-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P1yLsgNp8oTK8MDs7j1Vs3pxGubBa9vkCKca7HHgPtv+pB7xB6fPtifvBHplOuMZ lwKMz9Y22IQeIWtGDXqmCQ== 0000904454-01-500099.txt : 20010911 0000904454-01-500099.hdr.sgml : 20010911 ACCESSION NUMBER: 0000904454-01-500099 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20010910 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LABONE INC/ CENTRAL INDEX KEY: 0000830158 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 431039532 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-39927 FILM NUMBER: 1734897 BUSINESS ADDRESS: STREET 1: 10101 RENNER BLVD STREET 2: P. O. BOX 7568 CITY: LENEXA STATE: KS ZIP: 66219 BUSINESS PHONE: 9138881770 MAIL ADDRESS: STREET 1: 10101 RENNER BLVD STREET 2: X CITY: LENEXA STATE: KS ZIP: 66219 FORMER COMPANY: FORMER CONFORMED NAME: LAB HOLDINGS INC DATE OF NAME CHANGE: 19980406 FORMER COMPANY: FORMER CONFORMED NAME: SEAFIELD CAPITAL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SEAFIELD CAPTIAL CORP DATE OF NAME CHANGE: 19910520 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WELSH CARSON ANDERSON & STOWE IX LP CENTRAL INDEX KEY: 0001123639 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 320 PARK AVENUE STREET 2: SUITE 2500 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2128415755 MAIL ADDRESS: STREET 1: 320 PARK AVENUE STREET 2: SUITE 2500 CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 sch13d_3q-2001.txt SCHEDULE 13D CUSIP No. 50540L 10 5 Page 1 of 12 Pages SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. )1 LabOne, Inc. - ------------------------------------------------------------------------------ (Name of Issuer) Common Stock, $.01 par value - ------------------------------------------------------------------------------ (Title of Class of Securities) 50540L 10 5 - ------------------------------------------------------------------------------ (CUSIP Number) Welsh, Carson, Anderson Othon A. Prounis, Esq. & Stowe Reboul, MacMurray, Hewitt, 320 Park Avenue, Suite 2500 Maynard & Kristol New York, New York 10022 45 Rockefeller Plaza Attention: Jonathan M. Rather New York, New York 10111 Tel. (212) 893-9500 Tel. (212) 841-5700 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 31, 2001 - ------------------------------------------------------------------------------ (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. - -------- 1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act. CUSIP No. 50540L 10 5 Page 2 of 12 Pages 1) Name of Reporting Person: Welsh, Carson, Anderson & Stowe IX, L.P. and I.R.S. Identification No. of Above Person, if an Entity (Voluntary): - ----------------------------------------------------------------- 2) Check the Appropriate Box (a) [X] if a Member of a Group (b) [ ] - ----------------------------------------------------------------- 3) SEC Use Only - ----------------------------------------------------------------- 4) Source of Funds WC - ----------------------------------------------------------------- 5) Check if Disclosure of Legal Proceedings Is Not Applicable Required Pursuant to Items 2(d) or 2(e) - -------------------------------------------------------------------------------- 6) Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- Number of 7) Sole Voting 4,423,934 shares of Shares Beneficially Power Common Stock Owned by Each (issuable upon Reporting Person exercise of warrants and conversion of preferred stock) --------------------------------------------- 8) Shared Voting Power -0- --------------------------------------------- 9) Sole Disposi- 4,423,934 shares of tive Power Common Stock (issuable upon exercise of warrants and conversion of preferred stock) --------------------------------------------- 10) Shared Dis- positive Power -0- - -------------------------------------------------------------------------------- 11) Aggregate Amount Beneficially 4,423,934 shares of Owned by Each Reporting Person Common Stock (issuable upon exercise of warrants and conversion of preferred stock) - -------------------------------------------------------------------------------- 12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares - -------------------------------------------------------------------------------- 13) Percent of Class Represented by 29.1% Amount in Row (11) - -------------------------------------------------------------------------------- 14) Type of Reporting Person PN CUSIP No. 50540L 10 5 Page 3 of 12 Pages 1) Name of Reporting Person: WCAS Management Corporation and I.R.S. Idenification No. of Above Person, if an Entity (Voluntary): - -------------------------------------------------------------------------------- 2) Check the Appropriate Box (a) [X] if a Member of a Group (b) [ ] - -------------------------------------------------------------------------------- 3) SEC Use Only - -------------------------------------------------------------------------------- 4) Source of Funds WC - -------------------------------------------------------------------------------- 5) Check if Disclosure of Legal Proceedings Is Not Applicable Required Pursuant to Items 2(d) or 2(e) - -------------------------------------------------------------------------------- 6) Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- Number of 7) Sole Voting 2,189 shares of Shares Beneficially Power Common Stock Owned by Each (issuable upon exercise Reporting Person: of warrants and conversion of preferred stock) ---------------------------------------------- 8) Shared Voting Power -0- - -------------------------------------------------------------------------------- 9) Sole Disposi- 2,189 shares of tive Power Common Stock (issuable upon exercise of warrants and conversion of preferred stock - -------------------------------------------------------------------------------- 10) Shared Dis- positive Power -0- ---------------------------------------------------- 11) Aggregate Amount Beneficially 2,189 shares of Owned by Each Reporting Person Common Stock (issuable upon exercise of warrants and conversion of preferred stock - -------------------------------------------------------------------------------- 12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares - -------------------------------------------------------------------------------- 13) Percent of Class Represented by less than 0.1% Amount in Row (11) - -------------------------------------------------------------------------------- 14) Type of Reporting Person CO CUSIP No. 50540L 10 5 Page 4 of 12 Pages Schedule 13D ------------ Item 1. Security and Issuer ------------------- This statement relates to the Common Stock, $.01 par value (the "Common Stock"), of LabOne, Inc., a Missouri corporation ("LabOne" or the "Issuer"). As more fully described herein, the Common Stock to which this statement relates underlies certain other equity securities of the Issuer. The principal executive offices of the Issuer are located at 10101 Renner Boulevard, Lenexa, Kansas 66219. Item 2. Identity and Background ----------------------- (a) Pursuant to Rule 13d-1(k)(1)-(2) of Regulation 13D-G of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Act"), the undersigned hereby file this statement on Schedule 13D on behalf of Welsh, Carson, Anderson & Stowe IX, L.P., a Delaware limited partnership ("WCAS IX"), and WCAS Management Corporation, a Delaware corporation ("WCAS Management"). WCAS IX and WCAS Management are sometimes hereinafter referred to as the "Reporting Persons". The Reporting Persons are making this single, joint filing because they may be deemed to constitute a "group" within the meaning of Section 13(d)(3) of the Act. The Agreement among the Reporting Persons to file as a group (the "Group Agreement") is attached hereto as Exhibit A. As further described in Items 3 and 6 below, the Reporting Persons have entered into a Securities Purchase Agreement (the "Purchase Agreement"), dated as of August 31, 2001, among the Issuer and the purchasers named therein, including the Reporting Persons (collectively, the "Purchase Agreement Stockholders") and WCAS IX has entered into a Voting Agreement (the "Voting Agreement"), dated as of August 31, 2001, by and among WCAS IX and the holders of the Grant family interest named therein (collectively, the "Voting Agreement Stockholders"). Pursuant to Rule 13d-5(b)(1) under the Act, the Purchase Agreement Stockholders and/or the Voting Agreement Stockholders may also be deemed to constitute a group, however this statement on Schedule 13D is being filed solely on behalf of the Reporting Persons and not on behalf of any other members of any such group. WCAS IX ------- (b)-(c) WCAS IX is a Delaware limited partnership. The principal business of WCAS IX is that of a private investment partnership. The sole general partner of WCAS IX is WCAS IX Associates, L.L.C., a Delaware limited liability company ("IX Associates"). The principal business of IX Associates is that of acting as the general partner of WCAS IX. The principal business and principal office address of WCAS IX, IX Associates and the managing members of IX Associates is 320 Park Avenue, Suite 2500, New York, New York 10022. The managing members of IX Associates are citizens of the United States, and their respective principal occupations are set forth below. CUSIP No. 50540L 10 5 Page 5 of 12 Pages WCAS Management --------------- (b)-(c) WCAS Management is a Delaware corporation. The principal business of WCAS Management is that of an investment management company. The principal business and principal office address of WCAS Management and the stockholders of WCAS Management is 320 Park Avenue, Suite 2500, New York, New York 10022. The stockholders of WCAS Management are citizens of the United States, and their respective principal occupations are set forth below. Name Occupation - ---- ---------- Patrick J. Welsh Managing Member, IX Associates; Stockholder WCAS Management Russell L. Carson Managing Member, IX Associates, Stockholder WCAS Management Bruce K. Anderson Managing Member, IX Associates, Stockholder WCAS Management Thomas E. McInerney Managing Member, IX Associates Stockholder WCAS Management Robert A. Minicucci Managing Member, IX Associates Stockholder WCAS Management Lawrence B. Sorrel Managing Member, IX Associates Stockholder WCAS Management Anthony J. de Nicola Managing Member, IX Associates Paul B. Queally Managing Member, IX Associates Jonathan M. Rather Managing Member, IX Associates (d) None of the entities or persons identified in this Item 2 has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the entities or persons identified in this Item 2 has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds and Other Consideration -------------------------------------------------- On August 31, 2001, the Reporting Persons acquired an aggregate 13,599 shares of Senior Cumulative Convertible Preferred Stock, Series B-1, CUSIP No. 50540L 10 5 Page 6 of 12 Pages $.01 par value per share, of the Issuer (the "Series B-1 Preferred") and 20,398 shares of Senior Cumulative Convertible Preferred Stock, Series B-2, $.01 par value per share, of the Issuer (the "Series B-2 Preferred") pursuant to the Purchase Agreement. The Purchase Agreement is attached hereto as Exhibit B, and any description thereof is qualified in its entirety by reference thereto. The purchase price for the Series B-1 Preferred was $1,000 per share and the aggregate purchase price paid for the Series B-1 Preferred was $13,599,000. The purchase price for the Series B-2 Preferred was $1,000 per share and the aggregate purchase price paid for the Series B-2 Preferred was $20,398,000. The source of funds for such purchases was the working capital, or funds available for investment, of the Reporting Persons. The managing members of the general partner of WCAS IX and the stockholders of WCAS Management (together with the Reporting Persons, the "WCAS Purchasers") also acquired an aggregate 401 shares of Series B-1 Preferred and 602 shares of Series B-2 Preferred pursuant to the Purchase Agreement. The purchase price for the Series B-1 Preferred was $1,000 per share and the aggregate purchase price paid for the Series B-1 Preferred was $401,000. The purchase price for the Series B-2 Preferred was $1,000 per share and the aggregate purchase price paid for the Series B-2 Preferred was $602,000. The source of funds for such purchases was personal funds. The shares of Series B-2 Preferred are, under certain circumstances, convertible into shares of Series B-1 Preferred on a one-to-one basis and the shares of Series B-1 Preferred are, at the option of the holder, convertible into shares of Common Stock at a conversion price of $8.32 per share, subject, in each case, to adjustment in the event of certain circumstances described in the terms of the securities. The terms of the Series B-1 Preferred (the "Series B-1 Terms") are attached hereto as Exhibit C, and any description thereof is qualified in its entirety by reference thereto. The terms of the Series B-2 Preferred (the "Series B-2 Terms") are attached hereto as Exhibit D, and any description thereof is qualified in its entirety by reference thereto. The information contained in this statement relating to the number of shares of Common Stock acquired by the Reporting Persons, the managing members of the general partner of WCAS IX, and the stockholders of WCAS Management assumes the approval by the Issuer's shareholders of, among other things described in the Purchase Agreement, the Series B-1 Terms, and the Series B-2 Terms, the conversion of the shares of Series B-2 Preferred into shares of Series B-1 Preferred and the removal of any limitation on the conversion of the shares of Series B-1 Preferred into shares of Common Stock. Also on August 31, 2001, 339,948 Warrants were issued to the Reporting Persons and 10,052 Warrants (collectively, the "Warrants") were issued to the other WCAS Purchasers in connection with their purchase from the Issuer of the shares of Series B-1 Preferred. The Warrants are exercisable immediately, for a period of seven years ending on August 31, 2008, at an exercise price of $.01 per warrant share, subject to adjustment in the event of certain circumstances described in the Warrant Agreement, dated as of August 31, 2001, by and among the Issuer, WCAS IX, WCAS Management, and the other WCAS Purchasers (the "Warrant Agreement"). The Warrant Agreement is attached hereto as Exhibit E, and any description thereof is qualified in its entirety by reference thereto. CUSIP No. 50540L 10 5 Page 7 of 12 Pages Item 4. Purpose of Transaction The Reporting Persons have acquired securities of the Issuer for investment purposes. In connection with the execution of the Purchase Agreement, Paul B. Queally, managing member of WCAS IX, joined the Issuer's Board of Directors on August 31, 2001. In addition, following Company Shareholder Approval (as defined in the Purchase Agreement), the Purchase Agreement and the Series B-1 Terms provide for the right of the WCAS Purchasers to nominate or elect, respectively, up to three persons to serve on the Issuer's Board of Directors, subject to the retention of specified levels of share ownership by the WCAS Purchasers. Also in connection with the execution of the Purchase Agreement, the Issuer agreed to submit a proposed amendment to its articles of incorporation (the "Charter Amendment") to a vote of the Issuer's shareholders. The Charter Amendment is attached hereto as Exhibit F, and any description thereof is qualified in its entirety by reference thereto. Also in connection with the execution of the Purchase Agreement, the Issuer's Board of Directors approved an amendment to the Issuer's shareholder rights plan (the "Rights Plan Amendment"). The Rights Plan Amendment is attached hereto as Exhibit G, and any description thereof is qualified in its entirety by reference thereto. Item 5. Interest in Securities of the Issuer ------------------------------------ The following information is based on a total of 10,788,310 shares of Common Stock outstanding as of August 31, 2001, and gives effect to the conversion of all shares of Series B-2 Preferred and Series B-1 Preferred and the exercise of all Warrants held by each entity and person named below. (a) WCAS IX and IX Associates ------------------------- WCAS IX owns 4,423,934 shares of Common Stock, or approximately 29.1% of the Common Stock outstanding. IX Associates, as the general partner of WCAS IX, may be deemed to beneficially own the securities owned by WCAS IX. WCAS Management --------------- WCAS Management owns 2,189 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. Managing Members of IX Associates and Stockholders of WCAS Management ------------------------------- (i) Patrick J. Welsh owns 16,806 shares of Common Stock, or approximately 0.2% of the Common Stock outstanding. (ii) Russell L. Carson owns 16,806 shares of Common Stock, or CUSIP No. 50540L 10 5 Page 8 of 12 Pages approximately 0.2% of the Common Stock outstanding. (iii) Bruce K. Anderson owns 16,686 shares of Common Stock, or approximately 0.2% of the Common Stock outstanding. (iv) Thomas E. McInerney owns owns 16,927 shares of Common Stock, or approximately 0.2% of the Common Stock outstanding. (v) Robert A. Minicucci owns 16,927 shares of Common Stock, or approximately 0.2% of the Common Stock outstanding. (vi) Lawrence B. Sorrel owns 16,927 shares of Common Stock, or approximately 0.2% of the Common Stock outstanding. (vii) Anthony J. de Nicola owns 12,235 shares of Common Stock, or approximately 0.1% of the Common Stock outstanding. (viii) Paul B. Queally owns 9,116 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (ix) Jonathan M. Rather owns 2,732 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. Other WCAS Purchasers --------------------- (i) D. Scott Mackesy owns 2,338 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (ii) Sanjay Swani owns 254 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (iii) John D. Clark owns 254 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (iv) James R. Matthews owns 254 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (v) Sean Traynor owns 1,822 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (vi) John Almeida owns 258 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (vii) Eric J. Lee owns 254 shares of Common Stock, or less than 0.1% of the Common Stock outstanding. (b) The managing members of IX Associates and the stockholders of WCAS Management may be deemed to share the power to vote or direct the voting of and to dispose or direct the disposition of the securities of the Issuer owned by WCAS IX and WCAS Management, respectively. Each of the managing members of IX Associates and the stockholders of WCAS Management disclaims beneficial ownership of all securities other than those he owns directly or by virtue of his indirect pro rata interest, as a managing member CUSIP No. 50540L 10 5 Page 9 of 12 Pages of IX Associates or a stockholder of WCAS Management, in the securities owned by WCAS IX and WCAS Management. (c) Except as described in this statement, none of the entities or persons named in Item 2 has effected any transaction in the securities of the Issuer in the past 60 days. (d) Except as described in this statement, no person has the power to direct the receipt of dividends on or the proceeds of sales of the shares of Common Stock owned by WCAS IX or WCAS Management. (e) Not Applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer ------------------------------------------ Pursuant to the Purchase Agreement, each of the WCAS Purchasers has agreed to certain standstill provisions, including that until such purchasers and their respective Affiliates (as defined in the Purchase Agreement) own fewer than 5% of the shares of Common Stock of the Issuer acquired (on an as-converted basis) under the Purchase Agreement, they will not, except under certain circumstances excluded by the Purchase Agreement, purchase or otherwise acquire any voting securities of the Issuer. The WCAS Purchasers have also agreed, pursuant to the Purchase Agreement, to use their reasonable best efforts to cause the election or appointment to the Issuer's Board of Directors of the persons nominated by the Company Directors (as defined in the Purchase Agreement) until August 31, 2008. Pursuant to the Voting Agreement, until August 31, 2008, WCAS IX has agreed to vote its shares of Common Stock and its shares of Series B-1 Preferred (on an as-converted basis) in favor of the nominees of the Company Directors and the holders of the Grant family interest named in the Voting Agreement have agreed to vote their shares of Common Stock in favor of Company Shareholder Approval and in favor of persons nominated to be WCAS Directors (as defined in the Purchase Agreement). The Voting Agreement is attached hereto as Exhibit H, and any description thereof is qualified in its entirety by reference thereto. The Series B-2 Terms provide that the shares of Series B-2 Preferred are non-voting prior to Company Shareholder Approval and that upon receipt of Company Shareholder Approval, such shares convert automatically into shares of Series B-1 Preferred. The Series B-1 Terms and the Warrants provide that prior to the receipt of Company Shareholder Approval, the shares of Series B-1 Preferred are never convertible, together with the shares of Common Stock underlying the Warrants, into more than 19.9% of the Issuer's Common Stock outstanding immediately prior to the original issuance of the Series B-1 Preferred, effectively limiting the maximum number of votes to which the WCAS Purchasers are entitled to the same 19.9% number. The terms of the Warrants also provide that the warrant shares issuable upon exercise of the Warrants do not vote at any time that shares of Series B-1 Preferred are outstanding. CUSIP No. 50540L 10 5 Page 10 of 12 Pages The Issuer and the WCAS Purchasers also entered into a Registration Rights Agreement on August 31, 2001, pursuant to which the Issuer has agreed to grant to the WCAS Purchasers certain demand and piggyback registration rights with respect to their shares of Series B-1 Preferred, Series B-2 Preferred, and Common Stock issuable upon conversion thereof and upon exercise of Warrants. The Registration Rights Agreement is attached hereto as Exhibit I, and any description thereof is qualified in its entirety by reference thereto. Item 7. Material to Be Filed as Exhibits -------------------------------- Exhibit A - Group Agreement (Appears at Page 14) Exhibit B - Purchase Agreement Exhibit C - Series B-1 Terms Exhibit D - Series B-2 Terms Exhibit E - Warrant Agreement Exhibit F - Charter Amendment Exhibit G - Rights Plan Amendment Exhibit H - Voting Agreement Exhibit I - Registration Rights Agreement CUSIP No. 50540L 10 5 Page 11 of 12 Pages Signature --------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. WELSH, CARSON, ANDERSON & STOWE IX, L.P. By: WCAS IX Associates, LLC, General Partner By: /s/ Jonathan Rather -------------------------- Managing Member WCAS MANAGEMENT CORPORATION By: /s/ Jonathan Rather -------------------------- Treasurer Dated: September 10, 2001 CUSIP No. 50540L 10 5 Page 12 of 12 Pages EXHIBIT A --------- AGREEMENT OF WELSH, CARSON, ANDERSON & STOWE IX, L.P. AND WCAS MANAGEMENT CORPORATION PURSUANT TO RULE 13d-1(k) The undersigned hereby agree that the statement on Schedule 13D to which this Agreement is annexed as Exhibit A is filed on behalf of each of them in accordance with the provisions of Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended. WELSH, CARSON, ANDERSON & STOWE IX, L.P. By: WCAS IX Associates, LLC, General Partner By: /s/ Jonathan Rather -------------------------- Managing Member WCAS MANAGEMENT CORPORATION By: /s/ Jonathan Rather -------------------------- Treasurer Dated: September 10, 2001 EX-99 3 exhb.txt SECURITIES PURCHASE AGREEMENT EXHIBIT B --------- ================================================================================ SECURITIES PURCHASE AGREEMENT Among LABONE, INC., WELSH, CARSON, ANDERSON & STOWE IX, L.P. and THE OTHER PURCHASERS NAMED ON SCHEDULE I HERETO Dated as of August 31, 2001 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I. PURCHASE AND SALE OF INITIAL SECURITIES ON THE CLOSING DATE; PURCHASE PRICE............................2 SECTION 1.01. Issuance, Sale and Delivery of the Initial Securities.............................................2 SECTION 1.02. Closing................................................3 ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................4 SECTION 2.01. Organization and Qualification.........................4 SECTION 2.02. Investments and Commitments; Subsidiaries..............5 SECTION 2.03. Capitalization.........................................6 SECTION 2.04. Corporate Power and Authority; Authorization of Agreements; Non-Contravention.......................6 SECTION 2.05. Validity...............................................8 SECTION 2.06. Governmental Approvals.................................8 SECTION 2.07. SEC Filings............................................9 SECTION 2.08. Financial Statements...................................9 SECTION 2.09. Absence of Certain Changes or Events..................10 SECTION 2.10. Actions Pending.......................................10 SECTION 2.11. Compliance with Law; Material Permits.................10 SECTION 2.12. Title to and Condition of Properties..................10 SECTION 2.13. Real Property.........................................11 SECTION 2.14. Contracts.............................................11 SECTION 2.15. Intellectual Property; Software.......................12 SECTION 2.16. Tax Matters...........................................12 SECTION 2.17. Employee Benefit Plans................................14 SECTION 2.18. Customers.............................................15 SECTION 2.19. Labor Matters.........................................15 SECTION 2.20. Environmental Matters.................................15 SECTION 2.21. Insurance Coverage....................................16 SECTION 2.22. Offering of the Securities............................16 SECTION 2.23. Related-Party Transactions............................16 SECTION 2.24. Proxy Statement.......................................16 SECTION 2.25. Anti-Takeover Statutes and Certain Charter Provisions; Rights Plan...............................17 SECTION 2.26. Osborn Acquisition Agreement..........................17 SECTION 2.27. Completeness of Disclosure............................17 -i- Page ---- SECTION 2.28. Brokers...............................................17 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............................................18 SECTION 3.01. Organization and Authority............................18 SECTION 3.02. Authorization.........................................18 SECTION 3.03. Validity..............................................18 SECTION 3.04. Investment Representations............................19 SECTION 3.05. Governmental Approvals................................19 SECTION 3.06. Information Supplied..................................19 SECTION 3.07. Ownership of Capital Stock of the Company.............20 ARTICLE IV. COVENANTS OF THE PARTIES PENDING THE CLOSING...........................................20 SECTION 4.01. Conduct of the Company's Business.....................20 SECTION 4.02. Access to Information Concerning the Company and its Subsidiaries..................................22 SECTION 4.03. Authorizations, Consents, Waivers and Approvals.......22 SECTION 4.04. Further Assurances....................................23 SECTION 4.05. Notification of Certain Matters.......................23 SECTION 4.06. Anti-Takeover Statutes; Rights Plan Amendment.........23 SECTION 4.07. The Osborn Acquisition................................23 SECTION 4.08. Nasdaq Quotation......................................24 SECTION 4.09. SEC and Other Filings.................................24 SECTION 4.10. Certificates of Designation...........................24 ARTICLE V. CONDITIONS PRECEDENT..........................................24 SECTION 5.01. Conditions Precedent to the Obligations of Each Party............................................24 SECTION 5.02. Conditions Precedent to the Obligations of the Purchasers........................................25 SECTION 5.03. Conditions Precedent to the Obligations of the Company...........................................27 ARTICLE VI. POST-CLOSING COVENANTS AND AGREEMENTS.........................28 SECTION 6.01. Legends; Reservation of Shares........................28 SECTION 6.02. Board Composition.....................................28 -ii- Page ---- SECTION 6.03. Standstill Agreement..................................31 SECTION 6.04. Right To Purchase Series C Preferred Shares...........32 SECTION 6.05. Issuance of Series B Notes In Connection With Subsequent Acquisitions...............................35 SECTION 6.06. Company Shareholder Approval..........................39 SECTION 6.07. Tax Consistency.......................................40 SECTION 6.08 Certain Veto Rights Applying After Company Shareholder Approval..................................40 SECTION 6.09 Certain Negative Covenants Relating to the Series B-2 Preferred Shares, Series C-2 Preferred Shares, Series A Notes and Series B Notes.............41 ARTICLE VII. TERMINATION PRIOR TO CLOSING..................................48 SECTION 7.01. Termination of Agreement..............................48 SECTION 7.02. Effect of Termination.................................49 ARTICLE VIII. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION.....................49 SECTION 8.01. Survival of Representations, Warranties, Covenants and Agreements..............................49 SECTION 8.02. Indemnification.......................................50 SECTION 8.03. Conditions of Indemnification.........................51 SECTION 8.04. Other Claims..........................................53 SECTION 8.05. Remedies Cumulative...................................53 ARTICLE IX. MISCELLANEOUS.................................................53 SECTION 9.01. Specific Performance..................................53 SECTION 9.02. Expenses, Etc.........................................53 SECTION 9.03. Execution in Counterparts.............................54 SECTION 9.04. Notices...............................................54 SECTION 9.05. Amendments and Waivers................................56 SECTION 9.06. Amendments, Supplements, Etc..........................56 SECTION 9.07. Entire Agreement......................................56 SECTION 9.08. Benefit of Agreement; Assignment......................56 SECTION 9.09. Governing Law.........................................57 SECTION 9.10. Jurisdiction and Venue................................57 -iii- Page ---- SECTION 9.11. Severability..........................................58 SECTION 9.12. Publicity.............................................58 SECTION 9.13. Appointment of the Purchaser Representative...........58 SECTION 9.14. Interpretation........................................58 -iv- INDEX TO EXHIBITS AND SCHEDULES Exhibit Description ------- ----------- A Form of Series B-1 Preferred Certificate of Designation B Form of Warrant Agreement C Form of Series B-2 Preferred Certificate of Designation D Form of Senior Subordinated Note E Form of Series C-1 Preferred Certificate of Designation F Form of Series C-2 Preferred Certificate of Designation G Form of Rights Plan Amendment H Form of Opinion of Morrison & Hecker LLP I Form of Registration Rights Agreement J Form of Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol K Form of Charter Amendment Schedule Description -------- ----------- I Purchasers/Initial Securities -v- INDEX TO DEFINED TERMS THIS INDEX IS INCLUDED FOR CONVENIENCE ONLY AND DOES NOT CONSTITUTE A PART OF THE AGREEMENT Term Reference - ---- --------- "Additional Indebtedness" 6.09(A)(1)(L) "Additional Securities" Recitals "Additional Warrants" Recitals "Affiliate" 6.02(a) "Ancillary Agreements" 2.04(a) "Annual Report" 2.02(b) "Approval Date" 6.06(a) "Balance Sheet Date" 2.08 "Board Meeting" 2.04(b) "Capitalized Lease Obligations" 6.09(a) "Charter Amendment" 6.06(a) "ChoicePoint" Recitals "Closing" 1.02(a) "Closing Date" 1.02(a) "COBRA" 2.17(c) "Code" 2.17(c) "Co-Investors" 6.04(a) "Company" Recitals "Company Common Stock" 2.03(a) "Company Directors" 6.02(a)(iv) "Company Group" 8.02(b) "Company Preferred Stock" 2.03(a) "Company SEC Filings" 2.07 "Company Shareholder Approval" 6.06(a) "Company Shareholder Meeting" 6.06(a) "Company Stock Options" 2.03(b) "Confidentiality Agreement" 4.02(b) "Conversion Shares" 2.04(b) "Damages" 8.02 "Definitive Note Purchase Agreement" 6.05(d) "Disclosure Schedule" Article II "Disqualified Stock" 6.09(a)(ii) "Employee Plan" 2.17(a) "Environmental Event" 2.20 "Equity Offering" 6.04(b) "ERISA" 2.17(a) "Exchange Act" 2.06 "Existing Indebtedness" 6.09(a)(i)(E) "GAAP" 2.08 "Governmental Body" 2.10 "HIPAA" 2.17(c) "Indebtedness" 6.09(a) "Industrial Revenue Bonds" 6.09(a)(i)(D) "Initial Securities" Recitals "Initial Warrants" Recitals "In-the-Money Options" 6.04(d) "In-the-Money Preferred Stock" 6.04(d) "IRB Indebtedness" 6.09(a)(i)(D) "Jointly-Selected Director" 6.02(a)(iv) "Law" 2.04(c) "Leased Properties" 2.13 "Liens" 2.02(b) "Market Price" 6.04(d) "Material Adverse Effect" 2.01 "Material Customers" 2.18 "Material Contracts" 2.14 "Material Permits" 2.11 "Missouri Code" 2.25 "Mutual Approval" 6.05(d) "Non-WCAS Directors" 6.02(a)(iv) "Notes" 6.09 "Order" 2.04(c) "Original Transaction" 6.04(e) "Osborn" Recitals "Osborn Acquisition" Recitals "Osborn Acquisition Agreement" Recitals "Osborn Acquisition Documents" 4.07(c) "Other Financing" 6.05(e) "Parent" Recitals "Permitted Liens" 2.12 "Potential Acquisition" 6.05(a) "Potential Acquisition Notice" 6.05(a) "Potential Acquisition Target" 6.05(a) "Prohibited Related Party Transactions" 6.09(f) "Proxy Statement" 6.06(b) "Publicly-Available Contracts" 2.14 "Purchaser Group" 8.02 "Purchaser Representative" 9.13 "Purchaser" Recitals "Reference Date" 6.04(d) "Registration Rights Agreement" 5.02 "Related Party" 2.23 "Restricted Payments" 6.09(b) "Restricted Period" 6.04(a) "Returns" 2.16(a) "Rights Plan Amendment" 5.02 "Rights Plan" 2.25 "SEC" 2.07 "Securities Act" 2.03(b) "Senior Credit Agreement Indebtedness" 6.09(a)(i)(C) "Senior Indebtedness" 6.09(a)(i)(D) "Series A Notes" Recitals "Series B Notes" Recitals "Series B-1 Preferred Certificate of Designation" Recitals "Series B-2 Preferred Certificate of Designation" Recitals "Series B-1 Preferred Shares" Recitals "Series B-2 Preferred Shares" Recitals "Series B Note Transaction" 6.05(b) "Series C-1 Preferred Certificate of Designation" Recitals "Series C-2 Preferred Certificate of Designation" Recitals "Series C-1 Preferred Shares" Recitals "Series C-2 Preferred Shares" Recitals "Series C Preferred Transaction" 6.04(a) "Subsidiary" 2.02(a) "Taxes" 2.16(b) "Taxing Authorities" 2.16(b) "Third Party Claim" 8.03 "Transaction Expenses" 9.02 "Voting Agreement" 5.02 "Voting Securities" 6.03 "Warrant Agreement" Recitals "Warrant Certificate" 1.02(b) "WCAS Cessation of Interest Notice" 6.05(b) "WCAS Directors" 6.02(a)(iv) "WCAS" Recitals SECURITIES PURCHASE AGREEMENT dated as of August 31, 2001 among LABONE, INC., a Missouri corporation (the "Company"), WELSH, CARSON, ANDERSON & STOWE IX, L.P., a Delaware limited partnership ("WCAS"), and the other persons named on Schedule I hereto under the heading "Purchasers" (together with WCAS, each individually a "Purchaser" and collectively the "Purchasers"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company is a party to a Stock Purchase Agreement, dated as of August 31, 2001, by and among ChoicePoint Inc., a Georgia corporation ("Parent"), ChoicePoint Services Inc., a Georgia corporation and wholly-owned subsidiary of Parent ("ChoicePoint"), and the Company (the "Osborn Acquisition Agreement"), pursuant to which the Company has agreed to acquire from ChoicePoint (the "Osborn Acquisition") all of the issued and outstanding shares of capital stock of Osborn Group, Inc., a Delaware corporation and wholly-owned subsidiary of ChoicePoint ("Osborn"); WHEREAS, in order to finance the Osborn Acquisition, the Company desires to issue and sell to the Purchasers on the Closing Date (as hereinafter defined), and the Purchasers desire to purchase from the Company on the Closing Date, for an aggregate purchase price of $50,000,000, (A)(1) an aggregate 14,000 shares of Series B-1 Cumulative Convertible Preferred Stock of the Company (the "Series B-1 Preferred Shares") having a stated value of $1,000 per share and a par value of $0.01 per share and the designation, powers, preferences and rights, and qualifications, limitations and restrictions, set forth in the form of certificate of designation attached as Exhibit A hereto (the "Series B-1 Preferred Certificate of Designation"), together with an aggregate 350,000 nominally-priced detachable common stock purchase warrants (the "Initial Warrants") issued pursuant to the terms hereof and governed by the Warrant Agreement, dated as of the date hereof, in the form attached as Exhibit B hereto (the "Warrant Agreement") and (2) an aggregate 21,000 shares of Series B-2 Cumulative Convertible Preferred Stock of the Company (the "Series B-2 Preferred Shares") having a stated value of $1,000 per share and a par value of $0.01 per share and the designation, powers, preferences and rights, and qualifications, limitations and restrictions, set forth in the form of certificate of designation attached as Exhibit C hereto (the "Series B-2 Preferred Certificate of Designation") and (B) $15,000,000 in aggregate principal amount of Series A Senior Subordinated Notes of the Company in the form attached as Exhibit D hereto (the "Series A Notes" and, together with the Series B-1 Preferred Shares, the Series B-2 Preferred Shares and the Initial Warrants, the "Initial Securities"), all on the terms and subject to the conditions set forth herein, including, without limitation, the consummation of the Osborn Acquisition on the terms and conditions set forth in the Osborn Acquisition Agreement; WHEREAS, as a condition to the Purchasers' willingness to enter into this Agreement and consummate the transactions contemplated hereby, the Company will agree herein not to issue certain additional equity or equity-linked securities for a period of three years following the Closing Date unless it first grants to WCAS the right to purchase, together with its Co-Investors (as hereinafter defined), up to an aggregate 15,000 shares of (A) if Company Shareholder Approval (as hereinafter defined) has at the time of issuance been obtained, Series C-1 Cumulative Convertible Preferred Stock of the Company ("Series C-1 Preferred Shares") having a stated value of $1,000 per share and a par value of $0.01 per share and the designation, powers, preferences and rights, and qualifications, limitations and restrictions, set forth in the form of certificate of designation attached as Exhibit E hereto (the "Series C-1 Preferred Certificate of Designation") or (B) if Company Shareholder Approval has not been obtained at the time of issuance, Series C-2 Cumulative Convertible Preferred Stock of the Company ("Series C-2 Preferred Shares") having a stated value of $1,000 per share and a par value of $0.01 per share and the designation, powers, preferences and rights, and qualifications, limitations and restrictions, set forth in the form of certificate of designation attached as Exhibit F hereto ("Series C-2 Preferred Certificate of Designation"), all on the terms and subject to the conditions, limitations and exceptions set forth herein; and WHEREAS, the Company and WCAS desire to set forth in this Agreement the terms and conditions upon which the Company may agree to sell and WCAS may agree to purchase, together with its Co-Investors, up to $15,000,000 in aggregate principal amount of Series B Senior Subordinated Notes of the Company in the form attached as Exhibit D hereto (the "Series B Notes") together with certain additional nominally-priced detachable common stock purchase warrants (the "Additional Warrants" and together with the Series C-1 Preferred Shares, the Series C-2 Preferred Shares and the Series B Notes, the "Additional Securities") in order to finance future acquisitions by the Company that are approved by both the Board of Directors of the Company and WCAS; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I. PURCHASE AND SALE OF INITIAL SECURITIES ON THE CLOSING DATE; PURCHASE PRICE SECTION 1.01. ISSUANCE, SALE AND DELIVERY OF THE INITIAL SECURITIES. Subject to the terms and conditions set forth herein, and in reliance on the mutual representations and warranties being made herein, on the Closing Date, the Company shall issue, sell and deliver to each Purchaser, and each Purchaser shall purchase from the Company, (1) the number of Series B-1 Preferred Shares, the number of Series B-2 Preferred Shares and the number of Initial Warrants set forth opposite the name of such Purchaser on Schedule I hereto and (2) a Series A Note in the aggregate principal amount set forth opposite the name of such Purchaser on Schedule I hereto. The Initial Securities shall be issued, sold and delivered as provided in Section 1.02(b). Notwithstanding anything to the contrary contained above, the respective obligations of the Purchasers to purchase the Initial Securities hereunder shall be several and not 2 joint obligations except that WCAS shall be jointly and severally obligated, subject to the terms and conditions set forth herein, with each of the other Purchasers named on Schedule I hereto with respect to such other Purchaser's obligation to make full and prompt payment of the purchase price payable with respect to the Initial Securities being purchased by such Purchaser hereunder. SECTION 1.02. CLOSING. (a) Subject to the terms and conditions set forth herein, the issuance, sale and delivery of the Initial Securities contemplated by Section 1.01 (the "Closing") shall take place at the location of and concurrently with the closing of the Obsorn Acquisition, or at such other location and time and on such other date as the parties mutually agree (such date and time of Closing being herein called the "Closing Date"). Subject to the provisions of Article VII, failure to consummate the purchase and sale of the Initial Securities on the date and at the location and time determined pursuant to this Section 1.02(a) will not result in the termination of this Agreement. (b) Subject to the terms and conditions set forth in this Agreement, and concurrently with the consummation of the Osborn Acquisition, at the Closing: (i) The Company shall issue and deliver to each Purchaser, against payment of the purchase price therefor as set forth herein, (1) a stock certificate in definitive form, registered in the name of such Purchaser and evidencing the Series B-1 Preferred Shares being purchased by such Purchaser hereunder, (2) a stock certificate in definitive form, registered in the name of such Purchaser and evidencing the Series B-2 Preferred Shares being purchased by such Purchaser hereunder, (3) a definitive warrant certificate in the form attached as Exhibit A to the Warrant Agreement (each a "Warrant Certificate"), registered in the name of such Purchaser and evidencing the Initial Warrants being purchased by such Purchaser hereunder, and (4) a Series A Note, registered in the name of such Purchaser and evidencing the indebtedness of the Company to such Purchaser in connection with the purchase thereof; (ii) As payment in full for the Initial Securities being purchased by such Purchaser hereunder, and against delivery of the certificates and promissory notes therefor as aforesaid, each Purchaser shall pay, by wire transfer of immediately available funds to an account of the Company designated in writing to the Purchaser Representative (as hereinafter defined) not less than two business days prior to the Closing Date, the sum set forth opposite the name of such Purchaser on Schedule I hereto under the heading "Total Purchase Price"; (iii) The Company shall pay to WCA Management Corporation, by wire transfer of immediately available funds to an account designated in writing to the Company not less than two business days prior to the Closing Date, a $500,000 advisory fee for services rendered in connection with the Osborn Acquisition; 3 (iv) The Company shall pay, by wire transfer of immediately available funds to an account or accounts designed in writing to the Company not less than two business days prior to the Closing Date, the Transaction Expenses (as hereinafter defined) incurred by the Purchasers, as contemplated by and in accordance with Section 9.02; and (v) The parties hereto shall execute and/or deliver or cause to be executed and/or delivered each of the other documents, instruments, certificates, agreements and opinions contemplated by Sections 5.02 and 5.03 hereof. (c) All amounts received by the Company in respect of the issuance and sale of the Initial Securities pursuant to this Agreement shall be used solely to pay the purchase price for the Osborn Acquisition and/or to pay fees and expenses incurred in connection with the Osborn Acquisition and the transactions contemplated by this Agreement. ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the disclosure schedule delivered by the Company to the Purchaser Representative prior to the execution and delivery of this Agreement (the "Disclosure Schedule"), and, in each case, making specific reference to the particular section of this Article II to which such exception is being taken, the Company represents and warrants to each Purchaser as follows: SECTION 2.01. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the Laws (as hereinafter defined) of the State of Missouri. The Company has all requisite corporate power and corporate authority to own or lease and operate its properties and assets and to carry on its business as it is now being conducted. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction in which the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect (as hereinafter defined). "Material Adverse Effect" means any change, event, condition, circumstance or effect (or aggregation of changes, events, conditions, circumstances and effects) that is or could reasonably be expected to be materially adverse to the business, assets, financial condition, prospects or results of operations of the Company and its Subsidiaries taken as a whole, other than any change, event, condition, circumstance or effect (i) relating to the economy or securities markets generally, (ii) relating to the industries in which the Company and its Subsidiaries operate and not specifically relating to or disproportionately affecting (relative to other industry participants) the Company and its Subsidiaries or (iii) resulting from the execution of, the announcement of, or the performance of this Agreement, or any change in the value of the Series B-1 Preferred Shares, Series B-2 4 Preferred Shares, Series A Notes or Company Common Stock (as hereinafter defined) resulting from such execution, announcement, or performance (but not including effects which were known to the Company on the date hereof and not disclosed to the Purchasers in violation of the representations and warranties contained in this Agreement). The Company has previously made available to the Purchaser Representative or the Purchasers' counsel complete and accurate copies of the minute books and the Articles of Incorporation and By-Laws of the Company, each as in effect on the date hereof. The Company is not in default in the performance, observance or fulfillment of any provision of its organizational documents. SECTION 2.02. INVESTMENTS AND COMMITMENTS; SUBSIDIARIES. (a) Except for the outstanding capital stock of its Subsidiaries, the Company does not own, directly or indirectly, (i) any shares of outstanding capital stock or securities convertible into or exchangeable for capital stock of any other corporation or (ii) any participating interest in the revenues or profits of any corporation, partnership, limited liability company, joint venture or other business enterprise. Except in connection with the Osborn Acquisition, the Company is not subject to any obligation to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any entity or other business enterprise that is not a wholly-owned Subsidiary of the Company. For purposes of this Agreement, with respect to the Company, the term "Subsidiary" shall mean any corporation, partnership, limited liability company, joint venture or other business enterprise of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time owned by the Company and/or one or more other Subsidiaries of the Company. (b) A complete and accurate list of each Subsidiary of the Company is set forth on Exhibit 21 to the Annual Report of the Company on Form 10-K for the year ended December 31, 2000 (as amended by Amendment No. 1 thereto, the "Annual Report"). Each Subsidiary of the Company is a corporation duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as it is now being conducted. Each Subsidiary of the Company is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction in which the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect. The Company has previously made available to the Purchaser Representative or the Purchasers' counsel complete and accurate copies of the minute books, stock ledgers, charter documents and By-Laws of each of its Subsidiaries, each as in effect on the date hereof. No such Subsidiary is in default in the performance, observance or fulfillment of any provision of such organizational documents. All of the outstanding shares of capital stock of each Subsidiary of the Company are validly issued, fully paid and nonassessable and are owned by the Company or by a wholly-owned Subsidiary of the Company, free and clear of any liens, charges, pledges, security interests, mortgages, encum brances or adverse claims ("Liens"), and there are no proxies outstanding or restrictions on voting with respect to any such shares. 5 SECTION 2.03. CAPITALIZATION. (a) The authorized capital stock of the Company consists of 40,000,000 shares of Common Stock, par value $0.01 per share ("Company Common Stock"), and 3,000,000 shares of Preferred Stock, par value $.01 per share ("Company Preferred Stock"), of which, as of the Closing Date (after the filing of the Series B-1 Preferred Certificate of Designation and the Series B-2 Preferred Certificate of Designation), 300,000, 45,000, and 30,000 shares will have been designated as Series A Preferred Stock, Series B-1 Cumulative Convertible Preferred Stock and Series B-2 Cumulative Convertible Preferred Stock, respectively. As of the date hereof, 10,788,310 shares of Company Common Stock are issued and outstanding, all of which were duly authorized, validly issued, fully paid and nonassessable. There are 2,271,710 shares of Company Common Stock held in the Company's treasury. As of the date hereof and as of the Closing Date (prior to the issuance, sale and delivery of the Initial Securities), there are and will be no shares of Company Preferred Stock issued or outstanding or held in the Company's treasury. (b) Except for (i) rights issued pursuant to and in accordance with the Rights Plan (as hereinafter defined), (ii) rights under this Agreement and the Ancillary Agreements (as hereinafter defined), (iii) warrants that have been included as exhibits to the Annual Report and (iv) options (the "Company Stock Options") to purchase shares of Company Common Stock granted pursuant to the Company's 1987 Long-Term Incentive Plan, 1997 Long-Term Incentive Plan, or 2001 Long-Term Incentive Plan, no subscription, warrant, option or other right (contingent or other) to purchase or acquire, or any securities convertible into or exchangeable for, any shares of any class of capital stock of the Company or any Subsidiary of the Company, or any stock appreciation or phantom stock right or similar arrangement, is authorized or outstanding and there is not any commitment of the Company or any Subsidiary of the Company to issue, or register under the Securities Act of 1933 (the "Securities Act"), any shares, warrants, options or other such rights or any securities convertible into or exchangeable for capital stock or to distribute to holders of any class of capital stock any evidences of indebtedness or assets. Neither the Company nor any Subsidiary of the Company has any obligation (contingent or other) to purchase, redeem or otherwise acquire any shares of capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof. SECTION 2.04. CORPORATE POWER AND AUTHORITY; AUTHORIZATION OF AGREEMENTS; NON-CONTRAVENTION. (a) The Company has all requisite corporate power and corporate authority to execute and deliver this Agreement, the Warrant Agreement, the Registration Rights Agreement (as hereinafter defined), the Rights Plan Amendment (as hereinafter defined), each Series A Note, each Warrant Certificate, and each other instrument, certificate, agreement and document to be executed and delivered by the Company at the Closing (such other instruments, certificates, agreements and documents, together with the Warrant Agreement, the Registration Rights Agreement, the Rights Plan Amendment, the Series A Notes, and the Warrant Certificates, collectively, the "Ancillary Agreements") and to perform its respective obligations hereunder and thereunder. 6 (b) The execution and delivery of this Agreement and each Ancillary Agreement by the Company and the performance by the Company of its obligations hereunder and thereunder, including, the issuance, sale and delivery by the Company of the Initial Securities and the issuance and delivery by the Company of the shares of Company Common Stock or Series B-1 Preferred Shares, as applicable, issuable upon conversion or exercise of the Series B-1 Preferred Shares (including the shares underlying the Series B-2 Preferred Shares that would be issued if Company Shareholder Approval is obtained), the Series B-2 Preferred Shares and the Initial Warrants (the "Conversion Shares"), were approved by the Board of Directors of the Company at a meeting duly called and held on August 24, 2001 (the "Board Meeting"), and no other corporate proceedings on the part of the Company (including approval of its shareholders) are necessary to authorize this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby (except to the extent that such transactions are expressly made subject to Company Shareholder Approval in this Agreement or in the Ancillary Agreements). (c) The execution and delivery of this Agreement and each Ancillary Agreement by the Company do not, and the consummation by the Company of the transactions contemplated hereby and thereby, including, the issuance, sale and delivery of the Initial Securities and the issuance and delivery of the Conversion Shares (including the shares that would be issued upon obtaining Company Shareholder Approval, subject, in the case of those transactions that have been expressly made subject to Company Shareholder Approval in this Agreement or in the Ancillary Agreements, to the Company obtaining such Company Shareholder Approval), will not, (i) violate or conflict with any provision of the Articles of Incorporation or By-Laws of the Company; (ii) violate or conflict with any foreign or domestic statute, law, doctrine, directive or guideline (whether or not having the force of law), ordinance, rule or regulation (each a "Law") or order, writ, judgment, decree, consent decree, injunction, award, settlement agreement, stipulation, ruling or subpoena (each an "Order") of any Governmental Body (as hereinafter defined) applicable to the Company or any Subsidiary of the Company or any of their respective properties or assets; or (iii) result (with or without the giving of notice or the lapse of time or both) in any violation of or default under or loss of, or decrease (to the Company or to any Subsidiary of the Company) or increase (to any third party) in, any benefit under, or permit the acceleration, other modification or termination of any obligation under, any Material Permit (as hereinafter defined) or Material Contract (as hereinafter defined); or (iv) result in the creation or imposition of any Lien (other than a Permitted Lien (as hereinafter defined) upon any of the material properties or assets of the Company or any Subsidiary of the Company, other than, in the cases of clauses (iii) and (iv) above, as set forth in Item 2.04(c) of the Disclosure Schedule. (d) The issuance, sale and delivery of the Initial Securities is not subject to any preemptive rights of shareholders of the Company or to any right of first refusal or other similar right in favor of any person. Upon the filing of the Series B-1 Preferred Certificate of Designation and the Series B-2 Preferred Certificate of Designation, the Series B-1 Preferred Shares (including those which are Conversion Shares) and the Series B-2 Preferred Shares will have been duly authorized by the Company, and, the Series B-1 Preferred Shares (including those which are Conversion Shares) and the Series B-2 Preferred Shares, when issued in accordance 7 with the provisions of this Agreement or the Series B-2 Preferred Certificate of Designation, as applicable, will be validly issued, fully paid and nonassessable. (e) The Conversion Shares have been duly authorized by the Company and, when issued in accordance with the provisions of the Series B-1 Preferred Certificate of Designation, the Series B-2 Preferred Certificate of Designation or the Initial Warrants, as the case may be, the Conversion Shares will be validly issued, fully paid and nonassessable shares of Company Common Stock or Series B-1 Preferred Shares, as the case may be. The issuance and delivery of the Conversion Shares is not now, and upon conversion or exercise of the Series B-1 Preferred Shares (including those which are Conversion Shares), the Series B-2 Preferred Shares and/or the Initial Warrants will not be, subject to any preemptive rights of shareholders of the Company or to any right of first refusal or other similar right in favor of any person. (f) None of (A) the issuance, sale and delivery of the Series C-1 Preferred Shares and/or Series C-2 Preferred Shares pursuant to Section 6.04, (B) the issuance, sale and delivery of the Series B Notes and the Additional Warrants pursuant to Section 6.05 or (C) the issuance and delivery of Series C-1 Preferred Shares upon conversion of any Series C-2 Preferred Shares issued pursuant to Section 6.04, are, or will be, subject to any preemptive rights of shareholders of the Company or to any right of first refusal or other similar right in favor of any person. SECTION 2.05. VALIDITY. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that (a) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now or hereafter in effect, relating to or limiting creditors rights generally and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Each of the Ancillary Agreements, when executed and delivered by the Company as provided in this Agreement, will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that (a) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now or hereafter in effect, relating to or limiting creditors rights generally, (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought and (c) the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable federal or state securities laws. SECTION 2.06. GOVERNMENTAL APPROVALS. Subject to the accuracy of the representations and warranties of the Purchasers set forth in Article III hereof, no consent, approval, Order or authorization of, or registration, declaration or filing with, or other action by, any Governmental Body is required to be made or obtained by the Company in connection with the execution and delivery by the Company of this Agreement and the Ancillary Agreements and the performance by the Company of its obligations hereunder and thereunder, including, the 8 issuance, sale and delivery of the Initial Securities and the issuance and delivery of the Conversion Shares, except (i) for the filing of the Series B-1 Preferred Certificate of Designation and the Series B-2 Preferred Certificate of Designation with the Secretary of State of the State of Missouri, (ii) filings pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), and (iii) filings of notices of sale under applicable federal and state securities laws. SECTION 2.07. SEC FILINGS. The Company has timely filed all forms, reports, schedules, statements and other documents required to be filed with the Securities and Exchange Commission (the "SEC") since January 1, 1998, including (i) the Annual Report, (ii) the Quarterly Reports of the Company on Form 10-Q for the three months ended March 31, 2001 and the three months ended June 30, 2001 and (iii) the Proxy Statement on Schedule 14A relating to the Company's 2001 annual meeting of stockholders (collectively, the "Company SEC Filings"). The Company SEC Filings, including, all financial statements and schedules included therein, (i) were prepared in compliance with the requirements of the Securities Act and/or the Exchange Act, as the case may be, and (ii) did not at the time of filing (or if amended, supplemented or superseded by a subsequent filing, on the date of that subsequent filing) and, in the case of any registration statement, at the time of effectiveness, and in the case of any proxy statement, at the time of mailing, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Subsidiaries of the Company is required to file any forms, reports, schedules, statements or other documents with the SEC. SECTION 2.08. FINANCIAL STATEMENTS. The consolidated financial statements of the Company included in the Company SEC Filings have been prepared in accordance with United States generally accepted accounting principles consistently applied and consistent with prior periods ("GAAP") and the published rules and regulations of the SEC applicable thereto, except, in the case of unaudited interim consolidated financial statements, as permitted by Form 10-Q adopted under the Exchange Act. The consolidated balance sheets of the Company included in the Company SEC Filings fairly present the financial position of the Company and its Subsidiaries as of their respective dates, and the related consolidated statements of operations, stockholders' equity and cash flows included in the Company SEC Filings fairly present the results of operations of the Company and its Subsidiaries for the respective periods then ended, subject, in the case of unaudited interim financial statements, to year-end adjustments (which consist of normal recurring accruals) and the absence of certain footnote disclosures. Except for (A) liabilities or obligations that are accrued or reserved against in the Company's balance sheet as of June 30, 2001 (the "Balance Sheet Date") included in its Quarterly Report on Form 10-Q for the three months then ended, (B) contingent liabilities to the extent identified in the notes to the Company's financial statements contained in the Annual Report (as qualified by any subsequent inclusion of a liability, reserve or expense in the balance sheet as of June 30, 2001 included in its Quarterly Report on Form 10-Q for the three months then ended), (C) liabilities and obligations incurred subsequent to the Balance Sheet Date in the ordinary course of 9 business and consistent with past practice and (D) obligations otherwise incurred in the ordinary course of business and consistent with past practice which are not required to be disclosed in accordance with GAAP, none of the Company or any of its Subsidiaries has any material liabilities or obligations (whether fixed, absolute, accrued, contingent, secured or unsecured, known or unknown or otherwise). SECTION 2.