UC ACQUISITION SUB, INC.
August 10, 1999
Unilab Corporation
00000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Dear Sirs:
Reference is made to the Agreement and Plan of Merger dated as of May 24,
1999 between UC Acquisition Sub, Inc. ("Merger Sub") and Unilab Corporation (the
"Company"), as amended on July 8, 1999 and July 30, 1999 (the "Merger
Agreement"). This letter is to confirm the parties' agreement that the Merger
Agreement shall be amended and supplemented, effective as of the date of this
letter, as follows:
1. Roll-Over Shareholders
a) Section 1.7(a) shall be amended and restated in its entirety as
follows:
(a) Each holder who, on or prior to the Election Date referred to in
Section 1.7(c) below, is a record holder of shares of Company Common
Stock will be entitled, with respect to all or any portion of its
shares, to make an unconditional election (a "Retention Election") on
or prior to the Election Date (as defined in Section 1.7(c)) to retain
Retained Shares (subject to Section 1.8), on the basis hereinafter set
forth, provided that, on or prior to August 31, 1999, Merger Sub shall
use reasonable best efforts to convert the Merger into a merger
pursuant to which all shares of Company Common Stock, other than
Roll-Over Shares (as defined in Section 1.7(f)), if any, will be
converted only into the right to receive the Cash Election Price in
cash in the Merger (a "Conversion Decision"); provided that the
foregoing shall not require Merger Sub or Parent or any of their
affiliated entities to agree to any terms or provisions in connection
therewith which it or they find unacceptable or which it or they
believe, based on conversations with the SEC (as defined in Section
2.8), jeopardize the availability of recapitalization accounting
treatment for the Merger. Upon making a Conversion Decision, Merger
Sub shall promptly provide written notice thereof to the Company. In
connection with such Conversion Decision, Parent and Persons
affiliated or related to Parent shall continue to hold in the
aggregate at least a sufficient number of shares of the capital stock
of Merger Sub so that immediately following the consummation of the
Merger Parent and such Persons will own at least 75% of the
outstanding shares of Common Stock of the Surviving Corporation
calculated on a primary basis. So long as such 75% test is satisfied,
and regardless of whether a Conversion Decision is made, a portion of
the equity financing to be provided by Parent for cash can, at Merger
Sub's option, instead be provided by one or more third parties other
than Parent for cash, in the form of either purchases of Merger Sub
capital stock immediately prior to the Effective Time or purchases of
Company Common Stock at the Effective Time, so long as the price paid
is equivalent to the Cash Election Price per share of Company Common
Stock. In the event that Merger Sub makes a Conversion Decision,
Sections 1.6(c)(i), 1.7(c), 1.7(d), 1.7(e), 1.8 (provided that the
defined term "Retention Election Number" contained therein and the
number represented thereby shall remain operative for purposes of this
Agreement), 1.9(c) and 1.9(e) hereof and all references herein to the
Form S-4 (as defined in Section 2.8) (except to the extent the SEC (as
defined in Section 2.8) requires that a Form S-4 must be used because
of the existence of Roll-Over Shares) and any obligations in
connection therewith shall be deemed eliminated and have no effect,
and there shall be no Form of Election and no Retained Shares. In the
event of a Conversion Decision, this Agreement shall be deemed amended
such that the words (i) "or Roll-Over Shares, if any," shall be
inserted immediately after the phrase "other than Excluded Shares or
Dissenting Shares (as defined in Section 1.6(e))" in the fourth line
of Section 1.6(c) hereof and before the words "shall be converted" and
(ii) "or Roll-Over Shares, if any" shall be inserted immediately after
the words "Retained Shares" inside the parenthetical in subparagraph
1.6(c)(ii)."
