As filed with the Securities and Exchange Commission on January 11, 2002
Registration No. 333-71896
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
AMENDMENT NO. 2 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
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 L. 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. |_|
--------------------
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 JANUARY 11, 2002
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
--------------------------------
This prospectus will be used by holders of the LYONs to resell their
LYONs or the shares of our common stock, par value $0.10 per share, issuable
upon conversion or purchase of the LYONs. We originally issued 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). Additional LYONs were issued in
October 2001 due to the exercise in full by the initial purchaser of its over-
allotment option.
You may convert each LYON into 6.7054 shares of our common stock,
subject to adjustment for certain corporate events, which we refer to as the
conversion rate, only in the circumstances described in this prospectus. Our
common stock is listed on the New York Stock Exchange under the symbol "LH." On
January 10, 2002, the last reported sale price of our common stock on the NYSE
was $77.70 per share.
We will not pay interest on the LYONs prior to maturity unless
contingent cash interest becomes payable. Instead, on September 11, 2021, the
maturity date of the LYONs, you will receive for each LYON, $1,000 plus
contingent additional principal (and accrued original issue discount thereon),
if any. The original issue price of the LYONs represented 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.
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 in certain circumstances as described in this prospectus. In
addition, on September 11, 2004, if our stock price factor (as described in
this prospectus) is at or below specified thresholds, 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
subsequently original issue discount will continue to accrue at a rate of 2.0%
per year.
You may require us to purchase all or a portion of your LYONs on
September 11, 2004, 2006 and 2011 at the prices set forth in this prospectus.
We may choose to pay the purchase price in cash, common stock or a combination
of cash and common stock. You may also require us to purchase for cash all or a
portion of your LYONs if a change in control occurs on or before September 11,
2006. In addition, 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 this
prospectus.
--------------------------------
Investing in the LYONs involves risks that are described in "Risk
Factors Relating to the LYONs" beginning on page 8 of this prospectus.
--------------------------------
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 January , 2002
(TM)Trademark of Merrill Lynch & Co., Inc.
--------------------------------
TABLE OF CONTENTS
--------------------------------
Page
----
Summary..................................................................1
Risk Factors Relating to the LYONs.......................................8
Special Note Regarding Forward Looking Statements.......................10
Use of Proceeds.........................................................11
Ratio of Earnings to Fixed Charges......................................11
Description of LYONs....................................................12
Description of Capital Stock............................................30
U.S. Federal Income Tax Considerations..................................32
Selling Securityholders.................................................37
Plan of Distribution....................................................42
Legal Matters...........................................................44
Experts.................................................................44
Where You Can Find More Information.....................................44
ii
SUMMARY
We urge you to read the entire prospectus, as well as the information
incorporated by reference, before making an investment decision. As used in
this summary, the words "we," "us," "our," or "LabCorp" refer only to LabCorp
and do not include any current or future subsidiary of LabCorp.
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: (1) markets which are not served by
the routine clinical testing laboratory and therefore are often subject to less
stringent regulatory and reimbursement constraints; and (2) 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.
The Offering
LYONs............................... $744,000,000 aggregate principal amount
at maturity of LYONs due September 11,
2021. We will not pay any interest on
your 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. When we say the yield to maturity
is computed on a "semi-annual bond
equivalent basis" we mean that the yield
to maturity is calculated as if original
issue discount were paid to you
semi-annually and you reinvested these
payments so that original issue discount
would accrue on the amount reinvested.
Subordination....................... The LYONs are subordinated in right of
payment to all of our existing and future
senior indebtedness. As of September 30,
2001, we had approximately $7.5 million
of senior indebtedness outstanding. The
term "senior indebtedness" is defined in
the "Description of LYONs--Subordination"
section of this prospectus. The LYONs are
also effectively subordinated to all of
our subsidiaries' liabilities, including
trade payables. As of September 30, 2001,
our subsidiaries had approximately $485.4
million of liabilities outstanding.
Original Issue Discount............. We originally issued the LYONs at an
issue price of $671.65 per LYON (67.165%
of the principal amount at maturity).
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. When we say
original issue discount accrues at a rate
calculated on a "semi-annual bond
equivalent basis" we mean that original
issue discount is calculated as if
original issue discount were paid to you
semi-annually and you reinvested these
payments so that original issue discount
would accrue on the amount reinvested.
U.S. Federal Income Taxation........ Under the indenture, we and every holder
(including every initial holder who
purchased LYONs in the initial private
placement of the LYONs and every
subsequent purchaser of LYONs) 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
2
subject to the special regulations that
govern these instruments. Under these
regulations, even if we do not pay any
contingent cash interest on your 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 your 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
your LYON generally will be ordinary
interest income; any loss will be
ordinary loss to the extent of the
interest previously included in income,
and the balance will be capital loss. See
"U.S. Federal Income Tax Considerations."
Conversion Rights................... For each LYON surrendered for conversion,
if the conditions for conversion are
satisfied, you 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.
You 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 120% and
declining 0.1282% per subsequent calendar
quarter 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 the 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 that day, divided by the
conversion rate on that day. Upon
conversion, you will not receive any cash
payment representing accrued original
issue discount or contingent additional
principal, if any. Instead, accrued
original issue discount and contingent
additional principal, if any, will be
deemed paid by the shares of common stock
you will receive on conversion.
3
You may also surrender your LYONs for
conversion during any period in which the
rating assigned to the LYONs by Standard
& Poor's Ratings Services is BB- or
lower. The current rating assigned to the
LYONs by Standard & Poor's Ratings
Services is BBB-.
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 you contingent cash interest
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- 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 the record date.
Contingent cash interest, if any, will
accrue and be payable to you as of the
15th day preceding the last day of the
relevant six-month period. If we pay a
regular cash dividend on our common stock
during a quarter within the relevant
six-month period, contingent cash
interest, if any, will accrue and be
payable to you 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
4
contingent cash interest, if any, will
accrue and be payable to you 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 your 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
subsequently original issue discount will
continue to accrue at a rate of 2.0% per
year. When we say contingent additional
principal accrues at a rate calculated on
a "semi-annual bond equivalent basis" we
mean that contingent additional principal
is calculated as if contingent additional
principal were paid to you semi-annually
and you reinvested these payments so that
contingent additional principal would
accrue on the amount reinvested.
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.