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for the Osborn Acquisition and except as set forth in Item 2.09 of the Disclosure Schedule, since the Balance Sheet Date (i) the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course of business and consistent with past practice, (ii) neither the Company nor any Subsidiary of the Company has taken any of the actions described in Section 4.01, assuming that Section 4.01 had applied to the period since the Balance Sheet Date, or (iii) no event has occurred which could reasonably be expected to have a Material Adverse Effect. SECTION 2.10. ACTIONS PENDING. Except (i) as set forth in Item 2.10 of the Disclosure Schedule or (ii) as disclosed in the Company SEC Filings made prior to the date hereof, there is no action, suit, hearing, investigation, proceeding or claim pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or their respective properties or assets, by or before any court, arbitrator, arbitration board, tribunal or other judicial body or authority or administrative, governmental, quasi- governmental or regulatory body, authority or agency or securities exchange or association, including, the Nasdaq Stock Market ("Governmental Body"). None of the actions, suits, investigations, proceedings or claims set forth in Item 2.10 of the Disclosure Schedule, when taken together with all other similar actions, whether or not any or all of such actions are adversely determined, could reasonably be expected to have a Material Adverse Effect. SECTION 2.11. COMPLIANCE WITH LAW; MATERIAL PERMITS. Neither the Company nor any Subsidiary thereof is in default under or in violation of any Order to which the Company or any such Subsidiary or any of their respective properties or assets is or was subject or in violation, in any material respect, of any Laws to which the Company or any such Subsidiary is or was subject. The Company and its Subsidiaries possess all permits, authorizations, approvals, registrations, variances and licenses that are necessary for the Company and its Subsidiaries to own, use and maintain their material properties and assets used in or required for the conduct of the business of the Company and its Subsidiaries ("Material Permits"). Each Material Permit is in full force and effect, and no proceeding is pending or, to the knowledge of the Company, threatened, to suspend, revoke, limit or otherwise materially modify any Material Permit, and no actions have been taken or, to the knowledge of the Company, threatened, by any Governmental Body, in connection with the expiration or renewal of any Material Permit. SECTION 2.12. TITLE TO AND CONDITION OF PROPERTIES. (a) The Company and its Subsidiaries have good and valid title to all their material assets and properties, in each case free and clear of all Liens other than Liens permitted by Section 6.09(c)(A)-(F) hereof and (i) liens for taxes not yet due and payable, (ii) landlords' liens on fixtures and movable property located on premises leased by the Company or a Subsidiary in the ordinary course of business, (iii) purchase 10 money security interests in real property or equipment hereafter acquired by the Company in the ordinary course of business, (iv) workman's, materialman's, warehouseman's and similar Liens arising by Law for obligations not yet delinquent, (v) zoning and planning restrictions, easements, permits and other restrictions or limitations affecting the use of such properties that do not materially detract from the value or materially impair the use of such properties, and (vi) minor imperfections of title, if any, not material in amount and not materially detracting from the value or materially impairing the use of the property subject thereto or materially impairing the operations or proposed operations of the Company and its Subsidiaries (the Liens described in clauses (i) and (vi) above being referred to herein as "Permitted Liens"). (b) The assets, properties, contracts and rights of the Company and its Subsidiaries include all of the assets, properties, contracts and rights reasonably necessary for the conduct of the businesses of the Company and its Subsidiaries as now conducted. The Company and each of its Subsidiaries have maintained all of their material tangible assets in good and normal operating condition, ordinary wear and tear excepted, and all such material tangible assets are, in all material respects, adequate and suitable for the purposes for which they are presently used. SECTION 2.13. REAL PROPERTY. Except as disclosed in the Company SEC Filings made prior to the date hereof, neither the Company nor any of its Subsidiaries owns any real property. The Company and its Subsidiaries (i) have good and marketable title to all real property owned by them and (ii) a valid and enforceable leasehold interest in all of the material real property leased by them (the "Leased Properties"), in each case, free and clear of all Liens except for Permitted Liens. Each lease or other agreement relating to the Leased Properties is a valid and subsisting agreement, without any material default of the Company or any Subsidiary of the Company thereunder and, to the knowledge of the Company, without any material default thereunder of the other party or parties thereto. SECTION 2.14. CONTRACTS. Except for the contracts, licenses, leases, instruments and other commitments and agreements included as exhibits to or incorporated by reference as exhibits to the Annual Report or any other Company SEC Filing made subsequent to the filing of the Annual Report and prior to the date hereof ("Publicly-Available Contracts"), Item 2.14 of the Disclosure Schedule sets forth a complete and accurate listing of the following contracts, licenses, leases, instruments and other commitments and agreements (together with the Publicly-Available Contracts, the "Material Contracts"): (i) all contracts, instruments and other commitments and agreements relating to the borrowing of money, the granting of Liens or the extension of credit by or to the Company and/or its Subsidiaries, (ii) all employment, severance and other agreements with the officers and directors of the Company and its Subsidiaries, (iii) all agreements between the Company and/or any Subsidiary of the Company, on the one hand, and any Material Customer, on the other hand, (iv) all joint venture agreements or other agreements providing for the sharing of revenues or payment of royalties by or to the Company and/or its Subsidiaries, (v) all agreements prohibiting, partially restricting, or otherwise limiting the ability of the Company and/or its Subsidiaries to conduct any business anywhere in the world, (vi) all 11 agreements (other than the Osborn Acquisition Documents (as hereinafter defined)) relating to the acquisition or sale by the Company or any Subsidiary thereof of any company, business, division or other enterprise, whether in the form of stock purchase, asset acquisition, or otherwise and whether or not such acquisition or disposition was completed, (vii) all customer contracts involving the receipt by the Company and/or any of its Subsidiaries of more than $1,000,000 in any single year and all other contracts, licenses, leases, instruments and other commitments and agreements involving the payment or receipt by the Company and/or any of its Subsidiaries of more than $500,000 in any single year or $2,500,000 or more in the aggregate and (viii) all agreements to which the Company or any of its Subsidiaries is a party requiring the consent of any third party thereto to the consummation of the transactions contemplated hereby or by the Osborn Acquisition Agreement or having provisions which will be accelerated or otherwise affected by the consummation of such transactions. Each Material Contract is a valid and subsisting agreement, without any material default thereunder (with or without notice or the passage of time or both) of the Company or any Subsidiary thereof and, to the knowledge of the Company, without any material default (with or without notice or the passage of time or both) thereunder of the other party or parties thereto. The Company has not received notice of any cancellation or termination of, or of any threat to cancel or terminate, any Material Contract. SECTION 2.15. INTELLECTUAL PROPERTY; SOFTWARE. (a) The Company and its Subsidiaries own or have adequate right to use all of the patents, trademarks and trade names, trademark and trade name registrations, servicemarks, servicemark registrations and copyrights that are reasonably necessary to the conduct of their business. To the knowledge of the Company, (i) the Company and its Subsidiaries conduct their businesses without infringement or violation of any intellectual property rights of third parties, (ii) no third party is claiming that the conduct of the business of the Company or any of its Subsidiaries infringes, misappropriates or otherwise violates the intellectual property rights of such third party and (iii) no person is challenging, infringing, misappropriating or otherwise violating any intellectual property rights of the Company or any of its Subsidiaries. (b) To the knowledge of the Company, (i) the Company or a Subsidiary thereof either owns or has a valid license covering each copy of software used by the Company and its Subsidiaries, (ii) the use by the Company and its Subsidiaries of the software licensed by them from third parties complies in all material respects with the terms and conditions of such software licenses and (iii) no use of any software by the Company or any of its Subsidiaries infringes upon or violates any intellectual property or contract right of any third party. SECTION 2.16. TAX MATTERS. (a) Except as disclosed in Item 2.16 of the Disclosure Schedule or in the Company SEC Filings made prior to the date hereof, the Company and its Subsidiaries have (i) timely filed all federal, state, local and foreign returns, declarations, reports, estimates, information returns and statements ("Returns") required to be filed by them in respect of any Taxes (as hereinafter defined), all of which Returns were correct as filed (or as subsequently amended) and correctly reflect the facts regarding the income, business, assets, operations, activities and status of the Company and its Subsidiaries as well as any Taxes 12 required to be paid or collected by the Company and its Subsidiaries, (ii) timely paid or withheld all Taxes that are due and payable with respect to the Returns referred to in clause (i) (other than Taxes that are being contested in good faith by appropriate proceedings and are adequately reserved for in the Company's most recent consolidated financial statements included in the Company SEC Filings made prior to the date hereof), (iii) established reserves that are adequate for the payment of all Taxes not yet due and payable with respect to the results of operations of the Company and its Subsidiaries and (iv) complied with all applicable Laws relating to the payment and withholding of Taxes and has timely withheld from employee wages and paid over to the proper Taxing Authorities (as hereinafter defined) when due all amounts required to be so withheld and paid over. (b) For purposes of this Agreement, "Taxes" shall mean (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding on amounts paid or received, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit taxes, custom duties or other taxes, governmental fees or other like assessments or charges of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any governmental authority responsible for the imposition of any such taxes (domestic or foreign) ("Taxing Authorities"), (ii) liability for the payment of any amounts of the type described in (i) as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability for payments of such amounts was determined or taken into account with reference to the liability of any other person for any period and (iii) liability with respect to the payment of any amounts described in (i) as a result of any express or implied obligation to indemnify any other person. (c) Except as disclosed in Item 2.16 of the Disclosure Schedule or in the Company SEC Filings made prior to the date hereof, no Returns of the Company or any of its Subsidiaries have been examined by any Taxing Authority. (d) Except as disclosed in Item 2.16 of the Disclosure Schedule or in the Company SEC Filings made prior to the date hereof, (i) no extensions of time have been granted to the Company or any of its Subsidiaries to file any Return, (ii) no deficiency or adjustment for any Taxes has been proposed, asserted or assessed against the Company or any of its Subsidiaries, and there have never been any, and no Federal, state, local or foreign audits or other administrative proceedings or court proceedings are currently in progress or pending against the Company or any of its Subsidiaries with respect to any Taxes owed by the Company or any of its Subsidiaries, and (iii) no waiver or consent extending any statute of limitations for the assessment or collection of any Taxes owed by the Company or any of its Subsidiaries, has been executed by the Company or any of its Subsidiaries or on behalf of the Company or any of its Subsidiaries, nor are any requests for such waivers or consents pending. 13 SECTION 2.17. EMPLOYEE BENEFIT PLANS. (a) As used herein, "Employee Plan" means any "employee benefit plan" (as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")), as well as any other plan, program or arrangement involving direct and indirect compensation, under which the Company or any Subsidiary of the Company has any present or future obligations or liability on behalf of its employees or former employees, contractual employees or their dependents or beneficiaries. (b) On or prior to the date hereof, the Company has delivered to the Purchaser Representative or its counsel accurate and complete copies of each of the following with respect to each of the Employee Plans, all to the extent applicable: (i) all plan documents and all amendments thereto, (ii) summary plan descriptions and summaries of modifications, (iii) trust documents, insurance contracts and other funding instruments, (iv) the two most recently prepared financial statements and actuarial reports, (v) the two most recent annual reports and (vi) determination letters received from the Internal Revenue Service. (c) Except as disclosed in Item 2.17 of the Disclosure Letter: (i) each of the Employee Plans sponsored by the Company or any Subsidiary of the Company that is qualified under Section 401 of the Code has received a favorable determination letter from the Internal Revenue Service as to the qualification of such Employee Plan, and such letter has not been modified, revoked or limited by the failure to satisfy any condition thereof or by a subsequent amendment thereto, or failure to amend such Employee Plan; (ii) each Employee Plan has been operated and administered in accordance with its terms and is in compliance with ERISA, the Internal Revenue Code of 1986 (the "Code") and all other applicable Laws; (iii) all contributions due and payable in respect of any Employee Plan have been made in full and in proper form, or adequate accruals have been provided for in the most recent financial statements included in the Company SEC Filings made prior to the date hereof for such amounts; (iv) neither the Company nor any Subsidiary of the Company, nor to the knowledge of the Company, any other "disqualified person" or "party in interest" (as defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect to an Employee Plan has breached the fiduciary rules of ERISA or engaged in a prohibited transaction which could subject the Company or any Subsidiary of the Company to any tax or penalty imposed under Sections 4975 of the Code or Section 502 (i), (j) or (l) of ERISA; (v) each Employee Plan which is subject to the requirements of the Consolidated Omnibus Budget Reconciliation of 1985 ("COBRA") and the Health Insurance Portability and Accountability Act ("HIPAA") has been maintained in compliance with COBRA and HIPAA, including all notice requirements, and no tax payable on account of Section 4980B or any other section of the Code has been or is expected to be incurred; (vi) neither the Company nor any Subsidiary of the Company is or ever has been obligated to contribute to any "multiemployer plan" (within the meaning of Section 3(37) of ERISA, a "multiple employer plan" (within the meaning of Section 413 of the Code, or a defined benefit plan (within the meaning of Section 3(35) of ERISA; (vii) with respect to any Employee Plan, there has not been any act or omission by the Company or any Subsidiary of the Company that has given rise to or could give rise to any fines, penalties or related charges under ERISA or the Code for which the Company or any Subsidiary of the Company could be liable; (viii) no claims, actions, suits or 14 proceedings (other than routine benefit claims) are pending or, to the knowledge of the Company, threatened against or relating to any Employee Plan, or any fiduciary thereof, and to the knowledge of the Company, there is no basis for any such claim, action, suit or proceeding; (ix) the Company has timely deposited and transmitted all amounts withheld from employees for contributions or premium payments for each Employee Plan into the appropriate trusts or accounts; (x) each Employee Plan that allows loans to plan participants has been operated in accordance with its terms, the plan's written loan policy and all applicable laws; (xi) no individual who has been classified by the Company as a non-employee (such as an independent contractor, leased employee or consultant) shall have a claim against the Company for eligibility to participate in any Employee Plan, if such individual is later reclassified as an employee of the Company and (xii) no benefit payable or which may become payable by the Company pursuant to any Employee Plan shall constitute an "excess parachute payment," within the meaning of Section 280G of the Code, which is or may be subject to the imposition of an excise tax under Section 4999 of the Code or which would not be deductible by reason of Section 280G of the Code. SECTION 2.18. CUSTOMERS. Except as set forth in Item 2.18 of the Disclosure Schedule or as disclosed in the Company SEC Filings made prior to the date hereof, since January 1, 2000, neither the Company nor any Subsidiary of the Company has lost, and the Company has not been notified that either the Company or any of its Subsidiaries will lose or suffer material diminution in any relationship with any customer that was one of the Company's and its Subsidiaries' largest 25 customers (determined on the basis of revenues) for the twelve months ended June 30, 2001 ("Material Customers"). SECTION 2.19. LABOR MATTERS. Neither the Company nor any of its Subsidiaries is or has been a party to any collective bargaining or union agreement, and no such agreement is or has been applicable to any of their employees. There are no labor union grievances or unfair labor practice or labor arbitration proceedings pending, or, to the knowledge of the Company, threatened against the Company or any Subsidiary thereof. There are no labor unions or other organizations representing or purporting to represent any employees of the Company or any of its Subsidiaries and there are not any organizational efforts being made or, to the knowledge of the Company, threatened involving any of such employees. There are no material controversies between the Company or any of its Subsidiaries, on the one hand, and any of their respective employees, leased employees or independent contractors, on the other hand, and (ii) the Company and its Subsidiaries have complied in all material respects with all Laws relating to the hiring and retention of employees, leased employees and independent contractors including those relating to wages, hours, equal opportunity, collective bargaining and the withholding and payment of social security and other taxes. SECTION 2.20. ENVIRONMENTAL MATTERS. The Company and each Subsidiary of the Company conducts its business in material compliance with all applicable environmental Laws, and neither the Company nor any Subsidiary thereof has received notice of any claim, action, suit, proceeding, hearing or investigation based upon or related to the manufacture, pro- 15 cessing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, or hazardous or toxic material or waste (each, an "Environmental Event") by or on behalf of the Company or any Subsidiary of the Company. To the knowledge of the Company, no notice of any Environmental Event was given to any person or entity that occupied any of the premises occupied or used by the Company or any Subsidiary thereof prior to the date such premises were so occupied by the Company or such Subsidiary. Without limiting the generality of the foregoing, neither the Company nor any Subsidiary of the Company or, to the knowledge of the Company, any agent thereof, has disposed of or placed on or in any real property, any waste materials or hazardous substances in violation of any environmental Law. SECTION 2.21. INSURANCE COVERAGE. The insurance coverage maintained by the Company and its Subsidiaries is customary and adequate for corporations of similar size engaged in the same business as the Company and its Subsidiaries. The Company and its Subsidiaries have paid all premiums due under all insurance policies maintained by them. All such insurance policies are in full force and effect and no notice of termination or cancellation or denial of coverage has been received in respect thereof. SECTION 2.22. OFFERING OF THE SECURITIES. Assuming the accuracy of the representations and warranties of the Purchasers set forth in Article III hereof, neither the Company nor any person acting on the Company's behalf has taken or will take any action (including, without limitation, any offer, issuance or sale of any securities of the Company under circumstances which might require the integration of such transactions with the sale of the Initial Securities) which would subject the offering, issuance or sale of the Initial Securities to the Purchasers pursuant to this Agreement to the registration provisions of the Securities Act. SECTION 2.23. RELATED-PARTY TRANSACTIONS. Except as disclosed in the Company SEC Filings made prior to the date hereof, there are no existing arrangements or proposed transactions between the Company or any Subsidiary thereof, on the one hand, and any other person or entity (each a "Related Party") on the other hand, that the Company would be required to disclose pursuant to Item 404 of Regulation S-K of the SEC if a proxy statement of the Company were required to be filed on or as of the date hereof. SECTION 2.24. PROXY STATEMENT. The Proxy Statement (as hereinafter defined) will not at the time of mailing thereof or at the time of the Company Shareholder Meeting (as hereinafter defined), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, except that no representation is being made by the Company with respect to statements made therein based solely on information supplied by the Purchasers and their representatives for inclusion in the Proxy Statement. The Proxy Statement will comply as to form with the applicable provisions of the Exchange Act. 16 SECTION 2.25. ANTI-TAKEOVER STATUTES AND CERTAIN CHARTER PROVISIONS; RIGHTS PLAN. The approval of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby by the Board of Directors of the Company at the Board Meeting is sufficient to render inapplicable to (A) the issuance and delivery of the Initial Securities, the Conversion Shares, the Additional Securities, and any securities issuable upon conversion or exercise of the Additional Securities, and the Purchaser's ownership and voting of such securities, the provisions of Section 351.459 of the General and Business Corporation Law of the State of Missouri (the "Missouri Code") and (B) the issuance and delivery of the Initial Securities, the Conversion Shares, the Additional Securities, and any securities issuable upon conversion or exercise of the Additional Securities, the provisions of Article X of the Articles of Incorporation of the Company. Upon the adoption and effectiveness of the Rights Plan Amendment, the provisions of the Rights Agreement dated as of February 11, 2000 between the Company and American Stock Transfer & Trust Company (the "Rights Plan") will be rendered inapplicable to the issuance and delivery of the Initial Securities, the Conversion Shares, the Additional Securities to the Purchasers, and any securities issuable upon conversion or exercise of the Additional Securities. Section 351.407 of the Missouri Code is not applicable to the issuance and delivery of the Initial Securities, the Conversion Shares, the Additional Securities, and any securities issuable upon conversion or exercise of the Additional Securities and the Purchasers' ownership and voting of such securities. SECTION 2.26. OSBORN ACQUISITION AGREEMENT. All representations and warranties made by the Company in or pursuant to the Osborn Acquisition Agreement are true and correct in all material respects on and as of the date hereof and shall be true and correct in all material respects on and as of the closing date of the Osborn Acquisition. SECTION 2.27. COMPLETENESS OF DISCLOSURE. No representation, warranty or statement by the Company in this Agreement or in any Ancillary Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated herein or therein or necessary to make any statement herein or therein, in light of the circumstances in which they were made, not misleading. SECTION 2.28. BROKERS. All negotiations relative to this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby have been carried on by the Company directly with the Purchasers, without the intervention of any other person on behalf of the Company in such manner as to give rise to any valid claim by any other person for a finder's fee, advisory fee, investment banking fee, brokerage commission or similar payment. 17 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser, severally and not jointly, represents and warrants to the Company as follows, except that WCAS shall be jointly and severally liable with each other Purchaser with respect to the representations and warranties of each such Purchaser: SECTION 3.01. ORGANIZATION AND AUTHORITY. WCAS is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of the Purchasers has all requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform such Purchaser's respective obligations hereunder the thereunder. SECTION 3.02. AUTHORIZATION. The execution, delivery and performance by such Purchaser of this Agreement and the Ancillary Agreements to which such Purchaser is a party have been duly authorized by all requisite action on the part of such Purchaser and will not violate any provision of Law or any Order applicable to such Purchaser, the charter, limited partnership agreement or other governing documents of such Purchaser, if any, or any provision of any material indenture, agreement or other instrument by which such Purchaser or any of such Purchaser's properties or assets are bound, or conflict with, result in a breach of or constitute (with or without due notice or lapse of time or both) a default under any such material indenture, agreement or other instrument. SECTION 3.03. VALIDITY. This Agreement has been duly executed and delivered by such Purchaser and constitutes the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except that (a) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now or hereafter in effect, relating to or limiting creditors' rights generally and (b) the remedy of specific performance and injunctive and other terms of equitable relief may be subject to equitable defenses and the discretion of the court before which a proceeding therefor may be brought. Each of the Ancillary Agreements to which such Purchaser is a party, when executed and delivered in accordance with this Agreement, will constitute the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except that (a) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now or hereafter in effect, relating to or limiting creditors' rights generally, (b) the remedy of specific performance and injunctive and other terms of equitable relief may be subject to equitable defenses and the discretion of the court before which a proceeding therefor may be brought and (c) the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable federal or state securities laws. 18 SECTION 3.04. INVESTMENT REPRESENTATIONS. (a) Such Purchaser is acquiring the Initial Securities being purchased by such Purchaser hereunder for such Purchaser's own account, for investment, and not with a view toward the resale or distribution thereof. (b) Such Purchaser understands that such Purchaser must bear the economic risk of such Purchaser's investment for an indefinite period of time, because the Initial Securities are not and, when issued, the Conversion Shares will not be registered under the Securities Act or any applicable state securities laws and may not be resold unless subsequently registered under the Securities Act and such other laws or unless an exemption from such registration is available. Such Purchaser also understands that, except as provided in the Registration Rights Agreement, it is not contemplated that any registration will be made under the Securities Act to permit resale of the Initial Securities or the Conversion Shares. (c) Such Purchaser is able to fend for itself in the transactions contemplated by this Agreement and has the ability to bear the economic risks of the investment in the Initial Securities being purchased hereunder for an indefinite period of time. Such Purchaser further acknowledges that such Purchaser has had the opportunity to ask questions of, and receive answers from, officers of the Company with respect to the business and financial condition of the Company and the terms and conditions of the purchase and sale of the Initial Securities and to obtain additional information necessary to verify such information to the extent that the Company can acquire it without unreasonable effort or expense. (d) Such Purchaser has such knowledge and experience in financial and business matters that such Purchaser is capable of evaluating the merits and risks of its investment in the Initial Securities. Such Purchaser further represents that such Purchaser, is an "accredited investor" as such term is defined in Rule 501 of Regulation D of the SEC under the Securities Act with respect to its purchase of the Initial Securities, and that any such Purchaser that is a limited partnership or other entity has not been formed solely for the purpose of purchasing the Initial Securities. SECTION 3.05. GOVERNMENTAL APPROVALS. No registration or filing with, or consent or approval of, or other action by, any Governmental Body is or will be necessary by such Purchaser for the valid execution, delivery and performance by such Purchaser of this Agreement. SECTION 3.06. INFORMATION SUPPLIED. None of the written information supplied by any Purchaser specifically for inclusion or incorporation by reference in the Proxy Statement will at the time of filing or mailing thereof or at the time of the Company Shareholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. 