b) Section 1.7(f) shall be added to the Merger Agreement consisting of
the following:
"(f) In the event that Merger Sub makes a Conversion Decision, Merger
Sub shall deliver or cause to be delivered to the Company concurrently
therewith or at the time of any change in the number or identity of
Roll-Over Shares (i) agreements or undertakings between stockholders
of the Company designated by Merger Sub (the "Roll-Over Stockholders")
whose shares of Company Common Stock shall remain outstanding
following the Effective Time and Parent, Xxxxx (as defined in Section
8.8), Merger Sub or the Company to the effect that such Roll-Over
Stockholders have agreed that all or a specified portion of their
shares of Company Common Stock (such designated shares, "Roll-Over
Shares") shall remain outstanding pursuant to the Merger in lieu of
being converted into the right to receive what the Common Stock Merger
Consideration would otherwise consist of, in an aggregate number of
shares sufficient to provide that the number of Roll-Over Shares shall
be not less than the Retention Election Number (as defined in Section
1.8(a)) or (ii) in the event that there are no Roll-Over Shares or
that the number of Roll-Over Shares is less than the Retention
Election Number, commitment letters for equity financing from one or
more third parties in a form reasonably satisfactory to the Company
(it being agreed that the form of the Xxxxx Equity Letter (as defined
in Section 2.5) is reasonably satisfactory to the Company) for an
aggregate amount (the "Shortfall Amount") equal to the product of (x)
the excess, if positive, of the Retention Election Number over the
number of Roll-Over Shares, if any, and (y) the Cash Election Price;
provided that Merger Sub in its discretion may replace any stockholder
theretofore designated as a Roll-Over Stockholder or any shares of
Company Common Stock theretofore designated as Roll-Over Shares with
another stockholder and/or other shares prior to the Effective Time;
and provided further that Merger Sub in its discretion may, prior to
the Effective Time, eliminate from the category of Roll-Over Shares
(and
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not replace as Roll-Over Shares) any shares that had been theretofore
designated as Roll-Over Shares. In the event that at any time on or
after a Conversion Decision is made the number of Roll-Over Shares is
less than the Retention Election Number, then the amount of "Equity
Financing" (as defined in Section 2.5) shall be increased as provided
for in such definition. If a Conversion Decision is made, each
Roll-Over Share shall remain outstanding as one fully paid and
nonassessable share of Common Stock of the Surviving Corporation (such
consideration, the "Roll-Over Consideration") and references to
"Merger Consideration" in this Agreement shall include the Roll-Over
Consideration unless the context indicates otherwise. In the event
that no Conversion Decision is made, there shall be no Shortfall
Amount and no Roll-Over Shares. Notwithstanding anything to the
contrary contained herein, (i) the number of Roll-Over Shares, other
than Roll-Over Shares held by employees of the Company, shall not
exceed ten percent (10%) of the number of shares of Company Common
Stock outstanding on the date hereof, (ii) the number of Roll-Over
Shares owned by affiliates of the Company shall not exceed five
percent (5%) of the number of shares Company Common Stock outstanding
on the date hereof, (iii) all Roll-Over Stockholders, other than not
more than thirty-five (35) employees and Persons deemed to be excluded
purchasers pursuant to Rule 501(e) under the Securities Act (as
defined in Section 2.4(b)) by virtue of their relationship with any of
such employees, shall be "Accredited Investors" under the Securities
Act and the rules and regulations thereunder and (iv) no more than six
Roll-Over Stockholders will consist of Persons who are not employees
of the Company; provided that, for purposes of the foregoing clause
(iv), affiliates and associates of any Person shall not be counted
separately from such Person."
c) A new Section 1.9(k) shall be added to the Merger Agreement consisting
of the following:
"(k) Notwithstanding anything to the contrary contained in this
Agreement (including the penultimate sentence of Section 1.9(b)),
certificates representing Roll-Over Shares shall not be delivered or
surrendered to the Exchange Agent upon consummation of the Merger and
shall remain outstanding and represent shares of Common Stock of the
Surviving Corporation subject to all rights, powers, privileges and
preferences of such shares."