5
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 your
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: (cont'd)
------------------------------------------------------------------------------------------
Amount to be Deducted from 4.50% >5.00% >5.50% >6.00% >6.50% >7.00%
Two Year Unsecured to to to to to to
Subordinated Debt Rate to <=4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
------------------------- ------- ----- ----- ----- ----- ----- -----
Determine the Adjusted Rate:
-6.00%
-5.50%
-5.00%
-4.50% <=69%
-4.00% <=67% <=67%
-3.50% <=66% <=65% <=64%
-3.00% <=64% <=64% <=63% <=61%
-2.50% <=62% <=61% <=60% <=60% <=59%
-2.00% <=59% <=58% <=58% <=57% <=56% <=55%
-1.50% <=56% <=55% <=54% <=54% <=53% <=53% <=53%
-1.00% <=52% <=51% <=51% <=51% <=50% <=49% <=49%
-0.50% <=47% <=46% <=45% <=45% <=44% <=44% <=44%
0.00% <=40% <=40% <=39% <=38% <=38% <=38% <=37%
(cont'd)
Stock Price Factor Threshold
If Two Year Unsecured Subordinated Debt Rate
at September 11, 2004 is:
--------------------------------------------
Amount to be Deducted from >7.50% >8.00%
Two Year Unsecured to to
Subordinated Debt Rate to 8.00% 8.50% >8.50%
------------------------- ----- ----- ------
Determine the Adjusted Rate:
-6.00% <=74%
-5.50% <=73% <=71%
-5.00% <=72% <=70% <=69%
-4.50% <=69% <=68% <=66%
-4.00% <=67% <=65% <=64%
-3.50% <=64% <=63% <=62%
-3.00% <=61% <=61% <=59%
-2.50% <=58% <=58% <=57%
-2.00% <=55% <=54% <=53%
-1.50% <=52% <=51% <=51%
-1.00% <=48% <=48% <=48%
-0.50% <=43% <=43% <=43%
0.00% <=37% <=37% <=36%
Sinking Fund........................ None.
Redemption of LYONs at the
Option of LabCorp............ We may redeem for cash all or a portion
of your 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......... You may require us to purchase all or a
portion of your 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
6
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, you may require us to purchase for
cash all or a portion of your LYONs at a
price equal to the sum of the issue price
plus accrued original issue discount and
contingent additional principal, if any,
to the date of purchase. Under the
indenture, a "change in control" of
LabCorp means that either of the
following have occurred:
o any person, other than LabCorp or its
subsidiaries, files a Schedule 13D or
Schedule TO disclosing it has become
the owner of 50% or more of the
aggregate voting power of LabCorp,
with certain exceptions; or
o any share exchange, consolidation or
merger of LabCorp is consummated so
that our common stock would be
converted into cash, securities or
other property, other than a situation
in which the holders of our common
stock, immediately prior to the share
exchange, consolidation or merger
have, at least a majority of the total
voting power of the continuing or
surviving corporation immediately
after the share exchange,
consolidation or merger.
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.
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 nine
months ended September 30, 2001 were
2.14, 2.65, 4.33 and 7.22, 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.
We do not intend to list the LYONs on any national securities exchange and, as
a result, a public market for the LYONs may not develop or be maintained.
Resales of the LYONs will be registered transactions under the
Securities Act. However, the LYONs resold using this prospectus will no longer
be eligible for trading in the PORTAL system, and we do not intend to list the
LYONs on any national securities exchange. The initial purchaser of the LYONs
in the initial private placement has advised us that it intends to make a
market in the LYONs. However, the initial purchaser is not obligated to make a
market in the LYONs and may discontinue this market making activity at any time
without notice. As a result, a public market for the LYONs may not develop and,
if one does develop, it may not be maintained. If an active trading market for
the LYONs fails to develop or be sustained, the trading price of the LYONs
could be adversely affected. 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, your right to convert LYONs into
shares of our common stock is subject to conditions which, if not satisfied,
could result in you receiving less than the value of the common stock into
which your LYON is otherwise convertible. These features could adversely affect
the value and the trading prices for your 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,
you may require us to purchase your LYONs. However, it is possible that we
would not have sufficient funds at that time to make the required purchase of
LYONs. Our revolving credit facility, which ranks senior in right of payment to
the LYONs, would come due upon the occurrence of the same kind of change in
control events that would require us to purchase your LYONs. As of September
30, 2001, we had no amount outstanding under our revolving credit facility. 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."
For U.S. federal income tax purposes, you will be required to include in income
each year an amount of interest in excess of the initial yield to maturity of
the LYONs and to recognize as ordinary interest income any gain upon sale,
exchange, conversion or retirement of a LYON.
Under the indenture, you are required to agree with us to treat your
LYONs as contingent payment debt instruments for U.S. federal income tax
purposes. Because the Treasury regulations that apply to contingent payment
debt instruments do not directly address securities such as the LYONs, and
there is no other authority that addresses whether and how these regulations
would apply to the LYONS, it is uncertain whether and how the regulations will
apply to the LYONs. Notwithstanding this uncertainty, as a result of your
agreement with us under the indenture, 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 your 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 your LYON generally will be
ordinary interest income; any loss will be ordinary loss to the extent of the
interest previously included in income, and the balance will be capital loss.
See "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
8
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 September 30, 2001, we had senior indebtedness outstanding
of approximately $7.5 million and our subsidiaries had liabilities outstanding
of approximately $485.4 million. See "Description of LYONs--Subordination."
9
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. These forward looking statements are subject to
various risks and uncertainties. Actual events or results may 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 this 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.
We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform them to actual results.
10
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,
-------------------------------------------------
Nine Months Ended
1996 1997 1998 1999 2000 September 30, 2001
---- ---- ---- ---- ---- ------------------
Ratio of earnings to fixed charges.... N/A N/A 2.14 2.65 4.33 7.22
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 nine months ended September 30, 2001 would have been
6.60 and 10.26.
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.
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. We urge you to read the
provisions of the indenture, 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 due to the exercise in full
by the initial purchaser of its over-allotment option in October 2001. Your
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 your 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." Your
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 this 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 your LYONs. Instead, your 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 your LYONs as debt instruments subject to the Treasury
regulations that provide special rules for contingent payment debt instruments.
Your 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 your LYONs,
you are required to include accrued tax original issue discount in your 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 "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 your option 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 the 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 will initially be the
trustee. No service charge will be made for any registration of transfer or
exchange of LYONs. However, we may require you to pay any tax, assessment or
other governmental charge payable as a result of the transfer or exchange.
Subordination
Payment on your 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 your LYONs is also
effectively subordinated to all of our subsidiaries' existing and future
indebtedness and other liabilities, including trade payables.
Upon any payment or distribution of our assets to our creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other similar
proceedings,
12
the holders of all senior indebtedness are first entitled to receive payment in
full of all amounts due or to become due thereon, or payment of these amounts
must be provided for, before you are 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 you may receive less, ratably, than our other creditors.
In addition, no payment of the principal amount at the maturity of your
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 the default is either the subject of judicial proceedings
or we receive a written notice of the default from the holders of senior
indebtedness.
Notwithstanding the foregoing, the payment blockage period will end and
we may resume payments with respect to your 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 your LYONs at that time.
