1.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of 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;
(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 this registration statement. 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 SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in this registration
statement.
II-2
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, 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) The undersigned registrant hereby understands that, for purposes of
determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in this
registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, 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 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 SEC such indemnification is against public policy as
expressed in the Securities 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 whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Burlington, State of North Carolina, on October
19, 2001.
LABORATORY CORPORATION OF AMERICA HOLDINGS
By: /s/ Bradford T. Smith
---------------------------------------
Name: Bradford T. Smith
Title: Executive Vice President, Chief
Legal Counsel and Secretary
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bradford T. Smith and Wesley R. Elingburg, and
each of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
and to file the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto each said attorney-in-fact and agents full power and authority to do and
perform each and every act in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
on October 19, 2001.
Signature Title
--------- -----
Chairman of the Board, President,
/s/ Thomas P. MacMahon Chief Executive Officer and Director
-----------------------------------------
Thomas P. Mac Mahon
Executive Vice President,
/s/ Bradford T. Smith Chief Legal Counsel and Secretary
-----------------------------------------
Bradford T. Smith
Executive Vice President,
/s/ Wesley R. Elingburg Chief Financial Officer and Treasurer
-----------------------------------------
Wesley R. Elingburg
/s/ Jean-Luc Belingard Director
-----------------------------------------
Jean-Luc Belingard
/s/ Wendy E. Lane Director
-----------------------------------------
Wendy E. Lane
II-4
Signature Title
--------- -----
/s/ Robert E. Mittelstaedt, Jr. Director
-----------------------------------------
Robert E. Mittelstaedt, Jr.
/s/ James B. Powell Director
------------------------------------------
James B. Powell
/s/ David B. Skinner Director
-----------------------------------------
David B. Skinner
/s/ Andrew G. Wallace Director
-----------------------------------------
Andrew G. Wallace
II-5
EXHIBIT INDEX
Exhibit No. Document
----------- --------
3.1 Amended and Restated Certificate of Incorporation of LabCorp
dated as of May 24, 2001.
3.2 By-Laws of LabCorp dated as of April 28, 1995 (incorporated by
reference to Form 8-K filed on May 12, 1995).
4.1 Indenture dated as of September 11, 2001 between us and
The Bank of New York, as trustee.
4.2 Registration Rights Agreement dated as of September 11, 2001
between us and Merrill Lynch, Pierce Fenner & Smith Incorporated.
4.3 Form of Liquid Yield Option(TM)Notes due 2021 (included in
Exhibit 4.1).
5.1 Opinion of Davis Polk & Wardwell.
8.1 Opinion regarding tax matters (included in Exhibit 5.1).
12.1 Statement regarding computation of Ratio of Earnings to
Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature page of this
registration statement).
25.1 Form T-1 Statement of Eligibility of The Bank of New York pursuant
to the Trust Indenture Act of 1939 relating to Exhibit 4.1.
II-6