19 SECTION 3.07. OWNERSHIP OF CAPITAL STOCK OF THE COMPANY. The Purchasers do not beneficially own (within the meaning of Rule 13d-3 under the Exchange Act) any securities of the Company. No Purchaser shall acquire beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of any security of the Company prior to the Closing. For purposes of this Section 3.07 only, neither the execution, delivery or performance of this Agreement nor the execution, delivery or performance of the Voting Agreement (as hereinafter defined) shall be deemed to give rise to any beneficial ownership of securities by the Purchasers. ARTICLE IV. COVENANTS OF THE PARTIES PENDING THE CLOSING SECTION 4.01. CONDUCT OF THE COMPANY'S BUSINESS. Except as otherwise agreed to in writing by the Purchaser Representative on behalf of the Purchasers subsequent to the date hereof, or as otherwise set forth in Item 4.01 of the Disclosure Schedule or as expressly contemplated hereby, at all times between the date hereof and the Closing Date, the Company shall, and shall cause each of its Subsidiaries to: (a) operate its business only in the usual, regular and ordinary manner and on a basis consistent with past practice, and use its commercially reasonable efforts to preserve its current business organization, keep available the services of its officers and employees and preserve its present relationships with its customers and suppliers and all other persons with which it has material business dealings; (b) maintain its material assets and properties in good repair, order and condition, reasonable wear and tear excepted; (c) maintain its books of account and records in the usual, regular and ordinary manner, on a basis consistent with past practice, and use its commercially reasonable efforts to comply in all material respects with all Laws applicable to it and perform all of its material contractual obligations without default; (d) not amend its Articles or Certificate of Incorporation or By-Laws; (e) not change the character of its business in any manner; (f) not incur any material obligation, debt or liability of any kind or nature whatsoever (whether fixed, absolute, accrued, contingent, secured or unsecured, known or unknown or otherwise, and whether due or to become due), except in the ordinary course of business and consistent with past practice; 20 (g) not discharge or satisfy any material Lien or pay any material obligation, debt or liability of any kind or nature whatsoever (whether fixed, absolute, accrued, contingent, secured or unsecured, known or unknown or otherwise, and whether due or to become due), other than payments of obligations, debts or liabilities in the ordinary course of business and consistent with past practice; (h) not mortgage, pledge or subject to any Lien (other than Permitted Liens) any of its material assets or properties; (i) not transfer, lease or otherwise dispose of any of its material assets or properties except for fair consideration in the ordinary course of business and consistent with past practice or, except in the ordinary course of business and consistent with past practice, acquire any material assets or properties; (j) other than distributions by wholly-owned Subsidiaries of the Company to the Company or to other wholly-owned Subsidiaries of the Company, not declare, set aside or pay any distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or redeem or otherwise acquire any of its capital stock or split, combine, reclassify or otherwise similarly change its capital stock or authorize the creation or issuance of, or, other than in connection with the issuance or exercise of Company Stock Options, issue or sell any of its capital stock or any securities or obligations convertible into or exchangeable therefor, or give any person any right to acquire any of its capital stock; (k) not make any loan or investment of a capital nature, whether by purchase of stock or securities, contributions to capital, property transfers or otherwise, in any other partnership, corporation or other entity; (l) not cancel or compromise any material debt or claim, except in the ordinary course of business and consistent with past practice; (m) not waive or release any rights of material value or surrender or cause to be revoked or otherwise terminated any Material Permit; (n) not transfer or grant any material rights under or with respect to any material intellectual property, or permit any license, permit or other form of authorization relating to any material intellectual property to lapse; (o) not make or grant any wage, salary or benefit increase or bonus payment applicable to any group or classification of employees generally, enter into or amend in any material respect the terms of any employment contract with, or make any material loan to, or grant any severance benefits to, or enter into or amend in any material respect 21 the terms of any material transaction of any other nature with, any officer, director, employee or Related Party; (p) not enter into any contract, agreement, license or lease which involves payments by the Company or any of its Subsidiaries in excess of $200,000 per annum or $750,000 in the aggregate; (q) not enter into any other transaction, contract or commitment, except in the ordinary course of business and consistent with past practice; (r) not take any action, enter into any transaction or make any agreement or commitment, or knowingly permit any event to occur, which would result in (A) any of the representations or warranties of the Company contained in Article II of this Agreement not being true and correct in any material respect at and as of the time immediately after the occurrence of such action, transaction or event or on the Closing Date or (B) any of the conditions precedent set forth in Article V not being satisfied at Closing; or (s) not agree to take or enter into any agreement or commitment to take any of the actions prohibited by clauses (a)-(r) of this Section 4.01. SECTION 4.02. ACCESS TO INFORMATION CONCERNING THE COMPANY AND ITS SUBSIDIARIES. (a) Between the date of this Agreement and the Closing Date, the Company shall afford, and shall cause its Subsidiaries to afford, the representatives of the Purchasers reasonable access during normal business hours to the offices, facilities, books and records of the Company and its Subsidiaries and the opportunity to discuss the affairs of the Company and its Subsidiaries with the officers, employees, accountants, customers, suppliers and landlords of the Company and its Subsidiaries familiar therewith. Any investigation pursuant to this Section 4.02 shall be conducted in a manner that does not unreasonably interfere with the conduct of business by the Company and its Subsidiaries. (b) Except as required by Law, the Purchasers shall hold, and will cause their respective officers, employees, partners, representatives and agents to hold, any confidential information obtained by them in accordance with the terms and conditions of the letter agreement dated May 3, 2001 between the Company and WCAS (the "Confidentiality Agreement"). (c) No investigation pursuant to this Section 4.02 shall affect, add to or subtract from any representations or warranties of the parties hereto or the conditions to the obligations of the parties hereto to effect the transactions contemplated hereby. SECTION 4.03. AUTHORIZATIONS, CONSENTS, WAIVERS AND APPROVALS. Between the date hereof and the Closing Date, the Company shall use its commercially reasonable efforts to promptly apply for and seek to obtain and to make, and cause its Subsidiaries to promptly apply 22 for and seek to obtain and to make, all authorizations, consents, waivers and approvals and all notices, filings and registrations required, or reasonably requested by the Purchaser Representative, in connection with the execution, delivery and performance by the Company of this Agreement, the Ancillary Agreements and the Osborn Acquisition Documents. SECTION 4.04. FURTHER ASSURANCES. Between the date hereof and the Closing Date, subject to the terms and conditions herein provided, each of the parties hereto agrees to use its commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement. SECTION 4.05. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to the Purchaser Representative of (i) the occurrence, or failure to occur, of any event that would cause any of its representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to Closing Date and (ii) any material failure of the Company to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder prior to the Closing. No notice pursuant to this Section 4.05 shall affect, add to or subtract from any representations or warranties of the parties hereto or the conditions to the obligations of the parties hereto to effect the transactions contemplated hereby. SECTION 4.06. ANTI-TAKEOVER STATUTES; RIGHTS PLAN AMENDMENT. The Company shall (i) take all action necessary to ensure that no "business combination", "fair price," "control share acquisition" or other similar anti-takeover statute or regulation, including the provisions of Sections 351.407 and 351.459 of the Missouri Code, is or becomes applicable to the issuance and delivery of the Initial Securities or any Conversion Shares or any of the other transactions contemplated by this Agreement or the Ancillary Agreements (including any Series C Preferred Transaction or Series B Note Transaction) or to the ownership or voting of any of such securities (including any securities issued in any Series C Preferred Transaction or Series B Note Transaction) and (ii) if any such anti-takeover statute or similar statute or regulation becomes applicable to any of such transactions or to the ownership or voting of any of such securities, take all action necessary to ensure that each of such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and the Ancillary Agreements and otherwise to minimize the effect of such statute or regulation on such transactions and the ownership and voting of such securities. Prior to the Closing Date, the Company shall cause the Rights Plan Amendment to be executed and delivered by the parties thereto and become effective in accordance with its terms. SECTION 4.07. THE OSBORN ACQUISITION. (a) The Company shall use its commercially reasonable efforts to cause Parent, ChoicePoint and Osborn to afford the representatives of the Purchasers reasonable access during normal business hours to the offices, facilities, books and records of Osborn and its subsidiaries and the opportunity to discuss the 23 affairs of Osborn and its subsidiaries with the officers, employees, accountants, customers, suppliers and landlords of Osborn and its subsidiaries familiar therewith. (b) The Company shall given prompt notice to the Purchaser Representative of the occurrence of any event (that with or without the passage of time or the giving of notice) constitutes a default or event of default of any party under the Osborn Acquisition Agreement. (c) Prior to the Closing, the Company shall not, without the prior written consent of the Purchaser Representative, amend, supplement or modify the terms and conditions of, or waive any of its rights or closing conditions under, the Osborn Acquisition Agreement or any other agreement or instrument entered into or to be entered into in connection with the Osborn Acquisition (together with the Osborn Acquisition Agreement, the "Osborn Acquisition Documents"). True and correct copies of the Osborn Acquisition Documents (as in effect on the date hereof) have been delivered to the Purchaser Representative and to the Purchasers' counsel. (d) The Company shall keep the Purchaser Representative informed of, and consult with it on a prompt and regular basis on, all matters and developments regarding the Osborn Acquisition. SECTION 4.08. NASDAQ QUOTATION. The Company shall use all commercially reasonable efforts to cause the Conversion Shares that are Company Common Stock to be authorized for quotation on the Nasdaq Stock Market, subject only to official notice of issuance thereof. SECTION 4.09. SEC AND OTHER FILINGS. The Company shall promptly provide the Purchaser Representative and the Purchasers' counsel with copies of all filings made or to be made by the Company with the SEC or any other Governmental Body in connection with this Agreement or the Osborn Acquisition Agreement and the transactions contemplated hereby and thereby and a reasonable opportunity to comment thereon. SECTION 4.10. CERTIFICATES OF DESIGNATION. Prior to the Closing, the Company shall cause to be filed with the Secretary of State of the State of Missouri the Series B-1 Preferred Certificate of Designation and the Series B-2 Preferred Certificate of Designation pursuant to and in accordance with the Missouri Code. ARTICLE V. CONDITIONS PRECEDENT SECTION 5.01. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The obligation of each party hereto to consummate the purchase and sale of the Initial Securities at Closing is subject to the satisfaction, on or before the Closing Date, of the following conditions, 24 any or all of which may be waived in whole or in part by the Purchaser Representative on behalf of the Purchasers, on the one hand, or the Company, on the other hand: (a) No Legal Prohibition. No injunction or other Order of any court or other Governmental Body of competent jurisdiction nor any Law shall be in effect that would prevent the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements. No legal action or proceeding shall have been instituted by or before any Governmental Body that seeks to restrain, prohibit, invalidate or otherwise materially affect the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement. (b) Osborn Acquisition. Simultaneously with the Closing hereunder, the Osborn Acquisition shall have been consummated in accordance with the terms of the Osborn Acquisition Documents and all applicable Laws, without the giving of any waivers by the Company (unless such waivers were approved with the written consent of the Purchaser Representative), and the Company shall have so certified to the Purchasers in writing. SECTION 5.02. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS. The obligation of each Purchaser to consummate the purchase and sale of the Initial Securities at Closing is subject to the satisfaction, on or before the Closing Date, of the following conditions, any or all of which may be waived in whole or in part by the Purchaser Representative on behalf of all of the Purchasers: (a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The representations and warranties of the Company set forth in Article II of this Agreement that are qualified with reference to a Material Adverse Effect or otherwise qualified by reference to materiality shall be true and correct in all respects and all representations and warranties that are not so qualified shall be true and correct in all material respects, in each case, as of the Closing Date with the same force and effect as if made on the Closing Date (except that representations and warranties made as of a particular date shall be true and correct as of such date), and the Company shall have so certified to the Purchasers in writing. (b) PERFORMANCE. The Company shall have performed and complied in all material respects with all agreements and conditions contained herein that are required to be performed or complied with by it prior to or on the Closing Date, and the Company shall have so certified to the Purchasers in writing. (c) ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated by this Agreement and the Ancillary Agreements and the Osborn Acquisition Documents shall have been taken or obtained by the Company, and all documents incident thereto shall be reasonably satisfactory in form and substance to the Purchaser Representative and the Purchasers' counsel. 25 (d) NO MATERIAL ADVERSE CHANGE. There shall not have occurred since the Balance Sheet Date any event which could reasonably be expected to have a Material Adverse Effect, and the Company shall have so certified to the Purchasers in writing. (e) CONSENTS AND APPROVALS. All authorizations, consents, waivers and approvals required in connection with the execution, delivery and performance of this Agreement and each Ancillary Agreement, including, without limitation, all such authorizations, consents, waivers and approvals indicated as being so required in Item 2.04(c) and Item 2.06 of the Disclosure Schedule, shall have been duly obtained and shall be in form and substance reasonably satisfactory to the Purchaser Representative and the Purchasers' counsel. (f) RIGHTS PLAN AMENDMENT. The Rights Plan shall have been amended by an amendment thereto in the form of Exhibit G hereto (the "Rights Plan Amendment") and such amendment shall be in full force and effect. (g) CERTIFICATES OF DESIGNATION. The Series B-1 Preferred Certificate of Designation and the Series B-2 Preferred Certificate of Designation shall have each been filed in accordance with the Articles of Incorporation of the Company and the Missouri Code. (h) OPINION OF COUNSEL. The Purchasers shall have received the opinion of Morrison & Hecker LLP, counsel to the Company, dated the Closing Date and substantially in the form of Exhibit H hereto. (i) REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and delivered a counterpart to the Registration Rights Agreement in the form attached as Exhibit I hereto (the "Registration Rights Agreement"). (j) WARRANT AGREEMENT. The Company shall have executed and delivered a counterpart to the Warrant Agreement. (k) VOTING AGREEMENT. The Voting Agreement, dated as of the date hereof, between WCAS and the Stockholders (as defined therein) (the "Voting Agreement") shall have been executed and delivered by the parties thereto (other than WCAS) and shall be in full force and effect. (l) QUOTATION OF COMPANY COMMON STOCK. The Conversion Shares that are Company Common Stock shall have been authorized for quotation on the Nasdaq Stock Market, subject only to official notice of issuance thereof. (m) SUPPORTING DOCUMENTS. The Purchaser Representative or the Purchasers' counsel shall have received copies of the following supporting documents: 26 (i) (A) the Articles of Incorporation of the Company certified as of a recent date by the Secretary of State of the State of Missouri and (B) a certificate of such Secretary of State as to the due incorporation, existence and good standing of the Company and listing all documents on file with said official; (ii) a certificate of the Secretary of the Company dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the By-Laws of the Company as in effect on the date of such certification and (B) other than the filing of the Series B-1 Preferred Certificate of Designation and the Series B-2 Preferred Certificate of Designation, that the Articles of Incorporation of the Company have not been amended since the date of the last amendment referred to in the certificate delivered pursuant to clause (i)(B) above; (iii) certified copies of (A) all resolutions of the Board of Directors of the Company relating to this Agreement, the Ancillary Agreements, the Osborn Acquisition Documents and the transactions contemplated hereby and thereby and (B) the Osborn Acquisition Documents; and (iv) such additional officer's and secretary's certificates with respect to the Company and its Subsidiaries and other supporting documents and information with respect to the operations and affairs of such entities as the Purchaser Representative or the Purchasers' counsel may reasonably request. All such documents shall be reasonably satisfactory in form and substance to the Purchaser Representative and the Purchasers' counsel. SECTION 5.03. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The obligation of the Company to consummate the purchase and sale of the Initial Securities at Closing is subject to the satisfaction, on or before the Closing Date, of the following conditions, any or all of which may be waived in whole or in part by the Company: (a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The representations and warranties of the Purchasers set forth in Article III of this Agreement shall be true and correct in all material respects as of the Closing Date with the same effect as if made on the Closing Date, and the Purchasers shall have so certified to the Company in writing. (b) PERFORMANCE. The Purchasers shall have performed and complied in all material respects with all agreements and conditions contained herein that are required to be performed or complied with by them prior to or on the Closing Date, and the Purchasers shall have so certified to the Company in writing. 27 (c) OPINION OF COUNSEL. The Company shall have received the opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel to the Purchasers, dated the Closing Date and substantially in the form of Exhibit J hereto. (d) REGISTRATION RIGHTS AGREEMENT. Each Purchaser shall have executed and delivered a counterpart to the Registration Rights Agreement. ARTICLE VI. POST-CLOSING COVENANTS AND AGREEMENTS SECTION 6.01. LEGENDS; RESERVATION OF SHARES. (a) So long as applicable, each certificate representing Initial Securities or Conversion Shares shall contain, in addition to any legend required under the Rights Plan, the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH OTHER SECURITIES LAWS OR UNLESS EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE APPLICABLE WITH RESPECT TO SUCH DISPOSITION." (b) So long as any of the Initial Securities remain outstanding, the Company shall at all times keep reserved for issuance upon the conversion of the Series B-1 Preferred Shares (including on an as-converted basis (assuming Company Shareholder Approval is obtained) all outstanding Series B-2 Preferred Shares) and/or the exercise of the Initial Warrants, a sufficient number of shares of Company Common Stock to satisfy its obligations to issue Conversion Shares under the Series B-1 Preferred Certificate of Designation and the Initial Warrants. So long as any of the Series B-2 Preferred Shares remain outstanding, the Company shall at all times keep reserved for issuance upon conversion of the Series B-2 Preferred Shares, a sufficient number of Series B-1 Preferred Shares to satisfy its obligation to issue Conversion Shares under the Series B-2 Preferred Certificate of Designation. SECTION 6.02. BOARD COMPOSITION. (a) Subject to the provisions of Sections 6.02(b) and 6.02(d): (i) So long as the Purchasers and their respective Affiliates beneficially own (determined in accordance with Rule 13d-3 under the Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred Shares and/or Conversion Shares which represent 50% or more of the shares of Company Common Stock purchased hereunder on the 28 Closing Date (determined on an as-converted basis assuming conversion of all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder Approval and conversion of all Series B-1 Preferred Shares (including those which are Conversion Shares) into Company Common Stock), the Purchaser Representative shall have the right to nominate for election on behalf of the Purchasers and such Affiliates three directors to serve on the Company's Board of Directors. (ii) So long as the Purchasers and their respective Affiliates beneficially own (determined in accordance with Rule 13d-3 under the Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred Shares and/or Conversion Shares which represent 25% or more (but less 50%) of the shares of Company Common Stock purchased hereunder on the Closing Date (determined on an as-converted basis assuming conversion of all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder Approval and conversion of all Series B-1 Preferred Shares (including those which are Conversion Shares) into Company Common Stock), the Purchaser Representative shall have the right to nominate for election on behalf of the Purchasers and such Affiliates two directors to serve on the Company's Board of Directors. (iii) So long as the Purchasers and their respective Affiliates beneficially own (determined in accordance with Rule 13d-3 under the Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred Shares and/or Conversion Shares and such shares represent less than 25% (but more than 5%) of the shares of Company Common Stock purchased hereunder on the Closing Date (determined on an as-converted basis assuming conversion of all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder Approval and conversion of all Series B-1 Preferred Shares (including those which are Conversion Shares) into Company Common Stock), the Purchaser Representative shall have the right to nominate for election on behalf of the Purchasers and such Affiliates one director to serve on the Company's Board of Directors. (iv) So long as the Purchasers and their respective Affiliates beneficially own (determined in accordance with Rule 13d-3 under the Exchange Act) at least 5% of the shares of Company Common Stock purchased hereunder (determined on an as-converted basis assuming conversion of all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder Approval and conversion of all Series B-1 Preferred Shares (including those which are Conversion Shares) into Company Common Stock, in addition to the right to nominate for election directors under clause (i), (ii) or (iii) above, as applicable (the directors so nominated, the "WCAS Directors" and the other members of the Board of Directors of the Company (other than the Jointly-Selected Director (as hereinafter defined)), the "Company Directors"), one of the members of the Board of Directors of the Company not nominated by the Purchaser Representative pursuant to clause (i), (ii) or (iii) above, as applicable, shall be a person mutually agreed upon by the Purchaser Representative and the Company Directors (the "Jointly-Selected Director" and together with the Company Directors, the "Non-WCAS Directors"). 29 The term "Affiliate" when used herein shall have the meaning provided in Rule 501(b) promulgated under the Securities Act. (b) Notwithstanding anything to the contrary contained in Section 6.02(a) above, until such time as Company Shareholder Approval has been obtained, but only so long as the Purchasers and their respective Affiliates beneficially own (determined in accordance with Rule 13d-3 under the Exchange Act) at least 5% of the shares of Company Common Stock purchased hereunder (determined on an as-converted basis assuming conversion of all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder Approval and conversion of all Series B-1 Preferred Shares (including those which are Conversion Shares) into Company Common Stock, the Purchaser Representative shall have the right to nominate on behalf of the Purchasers and such Affiliates one director to serve on the Board of Directors of the Company (it being understood that (x) until Company Shareholder Approval is obtained, the provisions of this Section 6.02(b) and not the provisions of Section 6.02(a) shall govern and (y) once Company Shareholder Approval is obtained, the provisions of this Section 6.02(b) shall no longer be of any force or effect and the provisions of Section 6.02(a) shall govern). (c) For so long as the Purchaser Representative is entitled to nominate directors to serve on the Board of Directors of the Company on behalf of the Purchasers and their Affiliates under the provisions of Section 6.02(a) or 6.02(b), the Company shall, (i) in connection with any vote or meeting of stockholders of the Company at which directors are to be elected, nominate the nominees of the Purchaser Representative as set forth above and (ii) use its reasonable best efforts to cause their election to the Board of Directors of the Company by the holders of the Common Stock, including (A) nominating such nominee, (B) including the nominee in the Company's proxy statement, (C) recommending a vote for such nominee, (D) casting votes pursuant to proxies given to the Company in favor of such nominee and (E) taking or causing to be taken, all other actions and doing, or causing to be done, all other things necessary (in the reasonable opinion of the Purchaser Representative) to give effect to the provisions of Sections 6.02(a) or 6.02(b) above, as applicable. If the Purchaser Representative for any reason fails to nominate a person to fill any such directorship, such directorship shall remain vacant until such time as the Purchaser Representative nominates a director to fill such directorship and such directorship shall not be filled by resolution or vote of the Company's Board of Directors or the Company's other stockholders. All persons nominated to the Board of Directors of the Company by the Purchaser Representative pursuant to this Section 6.02 shall receive the same compensation and benefits (including equity-based compensation) that are provided to the other non-executive members of the Board of Directors of the Company. In addition, for so long as the provisions of this Section 6.02 remain in effect, the Company shall maintain policies of directors and officers liability insurance, with financially sound and reputable insurers, having terms that are customary for companies similarly situated. (d) The provisions of this Section 6.02 are intended to operate in conjunction with the provisions contained in Section 7(c) of the Series B-1 Preferred Certificate of Designation, such that, if the holders of Series B-1 Preferred Shares are entitled to elect directors 30 pursuant to said Section 7(c), the number of directors that such holders are entitled to elect pursuant to said Section 7(c) shall reduce the number of directors to be nominated by the Purchaser Representative on behalf of the Purchasers and their Affiliates pursuant to this Section 6.02. (e) So long as the Purchasers and/or their Affiliates are entitled to nominate directors to the Board of Directors of the Company pursuant to Section 6.02(a) or 6.02(b) above, as applicable, (i) the Board of Directors of the Company shall at all times consist of seven directors and (ii) the Purchasers and such Affiliates shall also be entitled to proportionate representation by WCAS Directors on each committee and subcommittee of the Board of Directors of the Company (other than the audit committee to the extent prohibited by applicable Law), such committee and subcommittee representatives to be designated by the WCAS Directors. In the event the WCAS Directors are entitled to designate one or more directors to serve on a committee or subcommittee of the Board of Directors of the Company under this Section 6.02(e), the Company shall use its reasonable best efforts to cause their appointment to such committee or subcommittee. (f) The Purchasers agree that, from the Closing Date until the seventh anniversary of the Closing Date, such Purchasers shall (i) use their reasonable best efforts to cause the election or appointment to the Board of Directors of the Company of the persons nominated by the Company Directors to fill the positions on such Boards of Directors allocated to the Company Directors, (ii) use their reasonable best efforts to cause the Company Directors to have proportionate representation on all committees of such Boards of Directors and (iii) not directly or indirectly take any action to seek or cause the removal of any Company Director as such a director or committee member without the written consent of a majority of the Non-WCAS Directors. SECTION 6.03. STANDSTILL AGREEMENT. WCAS agrees that, from the Closing Date until the seventh anniversary of the Closing Date, or, if earlier, until the first date upon which the Purchasers and their respective Affiliates hold fewer than 5% of the shares of Company Common Stock purchased hereunder determined on an as-converted basis assuming (i) the conversion of all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder Approval, (ii) the conversion of all Series B-1 Preferred Shares (including those which are Conversion Shares) into Company Common Stock, (iii) the exercise of all Initial Warrants, (iv) the conversion of all other convertible securities held by WCAS and its Affiliates (including any Series C-1 Preferred Shares or Series C-2 Preferred Shares) and (v) the exercise of all other outstanding warrants (including any Additional Warrants) held by WCAS and its Affiliates, the Purchasers will not take, or encourage or cause any other person or entity to take, any of the following actions without the prior written consent of a majority of the Non-WCAS Directors: (i) acquire, offer to acquire, or agree to acquire ownership (including without limitation beneficial ownership within the meaning of Rule 13d-3 under the Exchange Act), by purchase or otherwise, of any Voting Securities (as hereinafter defined), assets or business of the Company or any Subsidiary, or direct or indirect rights or options to acquire any Voting Securities, assets or 31 business of the Company or any Subsidiary (other than Voting Securities (1) in connection with transfers of Securities among the Purchasers and their Affiliates, (2) the acquisition of Series C-1 Preferred Shares, Series C-2 Preferred Shares or Additional Warrants as contemplated hereby, (3) upon the conversion of any Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares or Series C-2 Preferred Shares or upon the exercise of any Initial Warrants or Additional Warrants, (4) the acquisition of Voting Securities in connection with hedging transactions (so long as such transactions do not increase the overall holdings of Voting Securities of the Purchasers that are involved), (5) in connection with the Voting Agreement and (6) shares of Company Common Stock and/or options to purchase shares of Company Common Stock granted to individual Purchasers who are directors of the Company in connection with equity-based compensation provided to non-executive members of the Board of Directors of the Company; (ii) make, or in any way participate in, directly or indirectly, any "solicitation" of "proxies" (as such terms are used in the Exchange Act rules) or consents with respect to any Voting Securities of the Company or any Subsidiary or become a participant in any election contest; (iii) execute any written consent in lieu of a meeting of the holders of any class of Voting Securities that is solicited by or on behalf of any shareholder of the Company; (iv) initiate, propose or otherwise solicit shareholders for the approval of any shareholder proposal (as described in Rule 14a-8 under the Exchange Act or otherwise); (v) make any public announcement with respect to, submit any public proposal for or public offer of, or approach any party other than the Company regarding any extraordinary transaction involving the acquisition of the Company or its securities or assets; (vi) form, join or in any way participate in or assist in the formation of a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) in connection with any of the foregoing; (vii) otherwise act, alone or in concert with others, in a manner designed or having the deliberate effect of circumventing the restrictions otherwise imposed hereunder; (viii) disclose or publicly announce any intention, plan or arrangement inconsistent with the foregoing; or (ix) finance any other persons or entities in connection with any of the activities prohibited by the foregoing clauses (i) through (viii). As used herein, "Voting Securities" means all securities of the Company ordinarily having the power to vote for the election of any director of the Company and any securities or indebtedness convertible into or exchangeable or exercisable for, directly or indirectly, any such securities. SECTION 6.04. RIGHT TO PURCHASE SERIES C PREFERRED SHARES. (a) The Company agrees