No new period of payment blockage may be commenced under 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 your 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 the acceleration or the payment in full of all senior indebtedness, but only
if payment is then otherwise permitted under the terms of the indenture.
Notwithstanding the foregoing, upon the expiration of any payment blockage
period described above, you are required to pay over any amounts you collected
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);
(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
13
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 the lease or related document to purchase or to
cause a third party to purchase the 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 under which the same is outstanding, it is provided that the
indebtedness or obligation is not senior in right of payment to your LYONs or
that the indebtedness or obligation is subordinated to any other indebtedness
or obligation of LabCorp, unless the indebtedness or obligation expressly
provides that the indebtedness or obligations are to be senior in right of
payment to your LYONs. At September 30, 2001, we had approximately $7.5 million
of senior indebtedness outstanding.
The LYONs are effectively subordinated to all existing and future
liabilities of our subsidiaries. Any right we have to participate in any
distribution of the assets of any of our subsidiaries upon the liquidation,
reorganization or insolvency of that subsidiary (and your consequent right to
participate in those assets) will be subject to the claims of the creditors
(including trade creditors) of that subsidiary, except to the extent that our
claims as a creditor of the subsidiary may be recognized. In that case, our
claims would still be subordinate to any security interest in the assets of the
subsidiary and any indebtedness of the subsidiary senior to that held by us. At
September 30, 2001, our subsidiaries had approximately $485.4 million of
liabilities outstanding. The indenture does not restrict us from incurring
additional indebtedness, including senior indebtedness.
Conversion Rights
You 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 you have delivered a purchase notice or a change in
control purchase notice requiring us to purchase your LYONs may be surrendered
for conversion only if this notice is withdrawn as required by 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. If
you are otherwise entitled to a fractional share, you 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 your LYONs are
convertible and notify the trustee and us accordingly. If one or more of the
conditions to the conversion of your LYONs has been satisfied, we will promptly
notify you 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. You 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. The
specified percentage begins at 120% and declines 0.1282% per subsequent
calendar quarter until it reaches approximately 110% for the calendar quarter
beginning on July 1, 2021. The accreted conversion price per share as of any
day will equal the issue price of a LYON plus the accrued original issue
discount and any
14
accrued contingent additional principal as of that 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 for each of the first 20 calendar quarters following issuance of
the LYONs. These conversion trigger prices (column 3) reflect the accreted
conversion price (column 1) per share of common stock multiplied by the
applicable percentage (column 2) for the respective calendar quarter. The
accreted conversion price per share of common stock increases in each
subsequent 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% in each subsequent calendar quarter. The
conversion trigger price for the calendar quarter beginning on 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.
For example, using the table above and its stated assumptions, if you
wish to surrender a LYON for conversion in the second quarter of 2004 (that is,
between April 1 and June 30, 2004), you may do so if the sale price on at least
20 of the 30 consecutive trading days ending on January 30, 2004 (the last
trading day in the preceding quarter, since January 31 is a Saturday) is more
than $125.25. This sale price is calculated by multiplying the applicable
percentage from column 3 for the second quarter of 2004 (118.8462%) by the
accreted conversion price per share of common stock on the last day of the
preceding calendar quarter ($105.39, which is calculated by adding the issue
price and any accrued original issue discount, and dividing by the number of
shares of common stock issuable upon conversion of a LYON on that day).
Conversion Based on Credit Rating Downgrade. You may also surrender your
LYONs for conversion during any period that the rating assigned to the LYONs by
Standard & Poor's Ratings Services is BB- or lower. The current rating assigned
to the LYONs by Standard & Poor's Ratings Services is BBB-.
15
Conversion Based upon Notice of Redemption. You 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 that time. A LYON for which you have
delivered a purchase notice or a change in control purchase notice, as described
below, requiring us to purchase your LYON, may be surrendered for conversion
only if your notice is withdrawn as required by 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 security is quoted on the Nasdaq National Market, a day on which
trades may be made on that 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, your LYONs 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 the transaction, and at the effective date, the right to
convert your LYONs into common stock will be changed into a right to convert
them into the kind and amount of securities, cash or other assets of LabCorp or
another person which you would have received if you had converted your LYONs
immediately prior to the transaction. If the transaction also constitutes a
change in control of LabCorp, as defined in the indenture, you will be able to
require us to purchase all or a portion of your 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, you 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 you of the full number of shares
of common stock into which your LYONs are convertible, together with any cash
payment of your 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.
You are also required to agree with us that delivery to you of the full
number of shares of common stock into which your LYONs are convertible,
together with any cash payment of your fractional shares will be treated as a
payment (in an amount equal to the sum of the then fair market value of the
shares and the cash payment, if any) on your LYONs for purposes of the Treasury
regulations applicable to debt instruments with contingent payments. See "U.S.
Federal Income Tax Considerations."
If contingent cash interest is payable to you during any particular
six-month period, and your LYONs are converted after the applicable record date
therefor and prior to the next succeeding interest payment date, you will
receive the contingent cash interest payable on your LYONs on the corresponding
interest payment date notwithstanding the conversion. Your LYONs, upon
surrender for conversion, must be accompanied by funds equal to the amount of
contingent cash interest payable on your LYONs so converted, unless your LYONs
have been called for redemption, in which case no payment will 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 your LYONs are 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 if you
receive shares of our common stock upon surrendering LYONs for conversion, see
"U.S. Federal Income Tax Considerations--Tax Consequences to United States
Holders--Sale, Exchange, Conversion or Retirement of the LYONs."
We will adjust the conversion rate for:
16
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 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 (1) 5% of the sale price of
our common stock on the day preceding the date of declaration of
the dividend or other distribution and (2) the quotient of the
amount of any contingent interest paid during this 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 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 the
distribution, we will be required to give notice to you at least 20 days prior
to the ex-dividend date for the distribution and, upon giving this notice, your
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 the
distribution will not take place.
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 the dividend or distribution on the NYSE or any other national or regional
securities exchange or market on which the securities are then listed or
quoted.
No adjustment to the conversion rate need be made if you may participate
in the transaction or in certain other cases.
If we were to implement a stockholders' rights plan providing that, upon
conversion of your LYONs, you will receive, in addition to the shares of common
stock issuable upon conversion, the rights related to the common stock, there
will 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 the rights as specified in 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.
You 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.
17
See "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 you 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 your 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 this 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 the record date.
During any period when contingent cash interest will 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 you (1)
as of the record date, which will be the 15th day preceding the last day of the
relevant six-month period, or (2) if we pay a regular cash dividend on our
common stock during a quarter within the relevant six-month period, 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 to you 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.