2. Options
a) The following shall be added at the end and as part of the sentence
constituting Section 1.10(a): "; provided that, with respect to any
Option as Merger Sub, Parent or Xxxxx shall determine prior to the
Effective Time (and with the applicable optionee's consent), such
Option shall, in lieu of being cancelled pursuant to the foregoing,
remain outstanding on such terms (which, subject to the following
provisos, may vary from optionee to optionee, including as to the
number of shares of Common Stock of the Surviving Corporation into
which such Options are exercisable and the exercise price thereof) as
Merger Sub, Parent or
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Xxxxx, as the case may be, and the applicable optionee shall decide
(each such Option, a "Roll-Over Option"); provided further that with
respect to Roll-Over Options of any particular optionee, the aggregate
spread of the Cash Election Price over the exercise price of such
Roll-Over Options, after giving effect to the foregoing proviso, shall
remain equal to the aggregate spread of the Cash Election Price over
the exercise price of such Roll-Over Options prior to giving such
effect; and provided further that in no event shall the exercise price
of any Roll-Over Option, after giving effect to any amendment thereto,
be less than 25% of the Cash Election Price."
b) Section 2.5 shall be amended and/or supplemented as follows:
The words "minus the After-Tax Roll-Over Amount (as defined below)
plus additional cash equity financing from third parties in the amount
of any Shortfall Amount, if any" shall be inserted after
"$139,500,000" and before the parenthetical "(the "Equity Financing")"
in the third line of Section 2.5.
The following sentences shall be added to the end of Section 2.5 after
the last sentence thereof: "The "After-Tax Roll-Over Amount" shall
mean an amount in dollars equal to the sum of (i) the product of (x)
the excess, if positive, of the number of Roll-Over Shares over the
Retention Election Number and (y) the Cash Election Price and (ii) the
product of (x) .58 and (y) the aggregate spread (equal to the excess
of Cash Election Price over the exercise price) of all Roll-Over
Options. The Commitment Letter with respect to the equity financing
delivered by Xxxxx (the "Xxxxx Equity Letter") shall be deemed amended
such that the reference therein to "$139,500,000" shall instead refer
to such amount in dollars as equals $139,500,000 minus the After-Tax
Roll-Over Amount.
c) Section 6.3(f) shall be deleted and replaced by the following:
"(f) At the Effective Time, all Options issued and outstanding under
the Options Plans or otherwise shall either (i) have been cashed out
and cancelled or (ii) remain outstanding to acquire shares of Common
Stock of the Surviving Corporation on terms acceptable to Merger Sub,
in all cases in accordance with Section 1.10(a) hereof."
3. Additional Equity
Section 5.11(d) shall be added to the Merger Agreement consisting of
the following:
"(d) If Xxxxx or any of its affiliates are required to provide
additional equity financing to the Company or the Surviving
Corporation pursuant to the terms of any bank credit agreement or any
other agreement with other sources of financing or in connection with
any refinancing of indebtedness of the Surviving Corporation, Xxxxx or
any such affiliate or any other persons in connection
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therewith shall be entitled to purchase Common Stock of the Surviving
Corporation in connection therewith for an amount per share not
greater than the Cash Election Price, subject to adjustment by reason
of any stock split, dividend or similar transaction after the
Effective Time."
4. Survival
Section 8.1 shall be amended and restated in its entirety as follows:
"The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or the termination of this
Agreement pursuant to Section 7.1, as the case may be, except that the
agreements set forth in Article I and Sections 5.8, 5.9 and 8.8 shall
survive the Effective Time indefinitely and those set forth in
Sections 5.5(b), 5.5(c), 7.2(b) and 8.3 and in the fifth, sixth and
seventh sentences of Section 5.11(c) shall survive termination
indefinitely."
Very truly yours,
UC Acquisition Sub, Inc.
By: /s/ Xxxxx X. Xxxxxxx, XX
------------------------------
Name: Xxxxx X. Xxxxxxx, XX
Title: Vice President
Agreed to as of the date written above:
Unilab Corporation
By: /s/ Xxxx X. Xxxx
------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