that, from the Closing Date until the third anniversary of the Closing Date (the "Restricted Period"), it shall not conduct any Equity Offering (as hereinafter defined) unless and until it first grants to WCAS pursuant to this Section 6.04 the right to purchase, together with its Affiliates, general partners, and other related co-investors that are reasonably acceptable to the Company (collectively, "Co-Investors"), (A) if Company Shareholder Approval has been obtained, Series C-1 Preferred Shares or (B) if Company Shareholder Approval has not yet been obtained, Series C-2 Preferred Shares, in either case, for a purchase price of $1,000 per share. This Section 6.04 shall apply to all proposed Equity Offerings during the Restricted Period; provided, that (i) WCAS and its Co-Investors shall not have the right to purchase in any single transaction pursuant to this Section 6.04 (each such transaction, a "Series C Preferred Transaction") Series C-1 Preferred Shares or Series C-2 Preferred Shares with a stated value in excess of the amount 32 proposed to be raised by the Company pursuant to the related proposed Equity Offering and (ii) WCAS and its Co-Investors shall not have the right to purchase more than $15,000,000 in the aggregate of Series C-1 Preferred Shares and Series C-2 Preferred Shares pursuant to this Section 6.04 (measured by reference to the stated value thereof). (b) For purposes of this Section 6.04, "Equity Offering" shall mean any offer by the Company to sell or sale by the Company of any shares of capital stock of the Company, or any debt or equity security convertible into or exchangeable for, or carrying rights or options to purchase, capital stock of the Company, other than: (i) the issuance of Series A Preferred Shares of the Company, the Series B-1 Preferred Shares, the Series B-2 Preferred Shares, the Series C-1 Preferred Shares or the Series C-2 Preferred Shares, shares of capital stock upon conversion thereof or shares of capital stock upon exercise of the Initial Warrants or the Additional Warrants or upon the conversion or exercise of any other option, warrant or convertible security outstanding on the date hereof and disclosed in Item 6.04(b) of the Disclosure Schedule; (ii) the issuance of options (or Company Common Stock upon the exercise of such options) to employees, consultants, contractors, officers or directors of the Company or its Subsidiaries pursuant to any compensation plan or arrangement approved by the Board of Directors of the Company; (iii) the issuance of securities constituting, in the aggregate, not more than three percent of the outstanding Company Common Stock on a fully-diluted basis to banks or institutional lenders in connection with debt financings, equipment financings or similar transactions or to strategic partners in primarily non-financing transactions, in all such cases as approved by the Board of Directors of the Company; (iv) the issuance of Additional Warrants pursuant to Section 6.05; (v) the issuance of rights and other securities under and pursuant to the Rights Plan, and (vi) the issuance of shares in connection with stock splits, stock dividends or like transactions. (c) Prior to issuing any securities pursuant to a proposed Equity Offering, the Company shall give written notice thereof to WCAS. Such notice shall set forth the material terms and conditions of such Equity Offering and the securities to be sold in connection therewith, including the aggregate amount that the Company intends to raise in such Equity Offering. In the event that the consideration to be received by the Company for such securities is other than cash, such notice shall state the fair value of such consideration as determined in good faith by the Board of Directors of the Company. Each such notice shall constitute an offer by the 33 Company to sell to WCAS and its Co-Investors, for $1,000 per share, Series C-1 Preferred Shares or Series C-2 Preferred Shares, as applicable (depending on whether Company Shareholder Approval has been obtained), with an aggregate stated value equal to the lesser of (x) $15,000,000 less the aggregate amount of all Series C-1 Preferred Shares and/or Series C-2 Preferred Shares purchased in all previous Series C Preferred Transactions, if any, or (y) the amount proposed to be raised by the Company in such Equity Offering. For a period of thirty days following the giving of such notice, WCAS shall be entitled, by written notice to the Company, to elect to purchase all or any portion of such Series C-1 Preferred Shares or Series C-2 Preferred Shares, as applicable. In the event that WCAS shall not elect pursuant to this Section 6.04 to purchase any or all of the shares in connection with the Equity Offering described in such notice, the Company may issue such securities not elected to be purchased by WCAS in such amounts and on such terms and conditions without further compliance with this Section 6.04 within the sixty day period following the end of such thirty-day period. In the event that any such offer is accepted by WCAS within such thirty-day period, the Company shall sell to WCAS and its Co-Investors, and WCAS and its Co-Investors shall purchase from the Company, the Series C-1 Preferred Shares or Series C-2 Preferred Shares, as the case may be, elected to be purchased by WCAS as soon as practicable pursuant to a definitive stock purchase agreement that is customary for similar transactions and contains standard and adequate representations, warranties, covenants, conditions and indemnities which are no less favorable to WCAS and its Co-Investors than those contained in this Agreement and which are, subject to reasonable and appropriate modification, substantially similar to those contained in this Agreement (it being understood that such agreement would not contain provisions similar to those contained in Sections 6.02, 6.03, 6.04, 6.05 or 6.08 hereof). (d) The initial conversion price of any Series C-1 Preferred Shares issued in any Series C Preferred Transaction shall be equal to the lower of: (i) the product of (x) the average closing price per share of Company Common Stock for the twenty trading days immediately preceding the closing date of such Series C Preferred Transaction ("Market Price") and (y) 1.1; and (ii) a conversion price determined as follows: CP = [(7.5 x EBITDA) - (ND + PS)] / FDS As used in the above formula, the following shall have the meanings set forth below: CP = the initial conversion price of such Series C-1 Preferred Shares EBITDA = the consolidated net income of the Company before interest, income taxes, depreciation and amortization for the twelve months ending prior to the closing date of such Series C Preferred Transaction, adjusted for synergies related to acquisitions during such prior twelve month period in 34 such amount, if any, as may be agreed upon by the Company and the Purchaser Representative but excluding non-recurring gains or losses to the extent agreed upon by the Company and the Purchaser Representative ND = all Indebtedness (as hereinafter defined) of the Company and its Subsidiaries as of the last day of the last full month preceding the closing date of such Series C Preferred Transaction (the "Reference Date") less the sum of (i) the cash and cash equivalents of the Company and its Subsidiaries as of the Reference Date and (ii) the aggregate exercise price of all stock options of the Company that are outstanding on the Reference Date and that have an exercise price less than the Market Price ("In-the-Money Options") PS = the aggregate liquidation preference of all shares of preferred stock of the Company outstanding on the Reference Date, excluding any shares of convertible preferred stock having a conversion price less than the Market Price ("In-the-Money Preferred Stock") FDS = the number of shares of Company Common Stock outstanding on the Reference Date on a fully-diluted basis giving effect to the exercise of all then outstanding In-the-Money Options and the conversion of all then outstanding In-the-Money Preferred Stock All calculations made pursuant to this Section 6.04(d) shall be made in accordance with GAAP and certified by the Chief Executive Officer or Chief Financial Officer of the Company. (e) In the event that Series C-2 Preferred Shares are issued in a Series C Preferred Transaction (the "Original Transaction"), and thereafter Company Shareholder Approval is obtained, the conversion price of the Series C-1 Preferred Shares to be issued upon the automatic conversion of the Series C-2 Preferred Shares issued in such Original Transaction shall be calculated as if such Series C-1 Preferred Shares were issued on the closing date of the Original Transaction (giving effect to any adjustments that would have been made in accordance with the terms and provisions of the Series C-1 Preferred Certificate of Designation (if such Series C-1 Preferred Shares were outstanding from the closing date of the Original Transaction to the date of such conversion). (f) The Company agrees that, so long as any Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares and/or Series C-2 Preferred Shares remain outstanding, it will not issue any Series C-1 Preferred Shares or Series C-2 Preferred Shares to anyone other than WCAS and its Co-Investors. SECTION 6.05. ISSUANCE OF SERIES B NOTES IN CONNECTION WITH SUBSEQUENT ACQUISITIONS. (a) If, at any time after the date hereof and prior to the termination of this Section 35 6.05 as provided in Section 6.05(f) below, the Company shall identify an acquisition opportunity for the Company, the consummation of which would require the Company to obtain third-party debt financing (other than debt which by its terms is not subordinate to any other debt or obligations of the Company) (each a "Potential Acquisition"), the Company shall notify WCAS of such Potential Acquisition and the need to obtain such financing. Any such notice (each a "Potential Acquisition Notice") shall include all material information reasonably available to the Company with respect to the entity or business proposed to be acquired (the "Potential Acquisition Target") and all other material information reasonably available to the Company that is relevant to WCAS's decision whether or not to finance such acquisition. Without limiting the generality of the foregoing, each Potential Acquisition Notice shall include a description of the terms and conditions upon which the Company would expect to consummate such Potential Acquisition, the amount of such debt (in the form of Series B Notes) that the Company proposes to issue and the terms and conditions of any Other Financing (as hereinafter defined) that the Company would expect to obtain in connection with such Potential Acquisition. (b) As promptly as reasonably practicable after the giving of any Potential Acquisition Notice, and, in any event within ten days of the giving of such notice, appropriate representatives of the Company and WCAS shall make themselves available to discuss the status of the Potential Acquisition, the Company's strategic rationale therefor and the information provided to WCAS in connection with the Potential Acquisition Notice. As soon as practicable after the conclusion of such discussions and following the delivery to WCAS of any follow-up information reasonably requested by WCAS (and, in any event, within ten days thereof) WCAS shall provide the Company either (i) a non-binding indication of interest with respect to the sale and purchase of the Series B Notes proposed to be issued to finance the Potential Acquisition (a "Series B Note Transaction") or (ii) a notification that WCAS will not proceed with such Series B Note Transaction (a "WCAS Cessation of Interest Notice"). (c) In connection with any Potential Acquisition and related Series B Note Transaction, the Company shall use all commercially reasonable efforts to afford the representatives of WCAS reasonable access during normal business hours to the offices, facilities, books and records of the Potential Acquisition Target and the opportunity to discuss the affairs of the Potential Acquisition Target with the officers, employees, accountants, customers, suppliers and landlords of the Company and such Potential Acquisition Target familiar therewith. In addition, the Company shall keep the WCAS informed of, and consult with it on a prompt and regular basis on, all matters and developments regarding each Potential Acquisition and the proposed financing therefor. (d) If, after completion of their respective due diligence investigations with respect to such Potential Acquisition, and in light of the proposed terms and conditions upon which such acquisition would be financed and consummated, (i) the Board of Directors of the Company concludes that such Potential Acquisition, the related Series B Note Transaction and any Other Financing transactions related thereto would be in the best interest of the Company and its shareholders and approves such transactions and (ii) WCAS concludes that the Series B Note 36 Transaction would be in its best interest and approves such transaction (the approvals described in clauses (i) and (ii) are collectively referred to herein as "Mutual Approval"), the Series B Note Transaction will be consummated as follows: (i) Each such Series B Note Transaction shall be consummated pursuant to the terms and conditions set forth in a definitive note purchase agreement that is customary for similar transactions and contains standard and adequate representations, warranties, covenants, conditions and indemnities which are no less favorable in the aggregate to WCAS and its Co-Investors than those contained in this Agreement and which are, subject to reasonable and appropriate modification, substantially similar to those contained in this Agreement (a "Definitive Note Purchase Agreement"); and (ii) In connection with the issuance of Series B Notes in any such Series B Note Transaction the Company shall also issue to WCAS and its Co-Investors an aggregate number of Additional Warrants to be determined as follows: (A) If the average closing price per share of Company Common Stock for the twenty trading days immediately preceding the closing date of such Series B Note Transaction is equal to or less than $35.00 (as adjusted for any stock splits, stock dividends, reverse stock splits, share consolidations or similar transactions), then the aggregate number of Additional Warrants to be issued in such Series B Note Transaction (SBW) shall be determined as follows: SBW = M x P --------------- $15,000,000 (B) If the average closing price per share of Company Common Stock for the twenty trading days immediately preceding the closing date of such Series B Note Transaction exceeds $35.00 (as adjusted for any stock splits, stock dividends, reverse stock splits, share consolidations or similar transactions), then the aggregate number of Additional Warrants to be issued in such Series B Note Transaction (SBW) shall be determined as follows: SBW = 0.25 x P -------- S As used in the above formulas, the following shall have the meanings set forth below: S = the average closing price per share of Company Common Stock for the twenty trading days immediately preceding the closing date of such Series B Note Transaction 37 P = the aggregate principal amount of Series B Notes to be issued in such Series B Note Transaction M = the number of Additional Warrants that would be issued if P was equal to $15,000,000 and S was less than or equal to $35.00 (as adjusted for any stock splits, stock dividends, reverse stock splits, share consolidations or similar transactions), determined in accordance with the following table: S M ---------------- -------------------- Less than $10.00 300,000 $10.01 - $15.00 275,000 $15.01 - $20.00 225,000 $20.01 - $25.00 175,000 $25.01 - $30.00 150,000 $30.01 - $35.00 100,000 (all such figures as adjusted for any stock splits, stock dividends, reverse stock splits, share consolidations or similar transactions) (e) WCAS hereby agrees that it shall use its commercially reasonable efforts to conduct its due diligence investigations, obtain its internal approvals and consummate any Series B Note Transactions contemplated hereby, in each case, subject to the other provisions of this Section 6.05, in accordance with any reasonable timetable proposed by the Company in connection with any Potential Acquisition. (f) Notwithstanding anything to the contrary contained herein, (i) the Company agrees that it shall not seek to obtain any debt financing (other than debt which by its terms is not subordinate to any other debt or obligations of the Company) for any Potential Acquisition from any person other than WCAS and its Co-Investors ("Other Financing") unless and until WCAS and its Co-Investors are offered an opportunity to finance such acquisition through the purchase of Series B Notes as provided in this Section 6.05; provided, that the aggregate principal amount of Series B Notes issued pursuant to this Section 6.05 shall not exceed $15,000,000 (i.e., the Company shall not be restricted by this Section 6.05 from obtaining Other Financing once $15,000,000 in aggregate principal amount of Series B Notes have been issued hereunder in one or more Series B Note Transactions) and (ii) the Company's ability to obtain Other Financing shall at all times remain subject to the provisions of Section 6.04. (g) WCAS may terminate the provisions of this Section 6.05 at any time after the date hereof by delivering to the Company a written notice of such termination. The Company may terminate the provisions of this Section 6.05 at any time after the third anniversary of the Closing Date by delivering to WCAS a written notice of such termination. 38 (h) Notwithstanding anything to the contrary set forth above, nothing in this Section 6.05 shall be construed as a commitment of WCAS to provide financing for any Potential Acquisition. The parties hereto understand and agree that no agreement or agreement to agree providing for any Series B Note Transaction shall be deemed to exist between the parties as a result of this Section 6.05 unless and until Mutual Approval has been obtained and a final Definitive Note Purchase Agreement with respect thereto shall have been executed and delivered by the parties. In addition, (i) the Company acknowledges that WCAS may deliver a WCAS Cessation of Interest Notice at any time after delivery of a Potential Acquisition Notice and prior to the execution and delivery of a Definitive Note Purchase Agreement and (ii) the Company may, at any time, without liability to WCAS hereunder (except as provided in Section 9.02 below), determine not to proceed with any Potential Acquisition. SECTION 6.06. COMPANY SHAREHOLDER APPROVAL. (a) As soon as reasonably practicable after the Closing Date, the Company shall take all action necessary in accordance with all applicable Laws and its Articles of Incorporation and By-Laws to duly call, give notice of and convene a meeting (the "Company Shareholder Meeting") of its shareholders to consider and vote upon the approval of (1) the termination of the application of the "Conversion Cap" described in Section 4(a)(ii) of the Series B-1 Preferred Certificate of Designation, (2) the automatic conversion of the Series B-2 Preferred Shares into Series B-1 Preferred Shares pursuant to Section 4(a) of the Series B-2 Preferred Certificate of Designation, (3) the automatic conversion of any and all Series C-2 Preferred Shares into Series C-1 Preferred Shares pursuant to Section 4(a) of the Series C-2 Preferred Certificate of Designation, (4) the rights of the holders of the Series B-1 Preferred Shares to elect directors to the Board of Directors of the Company as described in paragraphs 7(c)(ii) and 7(c)(iii) of the Series B-1 Preferred Certificate of Designation and (5) an amendment to the Articles of Incorporation of the Company (the "Charter Amendment") substantially in the form of Exhibit K hereto ("Company Shareholder Approval"). The Board of Directors of the Company has approved the matters referred to in (1) through (4) above and shall approve the matters referred to in (5) above and shall recommend that the shareholders of the Company vote to approve such matters. The Company shall use all commercially reasonable efforts to solicit from its shareholders proxies in favor of Company Shareholder Approval. The date on which Company Shareholder Approval is obtained, if at all, is hereinafter referred to as the "Approval Date". (b) The Company shall, as promptly as practicable after the Closing Date, but in no event later than 30 days after the Closing Date, prepare and file with the SEC (after giving the Purchaser Representative and the Purchasers' counsel the opportunity to review and comment thereon) a proxy statement to be used in connection with the Company Shareholder Meeting (such proxy statement, together with the form of proxy included therein and any amendments thereof or supplements thereto, in the form mailed to the Company's shareholders, is herein referred to as, the "Proxy Statement"). The Company will use all commercially reasonable efforts to cause the Proxy Statement to be mailed to its shareholders at the earliest practicable date and shall use all commercially reasonable efforts to hold the Company Shareholder Meeting as soon as practicable after the Closing Date. 39 (c) The Company shall notify the Purchaser Representative of the receipt of any comments of the staff of the SEC and of any requests by the staff for amendments or supplements to the Proxy Statement, or for additional information, and shall promptly supply the Purchaser Representative with copies of all correspondence between the Company or its representatives and the staff of the SEC with respect thereto. If, at any time prior to the Company Shareholder Meeting, any event should occur relating to or affecting the Company or its Subsidiaries, which event should be described in an amendment or supplement to the Proxy Statement, the Company shall promptly inform the Purchaser Representative and shall promptly prepare, file (after giving the Purchaser Representative and the Purchasers' counsel the opportunity to review and comment thereon) and clear with the SEC and, if required by applicable Law, distribute to the Company's shareholders, such amendment or supplement. (d) Prior to the Approval Date, the Company shall make appropriate provision and take appropriate action such that a sufficient number of vacancies will exist on the Company's Board of Directors on the Approval Date that the holders of the Series B-1 Preferred Shares are able to elect the appropriate number of directors to the Company's Board of Directors on the Approval Date, as described in Section 7(c) of the Series B-1 Preferred Certificate of Designation. SECTION 6.07. TAX CONSISTENCY. The Company shall treat the Series B-1 Preferred Shares, the Series B-2 Preferred Shares, the Series C-1 Preferred Shares and the Series C-2 Preferred Shares as stock that participates in the corporate growth of the Company to a significant extent within the meaning of Treasury Regulation ss. 1.305-5(a), and not as "preferred stock" for purposes of the Section 305 of the Code and the Treasury Regulations promulgated thereunder, unless otherwise required pursuant to a final determination or a change in applicable statutes or regulations. SECTION 6.08 CERTAIN VETO RIGHTS APPLYING AFTER COMPANY SHAREHOLDER APPROVAL. From and after the Approval Date, and so long as the Purchasers and their respective Affiliates beneficially own (determined in accordance with Rule 13d-3 under the Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred Shares and/or Conversion Shares which represent 35% or more of the shares of Company Common Stock purchased hereunder on the Closing Date (determined on an as-converted basis after giving effect to the conversion of all of the Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder Approval and conversion of all Series B-1 Preferred Shares (including those which are Conversion Shares) into Company Common Stock), the Purchaser Representative on behalf of the Purchaser and such Affiliates shall have the right to approve, on behalf of the Purchasers and such Affiliates, the following transactions: (i) any merger or consolidation involving the Company or any sale of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole, (ii) any acquisition (or series of related acquisitions) of stock or assets of any entity or business by the Company or any Subsidiary of the Company outside of the ordinary course of business (whether by merger or purchase of stock or assets or otherwise) for consideration greater than $10,000,000 (it being agreed that the value of all non-cash 40 consideration payable in respect thereof will be determined in good faith by the Board of Directors of the Company and include the Board of Director's determination of the value of any contingent consideration payable in such transaction or series of related transactions), (iii) any sale, lease, transfer or other divestiture of material assets outside the ordinary course of business by the Company or any Subsidiary of the Company, (iv) any capital project or series of related capital projects costing in excess of $3,000,000, (v) any material changes in the Company's and its Subsidiaries' business strategy or operations from those in existence on the date hereof, (vi) any Restricted Payments (as hereinafter defined), (vii) any Prohibited Transactions With Affiliates (as hereinafter defined), (viii) any material change to any equity incentive plan of the Company or any of its Subsidiaries, (ix) any material increase in the compensation or benefits payable under any management incentive plan of the Company or any of its Subsidiaries and (x) any restructuring of senior management of the Company and its Subsidiaries. SECTION 6.09 CERTAIN NEGATIVE COVENANTS RELATING TO THE SERIES B-2 PREFERRED SHARES, SERIES C-2 PREFERRED SHARES, SERIES A NOTES AND SERIES B NOTES. From and after the Closing Date, and so long as any Series B-2 Preferred Shares, Series C-2 Preferred Shares, Series A Notes or Series B Notes remain outstanding, the Company shall comply with the following covenants and agreements and cause each of its Subsidiaries to comply with the following covenants and agreements unless compliance is waived in writing by (x) the holders of a majority of the outstanding Series B-2 Preferred Shares and Series C-2 Preferred Shares, voting together as a single class, and (y) the holders of not less than a majority in principal amount of the "Notes" (such term being used herein as defined in the form of Senior Subordinated Note attached as Exhibit D hereto): (a) LIMITATION ON INDEBTEDNESS AND DISQUALIFIED STOCK. The Company will not and will not permit any of its Subsidiaries to, directly or indirectly: (i) contract, create, incur, assume or suffer or permit to exist any Indebtedness (including by way of transferring to any third party any Indebtedness of the Company or any Subsidiary of the Company presently held by the Company or any Subsidiary of the Company), except: (A) Indebtedness represented by the Notes; (B) Indebtedness under Sections 1.4 of the Osborn Acquisition Agreement; (C) up to $28,000,000 of Indebtedness of the Company and its Subsidiaries under the line of credit letter agreement, dated March 8, 2000, between the Company and Commerce Bank N.A., as amended, modified, supplemented, amended and restated, extended, renewed, refinanced and/or replaced in an aggregate principal amount not exceeding such amount ("Senior Credit Agreement Indebtedness"); 41 (D) Indebtedness in respect of the City of Lenexa, Kansas Taxable Industrial Revenue Bonds (LabOne, Inc. Project) Series 1998A outstanding on the date hereof (the "Industrial Revenue Bonds") under the (x) Reimbursement Agreement, dated as of September 1, 1998, between the Company and Commerce Bank N.A., as amended, modified, supplemented, amended and restated, refinanced and/or replaced, and (y) the Lease, dated as of September 1, 1998, between the Company and the City of Lenexa, Kansas, in an aggregate amount not to exceed $16,300,000, as reduced by the amount of all payments of principal on the Industrial Revenue Bonds made after the date hereof ("IRB Indebtedness" and, together with the Senior Credit Agreement Indebtedness, "Senior Indebtedness"); (E) other Indebtedness of the Company and its Subsidiaries existing on the date hereof and set forth in Item 6.09(a)(i)(E) of the Disclosure Schedule ("Existing Indebtedness") and Indebtedness incurred in connection with any subsequent extension, renewal or refinancing thereof; provided, that (x) the amount thereof is not increased and (y) the terms thereof are no less favorable to the holders of the Series B-2 Preferred Shares, the Series C-2 Preferred Shares and the Notes than the terms of the agreement or instrument being extended, renewed or refinanced; (F) Indebtedness owing by the Company or any Subsidiary of the Company to any wholly-owned Subsidiary of the Company or to the Company; (G) Capitalized Lease Obligations (as hereinafter defined) of the Company and its Subsidiaries in an amount not to exceed $1,000,000 in the aggregate; (H) Indebtedness related solely to interest rate protection or currency hedging obligations entered into to protect the Company and its Subsidiaries from fluctuations in interest or currency exchange rates and not for speculative purposes; (I) Indebtedness of the Company or any of its Subsidiaries in connection with standby letters of credit or performance, surety or appeal bonds issued in the ordinary course of business; (J) Indebtedness of any Person acquired by the Company or any Subsidiary, existing at the time of acquisition and not incurred in contemplation thereof; 42 (K) Indebtedness that is incurred and used to repurchase all of the outstanding Series A Notes and Series B Notes or to redeem all of the outstanding Series B-2 Preferred Shares and Series C-2 Preferred Shares pursuant to obligations of the Company to effect such repurchases or redemptions; provided, that any such Indebtedness that is used to redeem the Series B-2 Preferred Shares and Series C-2 Preferred Shares shall (x) be subordinated to all Notes then outstanding, if any, and (y) not require repayment of principal prior to the scheduled repayment at maturity of any Notes then outstanding; (L) other Indebtedness of the Company and its Subsidiaries so long as the aggregate amount of all Indebtedness of the Company and its Subsidiaries, after giving effect to the incurrence thereof, does not exceed three times the consolidated net income of the Company before interest, income taxes, depreciation and amortization for the twelve months ending as of the date of such incurrence, adjusted for synergies from pending or completed acquisitions on such date in such amount, if any, as may be agreed upon by the Company and the Purchaser Representative which agreement will not be unreasonably withheld or delayed ("Additional Indebtedness"); and (M) guarantees of Indebtedness otherwise permitted hereunder; or (ii) issue any capital stock of the Company or any of its Subsidiaries (other than Series C-1 Preferred Shares and/or Series C-2 Preferred Shares) which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures, or is mandatorily redeemable, whether pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part prior to the later of Company Shareholder Approval and December 31, 2008 ("Disqualified Stock"). As used herein, "Indebtedness" means, with respect to the Company or any Subsidiary of the Company, (i) indebtedness for borrowed money; (ii) liabilities or obligations in respect of guarantees or letters of credit, excluding obligations with respect to trade letters of credit entered into in the ordinary course of business to the extent that such letters of credit are not are not drawn upon or, if drawn upon, to the extent the drawing is reimbursed no later than the third business day following receipt by the Company of a demand for reimbursement; (iii) the deferred purchase price of assets or services purchased (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business); (iv) any obligation to pay a specified purchase price for goods or services whether or not delivered or accepted pursuant to any agreement; (v) liabilities or obligations of the Company or any Subsidiary of the Company, as lessee, under any lease of property (whether real, personal or mixed) which, in accordance with GAAP, should be classified as a capital lease ("Capitalized Lease Obligations") (i.e., not operating leases); or (vi) liabilities or obligations in respect of any sale-leaseback transaction. (b) RESTRICTED PAYMENTS. The Company will not and will not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividends on, or make any other distribution or payment on account of, or redeem, retire, purchase or otherwise acquire for value, any shares of any class of capital stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, whether in cash, property or in obligations of the Company or any of its Subsidiaries, except for: (A) any of the foregoing with respect to the Company's Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares or Series C-2 Preferred Shares; (B) dividends or distributions payable in capital stock (other than Disqualified Stock) or in options, warrants, or other rights to purchase capital stock (other than Disqualified Stock); (C) dividends, distributions or payments by any Subsidiary to the Company or to any wholly-owned Subsidiary of the Company; and (D) repurchases of shares of any class of stock of the Company from employees upon termination of employment; provided, that the aggregate amount of such repurchases shall not exceed $100,000 in any calendar year; or (ii) make any voluntary or optional payments of principal of, or retire, redeem, purchase or otherwise acquire for value any Indebtedness other than payments in respect of (A) Senior Credit Agreement Indebtedness, (B) payments of IRB Indebtedness which correspond to scheduled payments of principal on the Industrial Revenue Bonds or (C) payments in respect of Additional Indebtedness. The declarations, payments, purchases, redemptions, retirements, acquisitions or distributions prohibited by this Section 6.09(b) are herein called "Restricted Payments". 