An example of when contingent cash interest will be payable follows. If
the average market price of a LYON for the five trading days ending on
September 7, 2007 (a date that is three trading days preceding the first day of
the six- month trading period beginning on September 12, 2007) is 120% of the
sum of the issue price, accrued original issue discount and contingent
additional principal, if any, for your LYON as calculated on September 11, 2007
(the day immediately preceding the first day of the six month period), then
contingent cash interest will be paid to you. The record date on which
contingent cash interest will accrue and be payable in this example would be
August 27, 2007 (the 15th day preceding the last day of this six-month period),
assuming no common stock dividend had been paid during this six-month period.
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 the determination date from
three independent nationally recognized securities dealers we select, provided
that if:
o at least three 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;
18
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 the 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 we believe are willing to bid for the LYONs.
Upon determination that you are entitled to receive contingent cash
interest during a relevant six-month period, we will issue a press release and
publish this information on our website or through another 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 your 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 your 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 subsequently 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 your 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 your 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
quotations are not obtained by the rate solicitation agent, then we will use
the average of two quotations obtained. If only one quotation is obtained, we
will use this 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.
19
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 your 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: (cont'd)
-----------------------------------------------------------------------------------------------
Amount to be Deducted from
Two Year Unsecured 4.50% >5.00% >5.50% >6.00% >6.50% >7.00%
Subordinated Debt Rate 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%
-----------------------------------------------------------------------------------------------------------------------------------
-6.00%
-5.50%
-5.00%
-4.50% <=69%
-4.00% <=67% <=67%
-3.50% <=66% <=65% <=64%
-3.00% <=64% <=64% <=63% <=61%
-2.50% <=62% <=61% <=60% <=60% <=59%
-2.00% <=59% <=58% <=58% <=57% <=56% <=55%
-1.50% <=56% <=55% <=54% <=54% <=53% <=53% <=53%
-1.00% <=52% <=51% <=51% <=51% <=50% <=49% <=49%
-0.50% <=47% <=46% <=45% <=45% <=44% <=44% <=44%
0.00% <=40% <=40% <=39% <=38% <=38% <=38% <=37%
(cont'd)
Stock Price Factor Threshold
If Two Year Unsecured Subordinated Debt Rate
at September 11, 2004 is:
--------------------------------------------
Amount to be Deducted from
Two Year Unsecured >7.50% >8.00%
Subordinated Debt Rate to to to
Determine the Adjusted Rate: 8.00% 8.50% >8.50%
---------------------------------- --------------------------------------------
-6.00% <=74%
-5.50% <=73% <=71%
-5.00% <=72% <=70% <=69%
-4.50% <=69% <=68% <=66%
-4.00% <=67% <=65% <=64%
-3.50% <=64% <=63% <=62%
-3.00% <=61% <=61% <=59%
-2.50% <=58% <=58% <=57%
-2.00% <=55% <=54% <=53%
-1.50% <=52% <=51% <=51%
-1.00% <=48% <=48% <=48%
-0.50% <=43% <=43% <=43%
0.00% <=37% <=37% <=36%
To determine the adjusted rate of accrual on your 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, according to the procedures described above, assume that
our subordinated debt rate is determined to be 6.25% (see the >6.00% to 6.50%
column in the table above) and the average of the closing prices of our shares
of common stock for the 20 consecutive trading days ending on September 8, 2004
(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).
In this example, we will deduct 3.00% from 6.25% to determine that the adjusted
rate of accrual for the two year period ending on September 11, 2006 will be
3.25%.
In the event that any contingent additional principal accrues on your
LYONs, the amount we will pay at maturity 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. The actual prices and percentages may not correspond to the
range of prices and percentages shown.
In the event that any contingent additional principal accrues on your
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 LYONs at your option and the
amount payable upon maturity of your LYONs. In addition, we will publish this
information on our website or through another 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 this notice, the trustee
will provide this 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 your LYONs. Prior to September 11, 2006,
we cannot redeem your LYONs at our option. Beginning on September 11, 2006, we
may redeem your LYONs for cash, as a whole at any time or from time to time in
part. We will give you not less than 30 days' or more than 60 days' notice of
redemption by mail.
20
If redeemed at our option, your 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 your 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 subsequent September 11 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 your LYON since the immediately
preceding date in the table below. In addition, if contingent additional
principal accrues, these prices will be increased to include contingent
additional principal (and any original issue discount accrued thereon).
(2)
(1) Accrued (3)
LYON Original Redemption
Issue Issue Price
Redemption Date Price Discount (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 your LYONs is selected for partial redemption
and you convert a portion of your 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 your option, be required to purchase any outstanding LYON for which a
written purchase notice has been properly delivered by you and not withdrawn,
subject to certain additional conditions. You may submit your 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 the 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 your LYONs as of the applicable
purchase date.
21
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 if you receive cash, common stock or any combination thereof, see
"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 you notice on a date not less than 20 business
days prior to each purchase date at the 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 you must follow to require us to purchase
your LYONs.
Your purchase notice electing to require us to purchase your LYONs must
state:
o the certificate numbers of your 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 LYONs are to be purchased by us according to the applicable
provisions of the LYONs; and
o in the event we elect, in 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 paid to you 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 you elect:
(1) to withdraw your purchase notice as to some or all of your LYONs
to which it relates, or
(2) to receive cash in respect of the entire purchase price for all
LYONs or portions of LYONs subject to your purchase notice.
If the purchase price for your LYONs subject to your purchase notice is
ultimately paid to you 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, you will be deemed to have
elected to receive cash in respect of the entire purchase price for all of your
LYONs unless you have properly notified us of your election to withdraw your
purchase notice. For a discussion of the tax treatment if you receive cash
instead of common stock, see "U.S. Federal Income Tax Considerations--Tax
Consequences to United States Holders--Sale, Exchange, Conversion or Retirement
of the LYONs."
You may withdraw your purchase notice 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. Your notice of withdrawal
must state:
o the principal amount at maturity being withdrawn;
o if certificated LYONs have been issued, the certificate numbers
of your LYONs being withdrawn, or if not certificated, your
notice must comply with appropriate DTC procedures; and
o the principal amount at maturity, if any, of your LYONs that
remains subject to your purchase notice.
22
If we elect to pay the purchase price, in whole or in part, in shares of
our common stock, the number of shares we deliver will 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 "U.S. Federal Income Tax
Considerations--Tax Consequences to United States Holders--Sale, Exchange,
Conversion or Retirement of the LYONs."
The market price of our common stock will 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
that business day is not a trading day, then on the last trading day prior to
that 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 that 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 other quotations as we consider appropriate.
Because the market price of our common stock is determined prior to the
applicable purchase date, you will bear the market risk with respect to the
value of the common stock to be received from the date the market price is
determined to the 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 as
specified in the above provisions, we will promptly issue a press release and
publish this information on our website or through another public medium as we
may use at that time.
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
qualification and registration.
If these conditions are not satisfied with respect to you prior to the
close of business on the purchase date, we will pay the purchase price of your
LYONs entirely in cash. See "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, components or percentages of
components of the consideration to be paid for your LYONs once we have given
you the required notice, 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
23
o file Schedule TO or any other required schedule under the
Exchange Act.