44 The provisions of Section 6.09(b) shall not be violated by reason of: (1) the redemption, repurchase, defeasance or other acquisition or retirement for value of the Series A Notes, the Series B Notes, the Series B-2 Preferred Shares and/or the Series C-2 Preferred Shares (including the premium, if any, and accrued and unpaid interest thereon) with the proceeds of, or in exchange for, Indebtedness incurred under Section 6.09(a)(i)(K); (2) payments or distributions to dissenting stockholders pursuant to applicable Law in connection with a consolidation, merger or transfer of assets that complies with the provisions of this Agreement, the Notes and the Series B-1 Preferred Certificate of Designation, the Series B-2 Preferred Certificate of Designation, Series C-1 Preferred Certificate of Designation, and the Series C-2 Preferred Certificate of Designation applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of the Company; (3) repurchases of capital stock deemed to occur upon the exercise of stock options if such options or capital stock represents a portion of the exercise price thereof; and (4) payments not to exceed $250,000 in the aggregate solely to enable the Company to make payments to holders of its Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares and/or Series C-2 Preferred Shares in lieu of the issuance of fractional shares of its capital stock. (c) LIMITATION ON LIENS. The Company will not and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist any consensual Liens (other than Permitted Liens) on any property or asset now owned or hereafter acquired, or on any income or profits therefrom, or assign or convey any right to receive income therefrom, except for: (A) Liens securing Senior Indebtedness or Additional Indebtedness that is subordinated to no other Indebtedness of the Company; (B) Liens existing on the date hereof and set forth in Item 6.09(c)(A) of the Disclosure Schedule, together with any subsequent extensions or renewals thereof; provided that neither the Indebtedness secured thereby nor the property subject thereto is increased; (C) Liens granted by a Subsidiary of the Company in favor of the Company or a wholly-owned Subsidiary of the Company to secure Indebtedness owing to the Company or such wholly-owned Subsidiary; 45 (D) Liens with respect to the property of any Person acquired by the Company or any Subsidiary after the date hereof, existing at the time of acquisition and not incurred in contemplation thereof, which Liens are not applicable to any property of the Company or any Subsidiary other than the property so acquired; (E) Liens that (1) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license, conveyance or similar contract or (2) exist by virtue of any transfer of, agreement to transfer, option or right with respect to, any property or assets of the Company or any Subsidiary not otherwise prohibited hereunder; (F) Liens in connection with operating leases; and (G) other Liens arising after the date hereof in the ordinary course of business so long as the value of the property secured thereby (as determined in good faith by the Board of Directors of the Company) does not exceed $500,000 in the aggregate. (d) CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The Company will not and will not permit any of its Subsidiaries to: (i) wind up, liquidate or dissolve; (ii) enter into any transaction of merger or consolidation, unless (x) the Company is the surviving corporation or unless the surviving corporation shall assume in writing the Company's obligations under the Series B-2 Preferred Shares, the Series C-2 Preferred Shares, the Series A Notes and the Series B Notes and (y) no Event of Default (as such term is defined in the Notes) exists immediately prior to or will exist after such transaction under the terms of the Notes and no default exists immediately prior to or will exist after such transaction under the terms of the Series B-2 Preferred Stock, the Series C-2 Preferred Stock, any Material Contract, or any instrument evidencing material Indebtedness of the Company or any Subsidiary; (iii) directly or indirectly, sell or otherwise dispose of or transfer all or any part of its property or assets (including, without limitation, any sale of capital stock or other securities convertible into capital stock other than the sale of directors' qualifying shares) other than to the Company or a wholly-owned Subsidiary of the Company; provided that, the foregoing shall not prohibit sales or other dispositions of property or assets (other than as provided in clause (iv) below) for an amount at least equal to the fair value of such property or assets (as 46 determined in good faith by the Board of Directors of the Company) so long as such aggregate fair value of such assets or property does not exceed $500,000 in respect of any single transaction or series of related transactions or $1,000,000 in the aggregate; (iv) sell any capital stock of any wholly-owned Subsidiary of the Company unless the sale is for all such capital stock; (v) after Company Shareholder Approval, directly or indirectly (A) acquire, whether through merger, purchase of assets or stock or otherwise, any corporation, partnership, limited liability company or other business enterprise or any division or line of business thereof, or (B) make any investment of a capital nature in or loan to any corporation, partnership, limited liability company or other business enterprise (other than investments in and/or loans to wholly-owned Subsidiaries of the Company), in either case, in any single transaction or series of related transaction valued at $10,000,000 or more (as determined in good faith by the Board of Directors of the Company); or (vi) after Company Shareholder Approval, make any capital expenditures or engage in any capital project or series of related capital projects costing in excess of $3,000,000. (e) PROHIBITIONS AGAINST CERTAIN DIVIDENDS AND OTHER RESTRICTIONS. The Company will not and will not permit any of its Subsidiaries to create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of: (i) any Subsidiary of the Company to (A) pay dividends or make any other distributions permitted by applicable Law on any capital stock of such Subsidiary; (B) pay any Indebtedness owed to the Company or any other Subsidiary of the Company or (C) make loans or advances to the Company or any other Subsidiary of the Company; or (ii) the Company to redeem the Series B-2 Preferred Shares or Series C-2 Preferred Shares in accordance with the terms of the Series B-2 Preferred Certificate of Designation or the Series C-2 Preferred Certificate of Designation, as applicable; provided, that this Section 6.09(e) shall not restrict the Liens listed in Section 6.09(c)(A)-(E), encumbrances or restrictions existing on the Closing Date, and any extension, renewal or refinancing of the instruments or agreements underlying such restrictions so long as the terms thereof are no less favorable to the holders of the Series B-2 Preferred Shares, the Series C-2 Preferred Shares and the Notes 48 than the terms of the agreement or instrument being extended, renewed or refinanced. (f) LIMITATION ON TRANSACTIONS WITH RELATED PARTIES. The Company shall not enter into, or permit any of its Subsidiaries to enter into, any transaction with any of the types of persons described in Item 404(a) of Regulation S-K of the SEC, except for (i) normal employment arrangements, benefit programs and employee incentive option programs on reasonable terms, (ii) normal compensation arrangements with directors of the Company and its Subsidiaries, (iii) any transaction approved by the Board of Directors of the Company or the shareholders of the Company in accordance with the provisions of Section 351.327 of the Missouri Code, (iv) transactions in the ordinary course of business and on arm's length terms and (v) transactions with the Purchasers and their Affiliates in accordance with this Agreement and the Ancillary Agreements. ("Prohibited Related Party Transactions"). (g) EMPLOYEE MATTERS. The Company shall not make (i) any material change to any equity incentive plan of the Company or any of its Subsidiaries, (ii) any material increase in the compensation or benefits payable under any management incentive plan of the Company or any of its Subsidiaries, and (iii) any restructuring of any senior management of the Company or its Subsidiaries. ARTICLE VII. TERMINATION PRIOR TO CLOSING SECTION 7.01. TERMINATION OF AGREEMENT. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: (a) by the mutual written consent of the Company and the Purchaser Representative on behalf of the Purchasers; (b) by the Purchaser Representative on behalf of the Purchasers if there shall have been a material breach by the Company of any of its representations, warranties, covenants or agreements contained in this Agreement and such breach would result in the failure to satisfy one or more of the conditions set forth in Section 5.01 or Section 5.02 and such breach (x) by its nature is not capable of being cured or (y) shall not have been cured within ten days after notice thereof shall have been received by the Company; (c) by the Company if there shall have been a material breach by the Purchasers of any of their representations, warranties, covenants or agreements contained in this Agreement and such breach would result in the failure to satisfy one or more of the conditions set forth in Section 5.01 or Section 5.03 and such breach (x) by its nature is not capable of being cured or (y) shall not have been cured within ten days after notice 48 thereof shall have been received by the Purchaser Representative on behalf of the Purchasers; (d) by either the Company or the Purchaser Representative on behalf of the Purchasers if the Closing shall not have occurred prior to the close of business on September 30, 2001, provided, that, the right to terminate this Agreement under this Section 7.01(d) shall not be available to any party whose breach of this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before the close of business on such date; (e) by either the Company or the Purchaser Representative on behalf of the Purchasers if the Obsorn Acquisition Agreement is terminated in accordance with the terms of Section 9 thereof; provided, that, the Company shall not have the right to terminate this Agreement under this Section 7.01(e) if it shall have consented to such termination of the Osborn Acquisition Agreement in violation of Section 4.07(c); or (f) upon the issuance of a final and non-appealable Order by any Governmental Body of competent jurisdiction enjoining the consummation of the transactions contemplated hereby; provided, that, the right to terminate this Agreement under this Section 7.01(f) shall not be available to any party whose actions or inaction has been the cause of the imposition of such injunction or the failure to have such injunction removed. Any party desiring to terminate this Agreement pursuant to this Section 7.01 shall give notice to the other parties in accordance with Section 9.04. SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of this Agreement pursuant to Section 7.01, this Agreement, except for the provisions of Section 4.02(b) and Articles VII and IX, shall become void and have no effect, without any liability on the part of any party or its Affiliates, directors, officers, employees, agents, partners or stockholders, provided, that nothing in this Section 7.02 shall relieve any party of liability for a breach of any provision of this Agreement occurring prior to such termination. ARTICLE VIII. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION SECTION 8.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. All representations, warranties, covenants and agreements contained in or made pursuant to this Agreement and the Ancillary Agreements shall survive the Closing Date for a period of eighteen months; provided, that (i) the representations and warranties made in Sections 2.01, 2.03, 2.04, 2.05, 3.01 and 3.02 shall survive the Closing Date indefinitely, (ii) the 49 representations and warranties made in Sections 2.16 and 2.17 shall survive until 90 days after the expiration of all applicable statutes of limitation (including all periods of extension, whether automatic or permissive) and (iii) all covenants and agreements that require or contemplate performance after the Closing Date shall survive in accordance with their respective terms. For purposes of this Article VIII, each statement contained in a certificate or other instrument delivered by a party pursuant to this Agreement or any Ancillary Agreement shall be deemed to constitute a representation made by such party pursuant hereto or thereto. Notwithstanding the foregoing, if notice of an indemnification claim shall have been delivered before the aforementioned time period has elapsed with respect to a breach of representation, warranty, covenant or agreement, such representation, warranty, covenant or agreement shall survive until such claim is finally resolved. The right to indemnification, payment of Damages (as hereinafter defined) or any other remedy based on the representations, warranties, covenants and agreements contained in or made pursuant to this Agreement or any Ancillary Agreement will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance or non-compliance with, any such representation, warranty, covenant or agreement. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or agreement, will not affect the right to indemnification, payment of Damages, or any other remedy based on such representations, warranties, covenants and agreements. SECTION 8.02. INDEMNIFICATION. (a) Subject to the terms and conditions of this Article VIII, the Company hereby agrees to indemnify, defend and hold the Purchasers and their respective Affiliates, officers, directors, employees, agents, shareholders, partners and other representatives (collectively, the "Purchaser Group") harmless from and against all demands, claims, actions, causes of action, assessments, losses (including any diminution in the value of the Initial Securities or the Conversion Shares), damages, liabilities, costs and expenses, including without limitation interest, penalties and reasonable attorneys' fees and expenses (collectively, "Damages"), asserted against, resulting to, imposed upon, suffered by or incurred by any member of the Purchaser Group by reason of, resulting from or arising out of (i) any breach or inaccuracy of any representation or warranty of the Company contained in or made pursuant to this Agreement or any Ancillary Agreement, (ii) any breach of or non-compliance with any covenant or agreement of the Company contained in or made pursuant to this Agreement or any Ancillary Agreement, (iii) any claim, action, proceeding or investigation or threat of claim, action, proceeding or investigation brought by or on behalf of any person other than the Company that relates to this Agreement, the Ancillary Agreements, the Osborn Acquisition Documents or the transactions contemplated hereby or thereby, or (iv) any untrue statement or alleged untrue statement of any material fact contained in the Proxy Statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (except to the extent arising out of or based upon an untrue statement or alleged untrue statement or omission or alleged omission made in conformity with information furnished by the Purchasers in writing specifically for use 50 in such Proxy Statement); provided, that, (x) the Company shall not be liable under this Section 8.02(a) unless the aggregate amount of Damages with respect to all matters referred to in this Section 8.02(a) exceeds $500,000 (in which case all such Damages shall be made subject to indemnification hereunder), (y) the Company's maximum liability under this Section 8.02(a) shall not exceed $50,000,000 in the aggregate and (z) if the Damages for which the indemnification is being sought are the result of a misrepresentation or breach of warranty, then a written claim for indemnification must be delivered to the Company within the applicable survival period set forth in Section 8.01. Any payment made to any Purchaser hereunder in respect of any Damages shall be treated as an adjustment to the purchase price of the Securities. (b) Subject to the terms and conditions of this Article VIII, each Purchaser, severally and not jointly (other than WCAS, whose obligations hereunder shall be joint and several with each other Purchaser with respect to the obligations of such other Purchasers) hereby agrees to indemnify, defend and hold the Company and its Affiliates, officers, directors, employees, agents, shareholders, and other representatives (collectively, the "Company Group") harmless from and against all demands, claims, actions, causes of action, assessments, losses, damages, liabilities, costs and expenses, including without limitation interest, penalties and reasonable attorneys' fees and expenses, asserted against, resulting to, imposed upon, suffered by or incurred by any member of the Company Group by reason of, resulting from or arising out of (i) any breach or inaccuracy of any representation or warranty of the Purchasers contained in or made pursuant to this Agreement or any Ancillary Agreement or (ii) any breach of or non-compliance with any covenant or agreement of the Purchasers contained in or made pursuant to this Agreement or any Ancillary Agreement; provided, that, (x) the Purchasers shall not be liable under this Section 8.02(b) unless the aggregate amount of Damages with respect to all matters referred to in this Section 8.02(b) exceeds $500,000 (in which case all such Damages shall be made subject to indemnification hereunder), (y) each Purchaser's liability under this Section 8.02(b) shall not exceed the amount of the purchase price paid by such Purchaser for the Initial Securities and (z) if the Damages for which the indemnification is being sought are the result of a misrepresentation or breach of warranty, then a written claim for indemnification must be delivered to the Purchasers within the applicable survival period set forth in Section 8.01. SECTION 8.03. CONDITIONS OF INDEMNIFICATION. (a) In order for a member of the Purchaser Group or Company Group to be entitled to indemnification pursuant Section 8.02 of this Agreement in respect of, arising out of, or involving a claim made by any person not a party to this Agreement (a "Third Party Claim"), the indemnified party must within 20 days after receipt of notice of commencement of any action, suit or proceeding relating to a Third Party Claim give the indemnifying party written notice thereof together with a copy of such claim, process or other legal pleading (provided that failure so to notify the indemnifying party of the assertion of a claim within such period shall not affect the indemnifying party's indemnity obligation hereunder except as and to the extent that such failure shall actually and materially adversely affect the defense of such claim), and, subject to Sections 8.03(b), (c) and (e) below, the indemnifying party shall have the right to undertake the defense thereof by counsel of its own choosing that is reasonably acceptable to the indemnified party; provided, that if the 51 indemnifying party is also a party to such proceeding and the indemnified party determines in good faith upon advice of counsel that joint representation would be inappropriate, the indemnifying party shall not have the right to undertake such defense but shall remain liable for the fees and expenses of counsel incurred by the indemnified party in defending such Third Party Claim. (b) In the event that the indemnifying party, by the 20th day after receipt of notice of any such Third Party Claim (or, if earlier, by the tenth day preceding the day on which an answer or other pleading must be served in order to prevent judgment by default in favor of the person asserting such Third Party Claim), does not elect to defend against such claim, the indemnified party will have the right to undertake the defense, compromise or settlement of such claim on behalf of and for the account and risk of the indemnifying party. (c) If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, it being understood that the indemnifying party shall control such defense. (d) If the indemnifying party assumes the defense of a Third Party Claim, (i) no compromise or settlement of such Third Party Claim may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any violation of Law or any violation of the rights of any person and no effect on any other claims that may be made against the indemnified party and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party and (ii) the indemnified party will have no liability with respect to any compromise or settlement of such Third Party Claim effected without its consent. (e) Anything in this Section 8.03 to the contrary notwithstanding, the indemnifying party shall not be entitled to assume the defense of any Third Party Claim if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the indemnified party that the indemnified party reasonably determines, after conferring with counsel, cannot be separated from any related claim for money damages (it being understood that if such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages). In such event, the indemnified party will have the right to undertake the defense, compromise or settlement of such claim on behalf of and for the account and risk of the indemnifying party; provided, that no compromise or settlement of such Third Party Claim may be effected by the indemnified party without the indemnifying party's consent. (f) In connection with any Third Party Claim, the indemnified party will cooperate with all reasonable requests of the Company and the Company will cooperate with all reasonable requests of the indemnified party. 52 SECTION 8.04. OTHER CLAIMS. In the event any indemnified party should have a claim against the indemnifying party that does not involve a Third Party Claim being asserted against or sought to be collected from such indemnified party, the indemnified party shall deliver notice of such claim with reasonable promptness to the indemnifying party. Subject to the provisions in this Article VIII governing the time periods within which claims for indemnification may be made, the failure by any indemnified party to so notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to such indemnified party, except to the extent that the indemnifying party demonstrates that it has been materially prejudiced by such failure. If the indemnifying party does not notify the indemnified party within 20 days following its receipt of such notice that the indemnifying party disputes its liability to the indemnified party, such claim specified by the indemnified party in such notice shall be conclusively deemed a liability of the indemnifying party and the indemnifying party shall pay the amount of such liability to the indemnified party on demand or, in the case of any notice in which the amount of the claim (or any portion thereof) is estimated, on such later date when the amount of such claim (or such portion thereof) becomes finally determined. If the indemnifying party has timely disputed its liability with respect to such claim, as provided above, the indemnifying party shall promptly pay any amount of such claim that is not disputed and such dispute shall be resolved in accordance with Section 9.10 below. SECTION 8.05. REMEDIES CUMULATIVE. Except to the extent a party may be entitled to the remedy of specific performance, and except for a breach of any representation, warranty, or covenant as a result of any matter constituting fraud or criminal activity under applicable Law, the indemnification provisions of this Article VIII shall be the exclusive remedy of the parties hereto against any other party under this Agreement with respect to claims relating to this Agreement and the transactions contemplated hereby. ARTICLE IX. MISCELLANEOUS SECTION 9.01. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur and that a remedy at law would not be adequate in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled by any court of competent jurisdiction to an injunction or injunctions, without actual proof of damages or the necessity of posting bond, to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. SECTION 9.02. EXPENSES, ETC. (a) The Company hereby agrees that, whether or not the transactions contemplated hereby are consummated, it shall pay up to $500,000 of the out-of-pocket costs and expenses of the Purchasers, including fees and disbursements of counsel, 53 advisors, accountants and consultants, that are incurred by the Purchasers in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and the Ancillary Agreements, (ii) the Purchasers' due diligence investigations with respect to the Company and its Subsidiaries and the Osborn Acquisition and (iii) the closing of the transactions contemplated by this Agreement, the Ancillary Agreements and the Osborn Acquisition Agreement ("Transaction Expenses"); provided, that, (A) the Company shall not be required to pay the Transaction Expenses of the Purchasers pursuant to this Section 9.02 if the transactions contemplated hereby are not consummated solely as a result of a material breach of this Agreement by any Purchaser and (B) 50% of the fees and expenses of each of Reboul, MacMurray, Hewitt, Maynard & Kristol and Ernst & Young LLP, in each case relating to the Osborn Acquisition, are being billed to the Company separate and apart from the Transaction Expenses and shall be paid directly by the Company and shall not therefor apply against the $500,000 limitation set forth above. In addition, the Company hereby agrees to pay (A) all of the reasonable out-of-pocket costs and expenses of WCAS and its Co-Investors, including fees and disbursements of counsel, advisors, accountants and consultants, incurred in connection with (x) any and all Series C Preferred Transactions and Series B Notes Transactions and (y) the preparation and review of the Proxy Statement and the Company Shareholder Meeting and (B) any fees and expenses associated with any filing required to be made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with any conversion of any Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares or Series C-2 Preferred Shares or any exercise of any Initial Warrants or Additional Warrants. (b) The Company, on the one hand, and the Purchasers, severally and not jointly (other than WCAS, whose obligations hereunder shall be joint and several with each other Purchaser with respect to the obligations of such other Purchasers), on the other hand, will indemnify the other and hold it or them harmless from and against any claims for finders' fees, advisory or investment banking fees or brokerage commissions in relation to or in connection with the transactions contemplated hereby as a result of any agreement or understanding between such indemnifying party and any third party. SECTION 9.03. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any or all such counterparts may be executed by facsimile. SECTION 9.04. NOTICES. All notices, requests, instructions and other documents that are required to be or may be given or delivered pursuant to the terms of this Agreement shall be in writing and shall be sufficient in all respects if delivered by hand or national overnight courier service, transmitted by facsimile or mailed by registered or certified mail, postage pre-paid, as follows: 54 if to the Company, to it at: 10101 Renner Boulevard Lenexa, Kansas 66219 Attention: Joseph C. Benage, Esq. Facsimile: (913) 859-6832 and Attention: John McCarty Facsimile: (913) 859-6804 with a copy to: Morrison & Hecker LLP 2600 Grand Avenue Kansas City, MO 64108-4606 Attention: Whitney F. Miller, Esq. Facsimile: (816) 474-4208 if to any Purchaser, to the Purchaser Representative: c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, New York 10022-6815 Attention: Paul B. Queally Facsimile: (212) 893-9566 with a copy to: Reboul, MacMurray, Hewitt, Maynard & Kristol 45 Rockefeller Plaza New York, New York 10111 Attention: Othon A. Prounis, Esq. Fax: (212) 841-5725 or such other address or addresses as any party hereto shall have designated by notice in writing to the other parties hereto. Such notices, requests, instructions and other documents shall be deemed given or delivered (i) five business days following sending by registered or certified mail, postage prepaid, (ii) one business day following sending by national overnight courier service, (iii) when sent, if sent by facsimile (but only if such facsimile is actually received) or (iv) when delivered, if delivered by hand. 55 SECTION 9.05. AMENDMENTS AND WAIVERS. The Company, on the one hand, and the Purchaser Representative on behalf of the Purchasers, on the other hand, may, by written notice to the other, (i) extend the time for the performance of any of the obligations or other actions of the other(s) under this Agreement; (ii) waive any inaccuracies in the representations or warranties of the other(s) contained in this Agreement or in any document delivered pursuant to this Agreement; (iii) waive compliance with any of the conditions or covenants of the other(s) contained in this Agreement; or (iv) waive performance of any of the obligations of the other(s) under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement or otherwise, including without limitation any investigation by or on behalf of the Company, on the one hand, or the Purchasers, on the other hand, shall be deemed to constitute a waiver by the party or parties taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. The waiver by the Company, on the one hand, and the Purchaser Representative on behalf of the Purchasers, on the other hand, of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. SECTION 9.06. AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may be amended or supplemented by such additional agreements, articles or certificates as may be determined by the parties hereto to be necessary, desirable or expedient to further the purposes of this Agreement, or to clarify the intention of the parties hereto, or to add to or modify the covenants, terms or conditions hereof or to effect or facilitate the consummation of any of the transactions contemplated hereby. Any such instrument must be in writing and signed by the Company and the Purchaser Representative on behalf of the Purchasers. Notwithstanding anything to the contrary contained above, from and after the date hereof and until the second business day preceding the Closing Date, WCAS shall have the right to amend the names of the other Purchasers appearing on Schedule I hereto and the allocation of the Initial Securities among the Purchasers by written notice to the Company; provided, that, no such amendment shall modify the aggregate amounts of Series B Preferred Shares, Initial Warrants and/or Series A Notes being purchased hereunder or the respective purchase prices therefor; provided, further, that, prior to the Closing Date, any additional Purchaser(s) added to Schedule I by WCAS shall (i) agree in writing to be bound by the terms of this Agreement as a Purchaser hereunder and (ii) be reasonably acceptable to the Company. SECTION 9.07. ENTIRE AGREEMENT. This Agreement, including its exhibits and the Disclosure Schedule, together with the Ancillary Agreements and the Confidentiality Agreement, constitute the entire agreement among the parties hereto with respect to the subject matter hereof and, except as provided in Section 4.02(b), supersede all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof other than the Confidentiality Agreement which shall survive the execution and delivery of this Agreement and the Closing. SECTION 9.08. BENEFIT OF AGREEMENT; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and 56 permitted assigns and nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto, their respective successors and permitted assigns, with respect to Article VIII, the members of the Purchaser Group or Company Group not party hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement. The rights and obligations of the parties hereto shall not be assigned without the consent of the Company, in the case of any assignment by a Purchaser, or the Purchaser Representative, on behalf of the Purchasers, in the case of any assignment by the Company, and any attempted assignment in violation of this Section 9.08 shall be null and void; provided, that, the Purchasers' rights hereunder are assignable, in connection with any transfer of Initial Securities or Conversion Shares, to any Affiliate thereof, and in the case of the Purchasers other than WCAS, to any family member or trust for the benefit of such Purchaser or such family members. SECTION 9.09. GOVERNING LAW. This Agreement and all disputes arising out of or relating to this Agreement, its subject matter, the performance by the parties of their respective obligations hereunder or the claimed breach hereof, whether in tort, contract or otherwise, shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to its choice of law principles, except that Missouri corporate Law shall apply to all matters relating to the corporate affairs of the Company. SECTION 9.10. JURISDICTION AND VENUE. Each suit, action or proceeding arising out of or relating to this Agreement or any Ancillary Agreement, the subject matter hereof or thereof, the performance by the parties of their obligations hereunder or thereunder or the claimed breach hereof or thereof, whether brought at law or in equity and whether based in tort, contract or otherwise, shall be brought in the federal or state courts located in the County of New York, New York, and each of the parties to this Agreement hereby submits with regard to any such suit, action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts and of the appropriate appellate courts therefrom. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such suit, action or proceeding (a) any claim that it is not personally subject to the jurisdiction of such courts for any reason other than the failure to lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), (c) that the suit, action or proceeding in any such court is brought in an inconvenient forum, (d) that the venue of such suit, action or proceeding is improper, (e) that this Agreement or any Ancillary Agreement or the subject matter hereof or thereof may not be enforced in or by such courts or (f) any right to a trial by jury which is hereby waived. Each party hereto agrees that process in any such suit, action or proceeding may be served on such party anywhere in the world, whether within or without the jurisdiction of such courts and that service of process on such party as provided in Section 9.04 shall be deemed effective service of process on such party. 57 SECTION 9.11. SEVERABILITY. Each provision of this Agreement shall be treated as a separate and independent clause, and the unenforceability of any one clause shall in no way impair the enforceability of any of the other clauses contained herein. If one or more of the provisions contained in this Agreement shall for any reason be held to be unenforceable, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with applicable Law, and no other provision hereof shall be affected by such holding, limitation or reduction. SECTION 9.12. PUBLICITY. Except as otherwise required by applicable Law, and except for disclosures jointly approved by the Company and the Purchaser Representative as to content, timing and manner of publication, no party hereto shall issue, or cause or allow any Subsidiary or other controlled Affiliate thereof to issue, any press release or otherwise publicly disclose any information, or make, or cause or allow any Subsidiary or other controlled Affiliate thereof to make, any other public statement relating to or connected with this Agreement or the Ancillary Agreements or the matters contained herein or therein. In the event that any party hereto believes in good faith that such a public disclosure is required by applicable Law, it shall nonetheless use its good faith efforts to consult (as to the content, timing and manner of publication thereof) with the Company or the Purchaser Representative, as applicable, a reasonable period of time prior to making such disclosure. SECTION 9.13. APPOINTMENT OF THE PURCHASER REPRESENTATIVE. The Purchasers hereby appoint WCAS as their agent and attorney-in-fact to act as "Purchaser Representative" hereunder, to take and receive notices on behalf of the Purchasers hereunder, to execute on behalf of the Purchasers hereunder waivers, amendments and consents relating hereto, and to take all other actions necessary or appropriate in the judgment of WCAS for the accomplishment of the foregoing or to carry out the purposes of this Agreement (WCAS, in such capacity, is herein referred to as the "Purchaser Representative"). A decision, act, waiver, consent or instruction of WCAS as Purchaser Representative hereunder shall constitute the action of each of the Purchasers and shall be final, binding and conclusive upon each of such Purchasers. For such purposes, notices or communications to or from the Purchaser Representative shall constitute notice to or from each of the Purchasers. SECTION 9.14. INTERPRETATION. (a) As used herein, the words "hereof", "herein", "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and the words "Article" and "Section" are references to the articles and sections of this Agreement unless otherwise specified. Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation". Each accounting term used in this Agreement has the meaning given to it in accordance with GAAP. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Any agreement, instrument or statute defined or referred to herein means such agreement, instrument or statute as from time to time amended, qualified or supplemented, including (in the 58 case of agreements and instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes. References to the Securities Act and the Exchange Act are also references to the rules and regulations of the SEC promulgated thereunder. References to a person are also to its successors and permitted assigns. (b) The parties have participated jointly in the negotiation and drafting of this Agreement and each Ancillary Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement and each Ancillary Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any Ancillary Agreement. 59 IN WITNESS WHEREOF, the Company, the Purchasers and the Purchaser Representative have executed this Securities Purchase Agreement as of the day and year first above written. LABONE, INC. By: /s/ W. Thomas Grant II ------------------------------------ Name: W. Thomas Grant II Title: President WELSH, CARSON, ANDERSON & STOWE IX, L.P. By: WCAS IX Associates LLC, Its General Partner By: /s/ Jonathan M. Rather ------------------------------------ Jonathan M. Rather Managing Member WCAS MANAGEMENT CORPORATION By: /s/ Jonathan M. Rather ------------------------------------ Jonathan M. Rather Treasurer Patrick J. Welsh Russell Carson Bruce K. Anderson Thomas E. McInerney Robert A. Minicucci Lawrence B. Sorrel Anthony J. De Nicola Paul B. Queally IRA FBO Jonathan M. Rather D. Scott Mackesy Sanjay Swani John D. Clark IRA FBO James R. Mathews Sean Traynor John Almeida Eric J. Lee By: /s/ Jonathan M. Rather ------------------------------------ Jonathan M. Rather as Attorney-in-Fact SCHEDULE I Purchasers/Initial Securities -----------------------------
Principal Number of Number of Series Number of Amount of Total Series B-1 B-2 Initial Series A Purchase Purchasers Preferred Shares Preferred Shares Warrants Notes Price - ---------- ---------------- ---------------- -------- ----- ----- Welsh, Carson, Anderson 13,592 20,388 339,801 $14,562,900 $48,543,000 &Stowe IX, L.P. WCAS Management 7 10 147 6,300 21,000 Corporation Patrick J. Welsh 51 78 1,302 55,809 186,027 Russell Carson 51 78 1,302 55,808 186,027 Bruce K. Anderson 51 77 1,303 55,808 186,027 Thomas E. McInerney 52 78 1,302 55,808 186,027 Robert A. Minicucci 52 78 1,302 55,808 186,028 Lawrence B. Sorrel 52 78 1,302 55,808 186,028 Anthony J. De Nicola 38 56 938 40,196 133,986 Paul B. Queally 28 42 703 30,147 100,490 IRA FBO Jonathan M. 8 13 209 8,958 29,860 Rather D. Scott Mackesy 7 11 175 7,500 25,000 Sanjay Swani 1 1 14 600 2,000 John D. Clark 1 1 14 600 2,000 IRA FBO James R. 1 1 14 600 2,000 Matthews Sean Traynor 6 8 140 6,000 20,000 John Almeida 1 1 18 750 2,500 Eric J. Lee 1 1 14 600 2,000 ----------------------- ------------------- ------------------ --------------- --------------- Totals 14,000 21,000 350,000 $15,000,000 $50,000,000 ======================= =================== ================== =============== ===============
EX-99 4 exhc.txt CERTIFICATE OF DESIGNATION EXHIBIT C --------- CERTIFICATE OF DESIGNATION OF SERIES B-1 CUMULATIVE CONVERTIBLE PREFERRED STOCK OF LABONE, INC. (Pursuant to Section 351.180 of the General and Business Corporation Law of Missouri) ------------------------------------------- LabOne, Inc. (hereinafter called the "Corporation"), a corporation organized and existing under the General and Business Corporation Law of Missouri (the "GBCL"), hereby certifies that, pursuant to authority vested in the Board of Directors of the Corporation by Article III of the Articles of Incorporation of the Corporation, the following resolution was duly adopted at a meeting of the Board of Directors of the Corporation duly called and held on August 24, 2001 and August 29, 2001: "RESOLVED, that pursuant to authority vested in the Board of Directors of the Corporation by Article III of the Articles of Incorporation of the Corporation, there is hereby created a series of Preferred Stock designated as "Series B-1 Cumulative Convertible Preferred Stock" (the "Series B-1 Preferred Stock"), consisting of Forty Five Thousand (45,000) shares of the authorized but unissued shares of preferred stock, $.01 par value per share, of the Corporation; FURTHER RESOLVED, that the Series B-1 Preferred Stock shall have the powers, preferences and rights, and qualifications, limitations and restrictions thereof set forth in Appendix B-1 attached hereto." IN WITNESS WHEREOF, this Certificate of Designation has been executed by the Corporation by its President and attested by its Secretary this 29th day of August 2001. LABONE, INC. /s/ W. Thomas Grant II -------------------------------- W. Thomas Grant II President Attest: /s/ Joseph C. Benage - --------------------------- Joseph C. Benage Secretary 2 STATE OF MISSOURI) ss: COUNTY OF JACKSON) I, Cheryl M. Duren, a Notary Public, do hereby certify that on the 29th day of August 2001, personally appeared before me W. Thomas Grant II who being by me first duly sworn, declared that he is the President of LabOne, Inc., that he signed the foregoing document of the Corporation, and that the statements therein contained are true. /s/ Cheryl M. Duren ---------------------------------------- Notary Public My commission expires: August 14, 2002 3 APPENDIX B-1 POWERS, RIGHTS AND PREFERENCES OF SERIES B-1 CUMULATIVE CONVERTIBLE PREFERRED STOCK OF LABONE, INC. 1. Rank. The Series B-1 Preferred Stock shall, with respect to dividend rights and rights on liquidation, dissolution and winding up, rank (i) pari passu with (A) the Corporation's Series B-2 Cumulative Convertible Preferred Stock (the "Series B-2 Preferred Stock") and (B) to the extent when these shares are authorized and issued by the Board of Directors of the Corporation and the related certificates of designation for such series are filed with the Office of the Secretary of State of the State of Missouri, the Corporation's Series C-1 Cumulative Convertible Preferred Stock (the "Series C-1 Preferred Stock") and Series C-2 Cumulative Convertible Preferred Stock (the "Series C-2 Preferred Stock"; together with the Series B-1 Preferred Stock, the Series B-2 Preferred Stock, and the Series C-1 Preferred Stock, the "Preferred Stock") and (ii) senior to all classes of the Corporation's common stock, par value $.01 per share ("Common Stock"), and to each other class of capital stock of the Corporation now or hereafter established (collectively, the "Junior Securities"). The definition of Junior Securities shall also include any rights or options exercisable for or convertible into any of the Junior Securities. 2. Dividends. --------- (a) Each holder of record of Series B-1 Preferred Stock shall be entitled to receive cumulative dividends in an amount per share equal to eight percent (8%) per annum on the Accrued Value. Such dividends shall accrue from and after the date of issue (except that dividends on any amounts added to the Accrued Value shall accrue only from the date such amounts are added to the Accrued Value) and shall be added to the Accrued Value semi-annually, whether or not declared and whether or not there are any funds of the Corporation legally available for the payment of dividends, on February 28th and August 31st of each year (each such date being a "Dividend Accrual Date" and each such semi-annual period being a "Dividend Period"), commencing with the first such date following the date of issue. Dividends for any period shorter than a Dividend Period shall be computed on the basis of the actual number of days elapsed over twelve 30-day months and a 360-day year. Notwithstanding the foregoing, the Put/Call Date shall be treated as a Dividend Accrual Date, and after the Put/Call Date, accrued dividends shall be payable in the form of cash on each succeeding Dividend Accrual Date, out of funds legally available for the payment of dividends. If any dividends accrued after the Put/Call Date are not paid in cash on any Dividend Accrual Date occurring after the Put/Call Date, the unpaid amount thereof shall be added to the Accrued Value on each such Dividend Accrual Date for purposes of calculating succeeding periods' dividends. (b) In case the Corporation shall make any dividend or distribution to holders of Common Stock, whether payable in cash, securities or other property (other than dividends or 4 distributions payable solely in Common Stock), the holder of each share of Series B-1 Preferred Stock on the record date for such dividend or distribution shall be entitled to receive an equivalent dividend or distribution based on the number of shares of Common Stock into which such share of Series B-1 Preferred Stock is convertible on such record date (without regard to any Conversion Cap then in effect). (c) So long as any shares of Series B-1 Preferred Stock are outstanding, no Junior Securities shall be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Securities) or any cash dividend made on any Junior Security other than (i) a dividend on the Corporation's Common Stock as determined and declared by the Board of Directors in which the holders of the Series B-1 Preferred Stock participate in accordance with subparagraph (b) above or (ii) repurchases of shares from employees of the Corporation and its subsidiaries upon termination of the holder's employment. (d) The date on which the Corporation initially issues any particular share of Series B-1 Preferred Stock shall be deemed to be its "date of issue" for purposes hereof regardless of the number of times transfer of such share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates that may be issued to evidence such share. The date on which the Corporation initially issues the first share of Series B-1 Preferred Stock shall be referred to as the "Original Date of Issue". 3. Liquidation Preference. ---------------------- (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (each a "Liquidation Event"), before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, the holder of each share of Series B-1 Preferred Stock shall be entitled to receive an amount per share equal to the Liquidation Value of such share on the date of distribution, and such holders shall not be entitled to any further payment. If, upon any Liquidation Event, the assets of the Corporation, or proceeds thereof, distributable among the holders of the Preferred Stock shall be insufficient to pay in full the preferential amount due on such shares, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares of Preferred Stock if all amounts payable thereon were paid in full. Solely for the purposes of this paragraph 3, a Change of Control shall not be deemed to be a Liquidation Event. (b) After payment shall have been made in full to the holders of the Preferred Stock, as provided in this paragraph 3, any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed to holders of capital stock of the Corporation, and the holders of the Preferred Stock shall not be entitled to share therein. 4. Conversion. ---------- 5 (a) (i) Subject to the provisions of this paragraph 4, each holder of shares of Series B-1 Preferred Stock shall have the right, at any time and from time to time, at such holder's option, to convert its outstanding shares of Series B-1 Preferred Stock, in whole or in part, into fully paid and non-assessable shares of Common Stock. Subject to subparagraph 4(a)(ii) below, the number of shares of Common Stock deliverable upon conversion of one share of Series B-1 Preferred Stock shall be equal to (i) the Accrued Value of such share on the date of conversion (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date), divided by (ii) the Conversion Price on such date. No notice delivered by the Corporation pursuant to paragraph 5 or 6 will limit in any way any holder's rights to convert pursuant to this paragraph 4(a). In order to exercise the conversion privilege set forth in paragraph 4(a), the holder of the shares of Series B-1 Preferred Stock to be converted shall surrender the certificate representing such shares at the office of the Corporation, with a written notice of election to convert completed and signed, specifying the number of shares to be converted. Each conversion pursuant to paragraph 4(a) shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Series B-1 Preferred Stock shall have been surrendered and such notice received by the Corporation as aforesaid, and the person in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder of record of the shares of Common Stock represented thereby at such time on such date. Effective upon such conversion, the shares of Series B-1 Preferred Stock so converted shall no longer be deemed to be outstanding, and all rights of a holder with respect to such shares surrendered for conversion shall immediately terminate except the right to receive the Common Stock and other amounts payable pursuant to this paragraph 4. (ii) Unless Shareholder Approval is obtained, in no event shall any conversion, series of conversions, or exchange (pursuant to paragraph 4, 5, or 6 or otherwise), of the Series B-1 Preferred Stock (together with the number of shares of Common Stock then issued or issuable upon exercise of the Initial Warrants (as defined in the Purchase Agreement) and the Additional Warrants (as defined in the Purchase Agreement), if any) result in the issuance, in the aggregate, of a number of shares of Common Stock in excess of 19.9% of the shares of Common Stock outstanding immediately prior to the issuance of the Series B-1 Preferred Stock on the Original Date of Issue (subject to proportional adjustment for any stock split, stock dividend, recapitalization, reverse stock split or other similar event with respect to the Common Stock) (the resulting number, the "Conversion Cap Number" and the resulting limitation the "Conversion Cap"). Any portion of the Accrued Value that at any time may not be converted into or exchanged for Common Stock as a result of the Conversion Cap (whether in connection with a conversion or exchange or otherwise) shall, (x) at the option of the holder, be immediately paid in cash by the Corporation or immediately converted into shares of Series B-2 Preferred Stock and (y) following such payment or conversion be deducted from the Accrued Value. If Shareholder Approval is obtained, this subparagraph 4(a)(ii) shall be of no further force or effect. (b) (i) Unless the shares issuable on conversion pursuant to this paragraph 4 are to be issued in the same name as the name in which such shares of Series B-1 Preferred Stock are registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the holder or the 6 holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax. (ii) As promptly as possible, but in any event within 5 business days after the surrender by the holder of the certificates for shares of Series B-1 Preferred Stock with a written notice of election to convert as aforesaid, the Corporation shall issue and shall deliver to such holder, or on the holder's written order (upon compliance with subparagraph (b)(i) hereof and federal and state securities laws applicable thereto which require the holder to take any action) to the holder's transferee, a certificate or certificates for the whole number of shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this paragraph 4. (iii) All shares of Common Stock delivered upon conversion of the Series B-1 Preferred Stock will upon delivery be duly and validly issued and fully paid and non-assessable, free of all liens and charges (other than caused by the holder) and not subject to any preemptive rights. (c) (i) Upon receipt by the Corporation of the shares of Series B-1 Preferred Stock to be converted and a notice of election to convert pursuant to paragraph 4(a) above, the right of the Corporation to purchase such shares of Series B-1 Preferred Stock shall terminate, regardless of whether a Put/Call Corporation Notice has been mailed pursuant to paragraph 6. (ii) From and after the effectiveness of conversion of Series B-1 Preferred Stock into Common Stock pursuant to paragraph 4(a) above, in lieu of dividends on such Series B-1 Preferred Stock pursuant to paragraph 2, such Series B-1 Preferred Stock shall participate equally and ratably with the holders of shares of Common Stock in all dividends paid on the Common Stock. (d) (i) The Corporation shall at all times reserve and keep available, free from preemptive rights, such number of its authorized but unissued shares of Common Stock as shall be required for the purpose of effecting conversion of the Series B-1 Preferred Stock. (ii) Prior to the delivery of any securities which the Corporation shall be obligated to deliver upon conversion of the Series B-1 Preferred Stock, the Corporation shall comply with all applicable federal and state laws and regulations which require action to be taken by the Corporation. (e) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversion of the Series B-1 Preferred Stock pursuant hereto; provided, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of the Series B-1 Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. 7 (f) Conversion Price. ---------------- (i) In order to prevent dilution of the conversion rights granted under this paragraph 4, the Conversion Price shall be subject to adjustment from time to time pursuant to this paragraph (f). (ii) If and whenever on or after the Original Date of Issue the Corporation issues or sells, or in accordance with paragraph (g) is deemed to have issued or sold, any shares of its Common Stock without consideration or at a price per share less than the Conversion Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then in each such case, the Conversion Price, upon each such issuance or sale, except as hereinafter provided, shall be lowered so as to be equal to an amount determined by multiplying the Conversion Price in effect immediately prior to such issuance or sale by the following fraction: P + N -------- P + F where P = the number of shares of Common Stock outstanding immediately prior to such issuance or sale, assuming the exercise or conversion of all outstanding securities exercisable for or convertible into Common Stock at any time on or after the date of such calculation (without regard to any Conversion Cap then in effect) N = the number of shares of Common Stock which the net aggregate consideration, if any, received by the Corporation for the total number of such additional shares of Common Stock so issued or sold would purchase at the Conversion Price in effect immediately prior to such issuance or sale F = the number of additional shares of Common Stock so issued or sold. (iii) Notwithstanding the foregoing, there shall be no adjustment in the Conversion Price under this paragraph 4 as a result of (A) any issue or sale (or deemed issue or sale under paragraph (g)(i) below) of Common Stock to employees, consultants, contractors, officers and directors of the Corporation pursuant to (or upon exercise of Options issued pursuant to) compensation plans or arrangements approved by the Corporation's Board of Directors so long as the per share consideration determined in good faith by the Board of Directors to have been received for such shares or the exercise price of any such Options is not less than the fair market value (as determined in accordance with the applicable compensation plan or arrangement) of a share of Common Stock on the date such shares or Options are issued, (B) any issuance of shares of Common Stock upon conversion of any Preferred Stock, (C) the issuance of any rights ("Rights") under the Corporation's Rights Agreement dated as of February 11, 2000, as amended (the "Rights Plan"), (D) with respect to any holder of Series B-1 Preferred Stock, the issuance of securities as contemplated by the Rights Plan as a result of such holder becoming an Acquiring Person within the meaning of the Rights Plan, (E) any issuance or exercise of warrants 8 or other rights issued to banks or institutional lenders in connection with debt financings, equipment financings or similar transactions or to strategic partners in primarily non-financing transactions, in all such cases as approved by the Board of Directors of the Corporation so long as the aggregate number of such shares of Common Stock does not exceed 400,000 (as adjusted for any stock splits, stock dividends, reverse stock splits, share consolidations or other similar transactions) in the aggregate, or (F) the issuance of Common Stock upon the exercise of Options outstanding on the Original Date of Issue. (g) Effect on Conversion Price of Certain Events. For purposes of determining the adjusted Conversion Price under paragraph (f), the following shall be applicable: (i) Issuance of Rights or Options. If the Corporation in any manner grants or sells any Options and the price per share for which Common Stock is issuable upon the exercise of such Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of such Options, is less than the Conversion Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the granting or sale of such Options for such price per share. For purposes of this paragraph, the "price per share for which Common Stock is issuable" shall be determined by dividing (A) the total amount, if any, received or receivable by the Corporation as consideration for the granting or sale of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon exercise of all such Options, plus in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. No further adjustment of the Conversion Price shall be made when Convertible Securities are actually issued upon the exercise of such Options or when Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (ii) Issuance of Convertible Securities. If the Corporation in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon conversion or exchange thereof is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this paragraph, the "price per share for which Common Stock is issuable" shall be determined by dividing (A) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Conversion Price shall 9 be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments of the Conversion Price had been or are to be made pursuant to other provisions of this paragraph (g), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. (iii) Change in Option Price or Conversion Rate. Except for Options granted in accordance with the provisions of paragraph (f)(iii) above or non-exerciseable rights issued in accordance with the Rights Plan, if the purchase price provided for in any Options, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be immediately adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of paragraph (g), if the terms of any Option or Convertible Security which was outstanding as of the date of issuance of the Series B-1 Preferred Stock are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided, that no such change shall at any time cause the Conversion Price hereunder to be increased. (iv) Treatment of Expired Options and Unexercised Convertible Securities. Upon the expiration of any Option or the termination of any right to convert or exchange any Convertible Security without the exercise in full of any such Option or right, the Conversion Price then in effect hereunder shall be adjusted immediately to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Security, to the extent outstanding and unexercised immediately prior to such expiration or termination, never been issued. For purposes of paragraph (g), the expiration or termination of any Option or Convertible Security which was outstanding as of the date of issuance of the Series B-1 Preferred Stock shall not cause the Conversion Price hereunder to be adjusted unless, and only to the extent that, a change in the terms of such Option or Convertible Security caused it to be deemed to have been issued after the date of issuance of the Series B-1 Preferred Stock. (v) Calculation of Consideration Received. If any Common Stock, Option or Convertible Security is issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor. If any Common Stock, Option or Convertible Security is issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Corporation shall be the Market Price thereof as of the date of receipt. If any Common Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in connection with any merger in which the Corporation is the surviving Corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the 10 non-surviving entity as is attributable to such Common Stock, Option or Convertible Security, as the case may be. The fair value of any consideration other than cash and securities shall be determined jointly by the Corporation and the holders of a majority of the outstanding Series B-1 Preferred Stock. If such parties are unable to reach agreement within a reasonable period of time, the fair value of such consideration shall be determined by an independent appraiser experienced in valuing such type of consideration jointly selected by the Corporation and the holders of a majority of the outstanding Series B-1 Preferred Stock. The determination of such appraiser shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be borne by the Corporation. (vi) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Corporation, together comprising one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the Option shall be deemed to have been issued for a consideration of $.01. (vii) Record Date. If the Corporation takes a record of the holders of Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (b) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the payment of such dividend or upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (h) Subdivision or Combination of Common Stock. If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and if the Corporation at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased, it being understood that in either such case, no further adjustment to the Conversion Price shall be made by virtue of any adjustments made to any other securities of the Corporation that were outstanding on the Original Date of Issue due to such subdivision or