Payment of the purchase price for a LYON for which your purchase notice
has been delivered and not validly withdrawn is conditioned upon delivery of
your LYON, together with necessary endorsements, to the paying agent at any
time after delivery of your purchase notice. Payment of the purchase price for
your LYON will be made as soon as practicable following the later of the
purchase date or the time of delivery of your LYON.
If the paying agent holds money or securities sufficient to pay the
purchase price of your LYON on the business day following the purchase date as
specified in the indenture, then, immediately after the purchase date, your
LYON will cease to be outstanding and accrued original issue discount on your
LYON will cease to accrue, whether or not your LYON is delivered to the paying
agent. At that time, all of your other rights will terminate, other than the
right to receive the purchase price upon delivery of the LYON.
No LYONs may be purchased for cash at your option 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 the 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, you will have the right,
at your option, subject to the terms and conditions of the indenture, to
require us to purchase for cash all or any portion of your LYONs in integral
multiples of $1,000 principal amount at maturity, at a price for each $1,000
principal amount at maturity of your 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 your LYONs as of a date no later
than 35 business days after the occurrence of a change in control, but in no
event prior to the date on which a 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 you at the 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 must state, among
other things:
o the events causing a change in control;
o the date of the 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 the change in control;
o that LYONs with respect to which you give a change in control
purchase notice may be converted only if your change in control
purchase notice has been withdrawn as required by the indenture;
and
o the procedures that you must follow to exercise these rights.
To exercise this right, you 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. Your purchase notice upon a change in control must
state:
o the certificate numbers of the LYONs you will deliver;
o the portion of the principal amount at maturity of your LYONs to
be purchased, which portion must be $1,000 or an integral
multiple of $1,000; and
24
o that we are to purchase your LYONs according to the applicable
provisions of the LYONs.
You may withdraw your change in control purchase notice 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. Your
notice of withdrawal must state:
o the principal amount at maturity of your LYONs being withdrawn;
o the certificate numbers of your LYONs being withdrawn; and
o the principal amount at maturity, if any, of your LYONs that
remains subject to your change in control purchase notice.
Payment of the change in control purchase price for a LYON for which
your change in control purchase notice has been delivered and not validly
withdrawn is conditioned upon delivery of your LYON, together with necessary
endorsements, to the paying agent at any time after the delivery of your change
in control purchase notice. Payment of the change in control purchase price for
your LYON will be made promptly following the later of the change in control
purchase date or the time of delivery of your LYON.
If the paying agent holds money sufficient to pay the change in control
purchase price of your LYON on the business day following the change in control
purchase date as specified in 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 your LYON will
cease to accrue, whether or not your LYON is delivered to the paying agent. At
that time, all of your other rights will 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 if:
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 the 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 any share exchange, consolidation or merger of LabCorp is
consummated in which our 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 your option 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 your 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;
25
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 your LYONs but that would
increase the amount of our or our subsidiaries' outstanding indebtedness.
No LYON may be purchased at your option 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
the payment is prohibited by the provisions of the indenture;
o default in payment of any contingent cash interest, which default
continues for 30 days;
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 that failure, or (B) the acceleration of
Indebtedness because of a default with respect to the
Indebtedness without the Indebtedness having been discharged or
the 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 the failure
or acceleration referred to in (A) or (B) above ceases or is
cured, waived, rescinded or annulled, then the event of default
by reason thereof will 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 a notice of 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) that default within 60
days after we receive notice; or
o certain events of bankruptcy, insolvency or reorganization
affecting LabCorp or our significant subsidiaries.
If an event of default occurs and continues, 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 your LYONs accrued through the date of the
declaration, and any accrued and unpaid contingent cash interest through the
date of the declaration and any accrued contingent additional principal through
the date of the 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 this event
will automatically become immediately due and payable.
26
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 the corporation (if
other than us) assumes all our obligations under the LYONs and
the indenture; and
o we or the successor corporation will not be in default under the
indenture.
Upon the assumption of our obligations by a corporation in these
circumstances, subject to certain exceptions, we will be discharged from all
obligations under the LYONs and the indenture. Although these 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 you to require us to purchase your LYONs 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;
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 your rights 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 your consent, 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 your benefit 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 in a
manner that does not does not materially adversely affect your
rights; or
27
o to make any change that does not adversely affect your rights.
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 your 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.
Calculations in Respect of LYONs
We are responsible for making all calculations called for under your
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
you. 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, your
claim under Title 11 of the United States Code is limited to the issue price of
your LYONs 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, you 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 your LYONs are governed by, and construed under, 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
Your 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 your
LYONs for all purposes under the indenture. As an owner of beneficial interests
in the LYONs represented by global securities, you hold your interests
according to the procedures and practices of DTC. As a result, your beneficial
interests in these securities are shown on, and may only be transferred
through, records maintained by DTC, and its direct and indirect participants,
and your interests may not be exchanged for certificated securities, except in
limited circumstances. You must exercise any rights in respect of your
interests, including any right to convert or require purchase of your LYONs,
according to the procedures and practices of DTC. As a beneficial owner, you
are not a holder 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.
28
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 under 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.
29
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 January 3, 2002, 70,553,718 shares of common stock
and no shares of preferred stock were issued and outstanding.
Common Stock
Each holder of our common stock is entitled to one vote for each share
held on all matters to be voted upon by our 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 dividends out of assets legally available for this purpose at
times and in 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
our 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, our common stock does not have cumulative
voting rights. Shares of our 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 our 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 this
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 series and the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
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 our 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.
Stockholder Rights Plan
We adopted a stockholder rights plan effective as of December 13, 2001
that provides that each common stockholder of record on December 21, 2001, will
receive a dividend of one right for each share of common stock held. Each right
entitles the holder to purchase from us one one-hundredth of a share of a new
series of participating preferred stock at an initial purchase price of $400.
These rights will become exercisable and will detach from our common stock if
any person becomes the beneficial owner of 15% or more of our common stock. In
that event, each right will entitle the holder, other than the acquiring
person, to purchase, for the initial purchase price, shares of our common stock
having a value of twice the initial purchase price. If, following an
acquisition of 15% or more of our common stock, we are involved in certain
mergers or other business combinations, or sell or transfer more than 50% of
our assets or earning power, each right will entitle the holder to purchase,
for the initial purchase price, common stock of the other party to the
transaction having a value of twice the initial purchase price.
At any time after a person has acquired 15% or more (but before any
person has acquired more than 50%) of our common stock, we may exchange all or
part of the rights for shares of our common stock at an exchange ratio of one
share of common stock per right. We may redeem the rights at a price of $0.001
per right at any time prior to the time that a person becomes the beneficial
owner of 15% or more of our common stock. The rights will expire on December
13, 2011, unless earlier exchanged or redeemed.
30
The existing reported shareholdings of Roche Holdings Inc. (the owner of
approximately 15.29% of our outstanding common stock) and its affiliates and
associates will not trigger any rights under the plan so long as Roche and its
affiliates and associates do not acquire any additional shares of our common
stock.
31
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, subject to the qualifications and limitations
described below, is the opinion of Davis Polk & Wardwell and sets forth 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 describe all of the tax consequences that may
be relevant to you in light of your particular circumstances, nor does it apply
to you if you are a member of a class of 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.
We urge prospective purchasers of LYONs to 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"). Under the indenture, you are required to agree
with us (in the absence of an administrative pronouncement or judicial ruling
to the contrary) to treat your 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 your LYONs, including generally our
determination of the rate at which interest will be deemed to accrue on your
LYONs (and the related "projected payment schedule" determined by us as
described below) for U.S. federal income tax purposes.
The contingent debt regulations do not directly address securities such
as the LYONs and there is no other authority that addresses whether and how
these regulations would apply to the LYONs. It is therefore uncertain whether
and how the regulations will apply to the LYONs. However, notwithstanding this
uncertainty, in the opinion of Davis Polk & Wardwell it is more likely than not
that the LYONs will be treated as indebtedness subject to the contingent debt
regulations as set forth herein. If it is nonetheless determined that the
contingent debt regulations do not apply to your LYONs, you would:
o accrue interest income at the initial yield to maturity of the
LYONs;
o recognize no income or gain upon conversion of your LYONs;
o recognize capital gain or loss upon a taxable disposition of your
LYONs;
32
o if you purchase LYONs for less than their adjusted issue price on
the acquisition date, either, if you so elect, include the market
discount as ordinary income as it accrues, or treat any gain
recognized on the sale or disposition of your LYON as ordinary
income to the extent of the accrued market discount; and
o if you purchase LYONs for more than their adjusted issue price on
the acquisition date, amortize the premium as a reduction of the
amount of interest income you are required to accrue on your
LYONs.
The remainder of this discussion is based on our treatment of the LYONs
as debt instruments that are subject to the contingent debt regulations.
Tax Consequences to United States Holders
This discussion applies to United States Holders. You are a United States
Holder if you are a beneficial owner of a LYON and you are 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, regardless of your method of
accounting for U.S. federal income tax purposes, you are required to accrue
interest income on your LYONs on a constant yield basis at the "comparable
yield", 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 taxable year, you 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
you are 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. You 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 your LYONs
will pay, or the value at any time of the common stock into which your LYONs
may be converted.
Based on the comparable yield and the issue price of the LYONs, and
regardless of your accounting method, you are 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 you hold 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 subsequent accrual
periods, the adjusted issue price will equal (1) the sum of the issue price of
the LYON and any interest previously accrued thereon by you (disregarding any
positive or
33
negative adjustments, both as defined below) minus (2) the amount of any
projected payments on the LYONs for previous accrual periods.
In addition to the interest accrual discussed above, you are 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 you receive
actual payments that are less than the projected payments in respect of a LYON
for a taxable year, you will incur a "negative adjustment" equal to the amount
of the difference. This negative adjustment will (1) first reduce the amount of
interest in respect of the LYON that you would otherwise be required to include
in the taxable year and (2) to the extent of any excess, will give rise to an
ordinary loss equal to that portion of the excess as does not exceed the excess
of (x) the amount of all previous inclusions under the LYON over (y) the total
amount of your 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 (1) and (2)
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.
If you purchase LYONs for more or less than the adjusted issue price of
the LYONs on the acquisition date you must, upon acquiring the debt instrument,
reasonably allocate the difference between your tax basis and the adjusted
issue price to daily portions of interest or projected payments over the
remaining term of the LYONs. We urge you to consult your tax advisors regarding
these allocations.
If your 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, your adjusted
basis in the debt instrument is reduced by the amount you treat as a negative
adjustment.
If your 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, your adjusted basis in the
debt instrument is increased by the amount you treat as a positive adjustment.
Sale, Exchange, Conversion or Retirement of the LYONs
Upon a sale, exchange or retirement of a LYON for cash, you will
generally recognize gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and your adjusted tax basis in the
LYON. Your adjusted tax basis in a LYON will generally be equal to your
original purchase price for the LYON, increased by any interest income
previously accrued by you (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. You 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, you 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 you under the rules described in the previous paragraph. For this purpose,
the amount realized by you will equal the fair market value of the common stock
received upon conversion or repurchase, plus any cash received.
Your tax basis in common stock received upon a conversion of a LYON or
upon your exercise of a repurchase option that we elect to satisfy in common
stock will equal the then current fair market value of our common stock. Your
holding period for the common stock received will commence on the day
immediately following the date of conversion or repurchase.
34
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, according to the anti-dilution provisions of the LYONs, the
conversion rate of the LYONs is increased, this increase may be deemed to be
the payment of a taxable dividend to you 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 you. 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.
Backup Withholding and Information Reporting
Information returns may be filed with the IRS in connection with
payments on your LYONs and the proceeds from a sale or other disposition of
your LYONs. You may be subject to U.S. backup withholding tax at the rates
specified in the Code on these payments if you fail to provide your 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 your U.S. federal income tax liability and may entitle you to a refund,
provided that the required information is furnished to the IRS.
Tax Consequences to Non-United States Holders
This discussion applies to Non-United States Holders. You are a Non-United
States Holder if you are a beneficial owner of a LYON and you are 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 you (other than
(1) the receipt of common stock upon conversion or repurchase of a LYON and (2)
any payment of contingent cash interest made in any period where the payment is
based on the average market price of the LYON) as subject to U.S. federal
withholding tax. Therefore, you are subject to withholding on these 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 you claiming that the payments
are effectively connected with your conduct of a U.S. trade or business. If you
are subject to withholding tax, we urge you to consult your own tax advisors as
to whether you 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 you, including a payment in our
common stock in 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: (1) you do not own, actually or constructively, 10 percent or
more of the total combined voting power of all classes of our stock entitled to
vote, you are not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership and you are not a bank receiving
certain types of interest, (2) the certification requirement described below
has been fulfilled with respect to you and (3) the payments and gain are not
effectively connected with your conduct of a trade or business in the United
States. However, if you are deemed to have received a constructive dividend
(see "Tax Consequences to United States Holders--Constructive Dividends"
above), you 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 the
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 you are 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, then although exempt from the withholding tax discussed above,
35
you will generally be taxed in the same manner as a United States Holder (see
"Tax Consequences to United States Holders" above), except that you 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. We urge you to
consult your 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.
Common Stock
Dividends paid to you in respect 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,
you will be required to provide an IRS Form W-8BEN certifying your entitlement
to benefits under a treaty. In addition, where dividends are paid to 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 you if you
provide a Form W-8ECI, certifying that the dividends are effectively connected
with your 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 you 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.
You 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 your conduct of a trade or
business in the United States,
o if you are a non-resident alien individual, you are 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
your 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 your LYONs or our common stock and the proceeds from their sale or
other disposition. You may be subject to U.S. backup withholding tax on these
payments unless you comply with certification procedures to establish that you
are not a U.S. person. The amount of any backup withholding from a payment to
you will be allowed as a credit against your U.S. federal income tax liability
and may entitle you to a refund, provided that the required information is
furnished to the IRS.
36
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 use this prospectus to offer and sell from time to time any
or all of the LYONs listed below and shares of common stock issued upon
conversion or purchase of the 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 to satisfy our obligation
under a registration rights agreement that we entered into with Merrill Lynch.
Under this registration rights agreement, we agreed, at our expense, to file a
shelf registration statement covering resale of the LYONs and the shares of
common stock issuable on 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 the LYONs
are convertible, each of which may be offered under 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 January 10, 2002. However, any or all of
the LYONs or shares of common stock listed below may be offered for sale under
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
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 Number of Shares Percentage of
Principal-Amount- LYONs of-Common-Stock Common-Stock-
at Maturity of Outstanding Owned and that Outstanding
LYONs Owned and Prior to the May be Sold (1) Prior to the
Name that May be Sold Offering Offering-(2)
-----------------------------------------------------------------------------------------------------------------------------------
AFTRA Health Fund $ 720,000 * 4,827 *
Allstate Insurance Company 2,900,000 * 19,445 *
Allstate Life Insurance Company 5,400,000 * 36,209 *
Alpha U.S. Sub Fund VIII, LLC 1,400,000 * 9,387 *
Aristeia International Limited 12,090,000 1.63% 81,068 *
Aristeia Partners, LP 3,410,000 * 22,865 *
Aventis Pension Master Trust 440,000 * 2,950 *
Bank Austria Cayman Islands, Ltd. 7,710,000 1.04% 51,698 *
Bear, Stearns & Co. Inc. 5,000,000 * 33,527 *
Black Diamond Capital I, Ltd. 587,000 * 3,936 *
Black Diamond Convertible Offshore LDC 2,099,000 * 14,074 *
37
Aggregate Percentage of Number of Shares Percentage of
Principal-Amount- LYONs of-Common-Stock Common-Stock-
at Maturity of Outstanding Owned and that Outstanding
LYONs Owned and Prior to the May be Sold (1) Prior to the
Name that May be Sold Offering Offering-(2)
-----------------------------------------------------------------------------------------------------------------------------------
Black Diamond Offshore Ltd. 2,091,000 * 14,020 *
Boilermaker - Blacksmith Pension Trust 2,750,000 * 18,439 *
CALAMOS(R)Convertible Fund - 8,500,000 1.14% 56,995 *
CALAMOS(R)Investment Trust
CALAMOS(R)Convertible Growth and 4,100,000 * 27,492 *
Income Fund - CALAMOS(R)Investment
Trust
CALAMOS(R)Convertible Portfolio - 200,000 * 1,341 *
CALAMOS(R)Advisors Trust
CALAMOS(R)Global Convertible Fund - 310,000 * 2,078 *
CALAMOS(R)Investment Trust
Chrysler Corporation Master Retirement
Trust 7,035,000 * 47,172 *
City of Albany Pension Plan 240,000 * 1,609 *
City of Knoxville Pension System 570,000 * 3,822 *
Clarica Life Insurance Co. - U.S. 690,000 * 4,626 *
CSFB Convertible & Quantative Strategies
Ltd. 5,500,000 * 36,879 *
Deephaven Domestic Convertible Trading
Ltd. 36,350,000 4.89% 243,741 *
Delta Airlines Master Trust 4,600,000 * 30,844 *
Delta Airlines Master Trust (c/o Oaktree
Capital Management, LLC) 1,900,000 * 12,740 *
Delta Pilots D & S Trust (c/o Oaktree Capital
Management, LLC) 945,000 * 6,336 *
Delta Pilots Disability and Survivorship Trust 925,000 * 6,202 *
Deutsche Banc Alex Brown Inc. 101,000,000 13.58% 677,245 *
DKR Fixed Income Holding Fund Ltd. 4,000,000 * 26,821 *
Double Black Diamond Offshore LDC 12,202,000 1.64% 81,819 *
The Dow Chemical Company Employees'
Retirement Plan 5,450,000 * 36,544 *
Drury University 85,000 * 569 *
First Union Securities Inc. 25,500,000 3.43% 170,987 *
The Fondren Foundation 110,000 * 737 *
Gaia Offshore Master Fund Ltd. 13,950,000 1.88% 93,540 *
38
Aggregate Percentage of Number of Shares Percentage of
Principal-Amount- LYONs of-Common-Stock Common-Stock-
at Maturity of Outstanding Owned and that Outstanding
LYONs Owned and Prior to the May be Sold (1) Prior to the
Name that May be Sold Offering Offering-(2)
-----------------------------------------------------------------------------------------------------------------------------------
GLG Global Convertible Fund 5,050,000 * 33,862 *
GLG Global Convertible UCITS Fund 950,000 * 6,370 *
GLG Market Neutral Fund 16,000,000 2.15% 107,286 *
Granville Capital Corporation 42,000,000 5.65% 281,626 *
Greek Catholic Union 50,000 * 335 *
Greek Catholic Union II 35,000 * 234 *
H.K. Porter Company, Inc. 65,000 * 435 *
JMG Triton Offshore Fund, Ltd. 4,000,000 * 26,821 *
Julius Baer Multibond Convertbond 500,000 * 3,352 *
Kettering Medical Center Funded
Depreciation Account 170,000 * 1,139 *
Knoxville Utilities Board Retirement System 390,000 * 2,615 *
Lincoln National Convertible Securities Fund 3,250,000 * 21,792 *
Louisiana Workers' Compensation
Corporation 925,000 * 6,202 *
Lutheran Brotherhood 2,000,000 * 13,410 *
Lyxor Master Fund 1,050,000 * 7,040 *
Mainstay Convertible Fund 10,070,000 1.35% 67,523 *
Mainstay VP Convertible Portfolio 2,870,000 * 19,244 *
Microsoft Corporation 1,020,000 * 6,839 *
MLQA Convertible Securities Arbitrage Ltd. 25,000,000 3.36% 167,635 *
Motion Picture Industry Health Plan - Active
Member Fund 645,000 * 4,324 *
Motion Picture Industry Health Plan - Retiree
Member Fund 280,000 * 1,877 *
New York Life Insurance Company
(Ord. Life Pre 82) 2,970,000 * 19,915 *
New York Life Insurance Company
(Ord. Life Pt 82) 7,030,000 * 47,138 *
New York Life Separate Account #7 1,340,000 * 8,985 *
Newport Investments Inc. 3,000,000 * 20,116 *
NMS Services (Cayman) Inc. 25,000,000 3.36% 167,635 *
OCM Convertible Trust 4,335,000 * 29,067 *
39
Aggregate Percentage of Number of Shares Percentage of
Principal-Amount- LYONs of-Common-Stock Common-Stock-
at Maturity of Outstanding Owned and that Outstanding
LYONs Owned and Prior to the May be Sold (1) Prior to the
Name that May be Sold Offering Offering-(2)
-----------------------------------------------------------------------------------------------------------------------------------
Partner Reinsurance Company Ltd. 1,130,000 * 7,577 *
Port Authority of Allegheny County
Retirement and Disability Allowance Plan for
the Employees Represented by Local 85 of
the Amalgamated Transit Union 2,900,000 * 19,445 *
Prisma Foundation 110,000 * 737 *
Qwest Occupational Health Trust 225,000 * 1,508 *
Ramius Capital Group 280,000 * 1,877 *
RCG Latitude Master Fund, Ltd. 1,800,000 * 12,069 *
RCG Multi Strategy LP 210,000 * 1,408 *
Royal Bank of Canada (6) 5,000,000 * 33,527 *
SCI Endowment Care Common Trust Fund -
First Union 85,000 * 569 *
SCI Endowment Care Common Trust Fund -
National Fiduciary Services 280,000 * 1,877 *
SCI Endowment Care Common Trust Fund -
Suntrust 90,000 * 603 *
Southdown Pension Plan 280,000 * 1,877 *
SPT 3,350,000 * 22,463 *
State Employees' Retirement Fund of the
State of Delaware 2,795,000 * 18,741 *
State of Connecticut Combined Investments
Funds 5,915,000 * 39,662 *
Susquehanna Capital Group 21,000,000 2.82% 140,813 *
TD Securities (USA) Inc. 35,000,000 4.70% 234,689 *
Teachers Insurance and Annuity Association 14,000,000 1.88% 93,875 *
UBS AG London Branch 30,500,000 4.10% 204,514 *
UBS O'Connor LLC, F/B/O UBS Global
Equity Arbitrage Master Ltd. 15,000,000 2.02% 100,581 *
UBS Warburg LLC 3,200,000 * 21,457 *
Union Carbide Retirement Account 3,700,000 * 24,809 *
United Food and Commercial Workers Local
1262 and Employers Pension Fund 1,250,000 * 8,381 *
Vopak USA Inc., Retirement Plan (f.k.a. Van
Waters & Rogers, Inc. Retirement Plan) 660,000 * 4,425 *
40
Aggregate Percentage of Number of Shares Percentage of
Principal-Amount- LYONs of-Common-Stock Common-Stock-
at Maturity of Outstanding Owned and that Outstanding
LYONs Owned and Prior to the May be Sold (1) Prior to the
Name that May be Sold Offering Offering-(2)
-----------------------------------------------------------------------------------------------------------------------------------
White River Securities L.L.C. 5,000,000 * 33,527 *
Worldwide Transactions Ltd. 521,000 * 3,493 *
All Other Holders of LYONs or Future
Transferees, Pledgees, Donees, Assignees or
Successors of any Holders (3) (4) 148,965,000 20.02% 998,869 1.42%
------------------------------------------------------------------------------------------------------------------------------------
Total (5) $744,000,000 100% 4,988,817 7.07%
----------------
* 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
70,553,718 shares of common stock outstanding as of January 3, 2002. 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 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.
(6) Royal Bank of Canada owns 2,600 shares of our common stock in addition to
the shares issuable upon conversion of its LYONS.
41
PLAN OF DISTRIBUTION
We are registering the LYONs and the underlying shares of common stock
covered by this prospectus to permit you 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 these 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 the 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.
42
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 under this prospectus. In addition, the selling
securityholders may 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 under
Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule
144A rather than under 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 the
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 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, under the registration statement to which this
prospectus relates, of all the securities registered thereunder;
and
o the expiration of the holding period applicable to the
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 under the registration statement to which this
prospectus relates.
43
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 us 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
Quarterly Report on Form 10-Q............ Quarter ended September 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
44
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
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
Current Report on Form 8-K............... Filed October 22, 2001
Current Report on Form 8-K............... Filed December 4, 2001
Current Report on Form 8-K............... Filed December 6, 2001
Current Report on Form 8-K............... Filed December 13, 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
Registration Statement on Form 8-A.................... Filed December 21, 2001
All documents we file with the SEC under 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 will 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
us 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.
45
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 this clause shall not apply to any
liability of a director (1) for any breach of the director's duty of loyalty to
LabCorp or our stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) under
Section 174 of the Delaware Corporation Law or (4) 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 (1) our current and former officers and
directors, (2) our subsidiaries and (3) "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.*
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.*
25.1 Form T-1 Statement of Eligibility of The Bank of New York
under the Trust Indenture Act of 1939 relating to Exhibit
4.1.*
* Previously filed with this registration statement.
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
II-2
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this registration statement.
(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
Amendment No. 2 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Burlington, State of
North Carolina, on January 11, 2002.
LABORATORY CORPORATION OF AMERICA HOLDINGS
By: /s/ Bradford T. Smith
-----------------------------------------
Name: Bradford T. Smith
Title: Executive Vice President, Chief Legal
Counsel and Secretary
Pursuant to the requirements of the Securities Act, this Amendment No. 2
to the registration statement has been signed by the following persons in the
capacities indicated on January 11, 2002.
Signature Title
----------- ------
* Chairman of the Board, President,
------------------------------------ Chief Executive Officer and Director
Thomas P. Mac Mahon
/s/ Bradford T. Smith Executive Vice President,
------------------------------------ Chief Legal Counsel and Secretary
Bradford T. Smith
* Executive Vice President,
------------------------------------ Chief Financial Officer and Treasurer
Wesley R. Elingburg
*
------------------------------------ Director
Jean-Luc Belingard
*
------------------------------------ Director
Wendy E. Lane
*
------------------------------------ Director
Robert E. Mittelstaedt, Jr.
*
------------------------------------ Director
James B. Powell
II-4
*
------------------------------------ Director
David B. Skinner
* Director
------------------------------------
Andrew G. Wallace
* The undersigned hereby signs this Amendment No. 2 to the registration
statement on Form S-3 on behalf of each of the indicated persons for
whom he is attorney-in-fact pursuant to a power of attorney previously
filed.
By: /s/ Bradford T. Smith
-----------------------------------
Name: Bradford T. Smith
Title: Executive Vice President,
Chief Legal Counsel
and Secretary
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.*
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.*
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.*
* Previously filed with this registration statement.
II-6