combination. (i) Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation's assets or other transaction, in each case which is effected in such a manner that the holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, is referred to herein as an "Organic Change". Prior to the consummation of any Organic Change, the Corporation shall make appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Series B-1 Preferred Stock then outstanding) to insure that each of the holders of Series B-1 Preferred Stock shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series B-1 Preferred Stock, such shares of stock, securities or assets as such holder would have received in 11 connection with such Organic Change if such holder had converted its Series B-1 Preferred Stock immediately prior to such Organic Change. In each such case, the Corporation shall also make appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Series B-1 Preferred Stock then outstanding) to insure that the provisions of paragraph 4 hereof shall thereafter be applicable to the Series B-1 Preferred Stock (including, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is other than the Corporation, an immediate adjustment of the Conversion Price pursuant to the provisions of this paragraph 4 to give effect to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and a corresponding immediate adjustment in the number of shares of Common Stock acquirable and receivable upon conversion of Series B-1 Preferred Stock, if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation, merger or sale). The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Corporation) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument (in form and substance reasonably satisfactory to the holders of a majority of the Series B-1 Preferred Stock then outstanding), the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. (j) Certain Events. If any event occurs of the type contemplated by the provisions of paragraph 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Corporation's Board of Directors shall make an appropriate adjustment in the Conversion Price so as to protect the rights of the holders of Series B-1 Preferred Stock; provided, that no such adjustment shall increase the Conversion Price as otherwise determined pursuant to paragraph 4 or decrease the number of shares of Common Stock issuable upon conversion of each share of Series B-1 Preferred Stock. (k) Notices. (i) Immediately upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof to all holders of Series B-1 Preferred Stock, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Corporation shall give written notice to all holders of Series B-1 Preferred Stock at least 20 days prior to the date on which the Corporation closes its books or takes a record (a) with respect to any dividend or distribution upon Common Stock, (b) with respect to any pro rata subscription offer to holders of Common Stock or (c) for determining rights to vote with respect to any Organic Change, dissolution or liquidation. (iii) The Corporation shall also give written notice to the holders of Series B-1 Preferred Stock at least 20 days prior to the date on which any Organic Change shall take place. (l) Certain Mergers. In connection with any consolidation with or merger with or into, any person in a transaction where the Common Stock is converted into or exchanged for securities of such person or an affiliate of such person, the Corporation covenants that as a 12 condition precedent to the consummation of any such consolidation or merger it shall provide the holders of the Series B-1 Preferred Stock with a certificate, in form and substance satisfactory to the holders of a majority of the Series B-1 Preferred Stock signed by a duly authorized officer of the Corporation indicating that the person issuing such securities will be organized and existing under the laws of a jurisdiction which allows for the issuance of preference stock and that the Series B-1 Preferred Stock shall be converted into or exchanged for and shall become shares of such person having in respect of such person substantially the same powers, preference and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon that the Series B-1 Preferred Stock had immediately prior to such transaction. (m) Conversion at the Option of the Corporation. If on any date after the third anniversary of the Original Date of Issue but before the Put/Call Date, the Daily Price has been at least $16.64 (as adjusted for any stock splits, stock dividends, reverse stock splits, share consolidations or other similar transactions) during any 30 trading days out of any consecutive 45 trading day period, the Corporation may elect, by written notice delivered to the Transfer Agent (with a copy to each holder of Series B-1 Preferred Stock), no later than five business days after such date, to cause all outstanding shares of Series B-1 Preferred Stock to be converted into fully paid and nonassessable shares of Common Stock. Any such conversion shall be deemed to have been effected, without further action by any party, immediately prior to the close of business on the date such notice is received by the Transfer Agent; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series B-1 Preferred Stock are (or an affidavit of loss in form reasonably acceptable to the Corporation is) delivered to the Transfer Agent. The number of shares of Common Stock deliverable upon conversion of one share of Series B-1 Preferred Stock shall be equal to (i) the Accrued Value of such share on the date of conversion (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date), divided by (ii) the Conversion Price on such date. 5. Change of Control Offer. (a) Not less than 20 days prior to the consummation of any Consensual Change of Control and promptly after the occurrence of any Non-Consensual Change of Control (the date of any such Change of Control being the "Change of Control Date"), the Corporation shall commence (or cause to be commenced) an offer to purchase all outstanding shares of Series B-1 Preferred Stock pursuant to the terms described in subparagraph (e) below (the "Change of Control Offer") at a purchase price to be determined in accordance with subparagraph (b) below, and shall purchase (or cause the purchase of) any shares of Series B-1 Preferred Stock tendered in response to the Change of Control Offer pursuant to the terms hereof; provided, that with respect to any Consensual Change of Control, the Corporation may condition its offer to purchase on consummation of the Consensual Change of Control. (b) At the option of the Corporation, the per share purchase price payable to each tendering holder shall be payable (A) in cash in an amount equal to the Change of Control Amount or (B) in a number of shares of Acceptable Stock determined by dividing the Change of Control Amount by the Market Price per share of the Common Stock as of the Change of 13 Control Payment Date (which formula, if the Acceptable Stock is to be common stock of a corporation other than the Corporation, will determine a number of shares of Common Stock that will, in turn, be used to determine the number of shares of Acceptable Stock that the holder is entitled to receive based on the exchange ratio to be otherwise applied to Common Stock and such Acceptable Stock in such Change of Control transaction); provided, that if the consideration is to be in the form of Acceptable Stock and the Market Price per share for such shares as of the Change of Control Date is below the Conversion Price (taking into consideration the applicable exchange ratio, if Acceptable Stock other than Common Stock is to be issued in such Change of Control transaction), then such per share purchase price shall be equal to a number of such shares equal to (1) the Accrued Value as of the Change of Control Payment Date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date) divided by (2) the Market Price per share of such shares of Acceptable Stock as of the Change of Control Payment Date divided by (3) 0.95; provided, further, that, if the number of shares of Common Stock to be issued as Acceptable Stock would otherwise exceed the Conversation Cap Number, the Conversion Cap shall apply to such issuance to the same extent that it would apply to a conversation of Series B-1 Preferred Stock and in lieu of any shares which may not be issued due to the application of the Conversion Cap, the Corporation shall pay the corresponding portion of the purchase price in cash, and each participating holder shall receive cash and shares ratably in accordance with the number of shares of Series B-1 Preferred Stock held by such holder. (c) Notwithstanding anything to the contrary contained in subparagraph (b) above, the Corporation shall not have the option of paying the purchase price required by subparagraph (b) above in Acceptable Stock (and shall pay such amount in cash) if (i) the holders of the Series B-1 Preferred Stock would be required to recognize gain or loss for federal or state income tax purposes in connection with such transaction, (ii) the holders of the Common Stock would receive any consideration other than Acceptable Stock for their shares of Common Stock in connection with such transaction, (iii) the average weekly trading volume of the class of stock to be received for the six month period preceding such Change of Control Date or market capitalization (excluding shares held by officers, directors and affiliates thereof) of the issuer of such Acceptable Stock (with respect to such class of stock) is less than that of the Corporation for such six month period or as of such date, in each case, prior to giving effect to such Change of Control transaction. (d) If the Corporation elects to pay the Change of Control Amount in cash, prior to the mailing of the Change of Control Notice referred to in paragraph (5)(e), the Corporation shall (A) promptly determine if the purchase of the Series B-1 Preferred Stock for cash would violate or constitute a default under the indebtedness of the Corporation and (B) either shall repay to the extent necessary all such indebtedness that would prohibit the repurchase of the Series B-1 Preferred Stock pursuant to a Change of Control Offer or obtain any requisite consents or approvals under instruments governing any indebtedness to permit the repurchase of the Series B-1 Preferred Stock for cash. The Corporation shall first comply with this subparagraph (5)(d) before it shall repurchase for cash any Series B-1 Preferred Stock pursuant to this paragraph (5). (e) Not less than 20 days prior to the consummation of any Consensual Change of Control or within 20 days following the date on which any Non-Consensual Change of Control has occurred, the Corporation shall send, by first-class mail, postage prepaid, a notice (a "Change 14 of Control Notice") to each holder of Series B-1 Preferred Stock. Such notice shall contain all instructions and materials necessary to enable such holders to tender Series B-1 Preferred Stock pursuant to the Change of Control Offer. Such notice shall state: (i) that a Change of Control has occurred or will occur, as applicable, that a Change of Control Offer is being made pursuant to this paragraph 5 and that, subject in the case of a Consensual Change of Control to the consummation of the Consensual Change of Control (if the Corporation has so conditioned its Change of Control Offer), all Series B-1 Preferred Stock validly tendered and not withdrawn will be accepted for payment; (ii) the purchase price to be paid for shares tendered in such offer (estimated as closely as possible in the case of a Consensual Change of Control), the form of consideration to be paid for tendered shares, and the purchase date (which shall be the Change of Control Date in the case of a Consensual Change of Control and a date no earlier than 30 days nor later than 60 days from the date such notice is mailed in the case of a Non-Consensual Change of Control) (the "Change of Control Payment Date"); (iii) that any shares of Series B-1 Preferred Stock not tendered will continue to accrue dividends; (iv) that, unless the Corporation defaults in making payment therefor, any share of Series B-1 Preferred Stock accepted for payment pursuant to the Change of Control Offer shall cease to accrue dividends after payment therefor on the Change of Control Payment Date; (v) that holders electing to have any shares of Series B-1 Preferred Stock purchased pursuant to a Change of Control Offer will be required to surrender stock certificates representing such shares of Series B-1 Preferred Stock, properly endorsed for transfer, together with such other customary documents as the Corporation and the Transfer Agent may reasonably request to the Transfer Agent at the address specified in the notice prior to the close of business on the Change of Control Payment Date; (vi) that holders will be entitled to withdraw their election if the Corporation receives, not later than five business days prior to the Change of Control Payment Date, a telegram, facsimile transmission or letter setting forth the name of the holder, the number of shares of Series B-1 Preferred Stock the holder delivered for purchase and a statement that such holder is withdrawing its election to have such shares of Series B-1 Preferred Stock purchased; (vii) that holders who tender only a portion of the shares of Series B-1 Preferred Stock represented by a certificate delivered will, upon purchase of the shares tendered, be issued a new certificate representing the unpurchased shares of Series B-1 Preferred Stock; and (viii) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control). 15 (f) The Corporation will comply with any tender offer rules under the Exchange Act which may then be applicable in connection with any offer made by the Corporation to repurchase the shares of Series B-1 Preferred Stock as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with provisions hereof, the Corporation shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligation hereunder by virtue thereof. (g) On the Change of Control Payment Date, subject in the case of a Consensual Change of Control to the consummation of the Consensual Change of Control (if the Corporation has so conditioned its Change of Control Offer), the Corporation shall (A) accept for payment the shares of Series B-1 Preferred Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the holders of shares so accepted the purchase price therefor, at the option of the Corporation, in cash or Acceptable Stock as provided in paragraph (b) above and (C) cancel each surrendered certificate and retire the shares represented thereby. Unless the Corporation defaults in the payment for the shares of Series B-1 Preferred Stock tendered pursuant to the Change of Control Offer, dividends will cease to accrue with respect to the shares of Series B-1 Preferred Stock tendered and all rights of holders of such tendered shares will terminate, except for the right to receive payment therefor on the Change of Control Payment Date. (h) To accept the Change of Control Offer, the holder of a share of Series B-1 Preferred Stock shall deliver, prior to the close of business on the Change of Control Payment Date, written notice to the Corporation (or an agent designated by the Corporation for such purpose) of such holder's acceptance, together with certificates evidencing the shares of Series B-1 Preferred Stock with respect to which the Change of Control Offer is being accepted, duly endorsed for transfer. 6. Put/Call. (a) At any time on or after the seventh anniversary of the Original Date of Issue (the "Put/Call Date"), (x) the holders of a majority of the shares of Series B-1 Preferred Stock then outstanding may, by written notice to the Corporation (the "Put Notice"), require the Corporation to purchase all of the outstanding shares of Series B-1 Preferred Stock (the "Put Right") and (y) the Corporation may, by written notice to each holder of Series B-1 Preferred Stock, elect to purchase all of the outstanding shares of Series B-1 Preferred Stock (the "Call Right"). If either the Put Right or the Call Right is exercised, the consideration per share payable by the Corporation for the shares of Series B-1 Preferred Stock (the "Put/Call Consideration") shall be, at the option of the Corporation, either: (i) payable in cash in an amount equal to the Accrued Value as of the Put/Call Purchase Date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date); or (ii) payable through the issuance of the number of shares of Common Stock equal to (A) if the Market Price per share for the Common Stock as of the Put/Call Purchase Date is at or above the Conversion Price, (x) the Accrued Value as of 16 the Put/Call Purchase Date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date) divided by (y) the Market Price per share of the Common Stock as of the Put/Call Purchase Date or (B) if the Market Price per share for the Common Stock as of the Put/Call Purchase Date is below the Conversion Price, (x) the Accrued Value as of the Put/Call Purchase Date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date), divided by (y) the Market Price per share of the Common Stock as of the Put/Call Purchase Date, divided by (z) 0.95. (b) If the Corporation shall elect to exercise its Call Right, or if the Corporation shall receive a Put Notice, the Corporation shall promptly give notice to each holder of record of Series B-1 Preferred Stock; provided, that neither the failure to give such notice nor any defect therein shall affect the validity of the giving of notice for the purchase of any share of Series B-1 Preferred Stock to be purchased except as to the holder to whom the Corporation has failed to give said notice or except as to the holder whose notice was defective. Each such notice (the "Put/Call Corporation Notice") shall state: (i) the date of purchase (the "Put/Call Purchase Date"), which shall be no earlier than 30 days from the date of the Put/Call Corporation Notice and no later than 45 days from the date of the Put Notice, if one has been given; (ii) the form and amount of the Put/Call Consideration; (iii) the place or places where certificates for such shares are to be surrendered for payment of the Put/Call Consideration; and (iv) that dividends on the shares to be purchased will cease to accrue on the Put/Call Purchase Date. (c) The Put/Call Corporation Notice having been mailed as aforesaid, from and after the Put/Call Purchase Date (unless default shall be made by the Corporation in providing for the payment of the Put/Call Consideration on such date), dividends on the shares of Series B-1 Preferred Stock shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the Put/Call Consideration) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so purchased (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be purchased by the Corporation for the Put/Call Consideration. (d) Notwithstanding the foregoing, if any or all of the Put/Call Consideration is to be in the form of Common Stock and the Conversion Cap prohibits the issuance of the number of shares of Common Stock otherwise required by paragraph 6(a)(ii) above, then, in lieu of any such shares of Common Stock which may not be issued due to the Conversion Cap, the Corporation shall pay the corresponding portion of the Put/Call Consideration in cash. If, as a result of the foregoing, the Corporation is required to include both cash and Common Stock in the Put/Call Consideration, then each holder of Series B-1 Preferred Stock shall receive shares and cash ratably in accordance with the number of shares of Series B-1 Preferred Stock held by such holder. (e) For the avoidance of doubt, nothing in this paragraph 6 shall restrict the right of the holders of Series B-1 Preferred Stock to convert their shares of Series B-1 Preferred Stock into shares of Common Stock prior to such holder's acceptance of the Put/Call Consideration on 17 the Put/Call Purchase Date. 7. Voting Rights. (a) Each holder of Series B-1 Preferred Stock shall be entitled to vote on or give or withhold consent with respect to all matters submitted to the stockholders of the Corporation for a vote or action by written consent and shall be entitled to that number of votes equal to the lesser of (i) the number of shares of Common Stock into which such holder's shares of Series B-1 Preferred Stock could be converted pursuant to the provisions of paragraph 4 hereof or (ii) the product of (A) the number of shares of Common Stock into which all outstanding shares of Series B-1 Preferred Stock could be converted pursuant to the provisions of paragraph 4 hereof if the Conversion Price on the Original Date of Issue were equal to the Daily Price on the day immediately prior to the Original Date of Issue and (B) a fraction, the numerator of which is equal to the number of shares of Series B-1 Preferred Stock held by such holder, and the denominator of which is equal to the number of shares of Series B-1 Preferred Stock then outstanding, in each case on the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, on the date such vote is taken or any written consent of shareholders is solicited; provided, that nothing contained herein shall in any way affect or restrict the rights of any holder to vote shares of any other series of capital stock of the Corporation held by such holder; provided, further, that the holders of the Series B-1 Preferred Stock will not be entitled to vote or give or withhold consent in writing pursuant to this subparagraph (a) in connection with the election or removal of directors to the extent the holders of the Series B-1 Preferred Stock are then represented by one or more Series B Directors elected in accordance with subparagraph (c) below. Except as otherwise expressly provided herein or as required by law, the holders of shares of Series B-1 Preferred Stock and Common Stock shall vote together as a single class on all matters. (b) In addition, so long as any of the Series B-1 Preferred Stock is outstanding, the affirmative vote of the holders of (x) 66 2/3% of the outstanding shares of Series B-1 Preferred Stock, voting together as a single class, shall be necessary to alter or change the preferences, rights or powers of the Series B-1 Preferred Stock, and (y) a majority of the outstanding shares of Series B-1 Preferred Stock, voting together as a single class, shall be necessary to: (i) increase or decrease the authorized number of shares of Series B-1 Preferred Stock, (ii) amend, alter, repeal or waive any provision of the Corporation's articles of incorporation (including any certificate of designation or articles of amendment and whether by amendment, merger or otherwise) or by-laws so as to adversely affect the preferences, rights or powers of the Series B-1 Preferred Stock, including, without limitation, the voting powers, dividend rights and liquidation preference of the Series B-1 Preferred Stock, or change the Series B-1 Preferred Stock into any other securities (other than as required by paragraph 4(i)), cash or other property, or (iii) issue any additional Series B-1 Preferred Stock (other than upon conversion of Series B-2 Preferred Stock) or create, authorize or issue any capital stock that ranks prior to or pari passu with (whether with respect to dividends or upon liquidation, dissolution, winding up or otherwise) the Series B-1 Preferred Stock (other than Series B-2 Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock). (c) In addition, the holders of the Series B-1 Preferred Stock, voting or consenting, as 18 the case may be, separately as a single class to the exclusion of all other classes of the Corporation's capital stock and with each share of Series B-1 Preferred Stock entitled to one vote, shall by majority vote be entitled to elect directors to the Corporation's Board of Directors (each a "Series B Director") as follows: (i) Until Shareholder Approval is obtained, from and after the Original Date of Issue and so long as the Series B-1 Voting Power equals or exceeds the Pre-Shareholder Approval Minimum, the holders of the Series B-1 Preferred Stock shall be entitled to elect one director to serve on the Corporation's Board of Directors until such director's successor is duly elected by the holders of the Series B-1 Preferred Stock or such director is removed from office by the holders of the Series B-1 Preferred Stock. (ii) If Shareholder Approval is obtained, for so long as the Series B-1 Voting Power equals or exceeds the Post-Shareholder Approval Two Director Minimum, the holders of the Series B-1 Preferred Stock shall be entitled to elect two directors to serve on the Corporation's Board of Directors until such directors' successors are duly elected by the holders of the Series B-1 Preferred Stock or such directors are removed from office by the holders of the Series B-1 Preferred Stock. (iii) If Shareholder Approval is obtained, for so long as the Series B-1 Voting Power equals or exceeds the Post-Shareholder Approval One Director Minimum but is less than the Post-Shareholder Approval Two Director Minimum, the holders of the Series B-1 Preferred Stock shall be entitled to elect one director to serve on the Corporation's Board of Directors until such director's successor is duly elected by the holders of the Series B-1 Preferred Stock or such director is removed from office by the holders of the Series B-1 Preferred Stock. So long as the holders of the Series B-1 Preferred Stock are entitled to elect any directors under this paragraph 7(c): (A) the Board of Directors of the Corporation shall at all times consist of seven directors; (B) the holders of the Series B-1 Preferred Stock shall be entitled to elect the number of directors indicated in subsections (i) through (iii) above, as applicable, at any annual meeting of stockholders (or special meeting held in place thereof); (C) if the holders of the Series B-1 Preferred Stock for any reason fail to elect a person to fill any directorship to which they are otherwise entitled under this paragraph 7(c), such directorship shall remain vacant until such time as the holders of the Series B-1 Preferred Stock elect a director to fill such directorship and such directorship shall not be filled by resolution or vote of the Corporation's Board of Directors or the Corporation's other stockholders; and (D) any vacancy occurring because of the death, disability, resignation or removal of a director elected by the holders of the Series B-1 Preferred Stock shall be 19 filled by the vote or consent of the holders of the Series B-1 Preferred Stock. 8. Miscellaneous. (a) Upon any conversion or exchange of shares of Series B-1 Preferred Stock pursuant to Section 4, 5 or 6 hereof (each such conversion or exchange, a "Series B-1 Conversion or Exchange") into or for shares of Common Stock or Acceptable Stock ("Conversion or Exchange Securities"), prior to the delivery of such Conversion or Exchange Securities, the Corporation and/or any other Person issuing such Conversion or Exchange Securities shall (i) comply with all statutes, rules and regulations applicable thereto at that time, including any and all regulations of the principal trading market on which such Conversion or Exchange Securities are then trading, including, if necessary, any shareholder approval requirement under NASD Rule 4350(i), as it may be amended from time to time, taking into account the Conversion Cap provided in Section 4, 5 and 6, (ii) take all necessary action to assure that any such Conversion or Exchange Securities will, upon delivery, be duly and validly issued, fully paid and non-assessable, free of all liens, pledges and other security interests (other than caused by the holder), and not subject to any preemptive rights, and (iii) pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of such Conversion or Exchange Securities, provided, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or deliver of such Conversion or Exchange Securities in a name other than that of the holder of the Series B-1 Preferred Stock. (b) Any fractional share interests payable upon any Series B-1 Conversion or Exchange shall not be paid in Conversion or Exchange Securities but shall instead be paid in cash in an amount equal to such fractional interest multiplied by the Market Price per share of the Conversion or Exchange Securities to be delivered as of the date of such Series B-1 Conversion or Exchange. (c) Notwithstanding anything to the contrary herein contained, if in connection with any Series B-1 Conversion or Exchange, the amount of Conversion or Exchange Securities to be received by one or more holders of the Series B-1 Preferred Stock (each, an "Affected Holder") would result in such Series B-1 Conversion or Exchange being subject to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder, or any successor thereto (the "HSR Act"), then compliance with the HSR Act shall be a condition precedent to the consummation of such Series B-1 Conversion or Exchange. The provisions of this paragraph 8(c) shall in no way limit the obligation of the Corporation to otherwise comply with the provisions of Sections 5 and 6 hereof. (d) Each holder of Series B-1 Preferred Stock hereby agrees, by acceptance of its shares of Series B-1 Preferred Stock, to use its commercially reasonable efforts to make all filings required by the HSR Act and comply with all other provisions of the HSR Act as promptly as practicable to the extent necessary in connection with any Series B-1 Conversion or Exchange or as provided in subparagraph (e). (e) If the Corporation shall have received notice from one or more holders of Series 20 B-1 Preferred Stock within 10 business days after receipt by the holders of the Series B-1 Preferred Stock of any Change of Control Notice relating to a Consensual Change of Control to the effect that (A) such holder would be an Affected Holder if such holder were to elect to either (x) convert its shares of Series B-1 Preferred Stock into Common Stock pursuant to Section 4(a) at such time or (y) accept the Change of Control Offer to which such Change of Control Notice relates and (B) such holder reasonably expects to either convert its shares of Series B-1 Preferred Stock in connection with such Change of Control or accept Conversion or Exchange Securities in connection with its acceptance of such Change of Control Offer, the Corporation shall not consummate such Consensual Change of Control unless there shall have occurred the expiration or earlier termination of the waiting period under the HSR Act with respect to the acquisition of such Conversion or Exchange Securities by each such Affected Holder. (f) Notwithstanding anything to the contrary contained above, the provisions of Section 8(e) shall not prevent or delay any Consensual Change of Control (A) for a period of more than 60 days from the date that the Change of Control Notice related thereto is received by the holders of the Series B-1 Preferred Stock or (B) if, prior to such Consensual Change of Control, adequate provision shall have been made (pursuant to an amendment to the certificate or articles of incorporation of the issuer of the Conversion or Exchange Securities) to prevent (to the extent necessary to allow each Affected Holder to acquire the Conversion or Exchange Securities it proposes to acquire without a resulting violation of the HSR Act) each Affected Holder from voting the Conversion or Exchange Securities to be issued to it in connection with such Consensual Change of Control at all times prior to such Affected Holder's compliance with the requirements of the HSR Act (the adequacy of such provision to be determined by mutual agreement of the Corporation and each Affected Holder). (g) Reacquired Shares. Any shares of Series B-1 Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by an amendment or amendments of the Corporation's articles of incorporation adopted by the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. (h) Notices. (i) All notices, requests, demands and other communications to the Corporation hereunder shall be in writing and shall be delivered personally, sent by facsimile or sent by certified mail (return receipt requested) or by express mail or overnight courier, addressed to the President of the Corporation at the Corporation's principal executive offices. (ii) All notices, requests, demands and other communications to the holders of Series B-1 Preferred Stock hereunder shall be in writing and shall be delivered personally, sent by facsimile or sent by certified mail (return receipt requested) or by express mail or overnight courier, addressed to each holder of record at such holder's address appearing on the stock transfer register of the Corporation. (iii) Such notices, requests, demands and other communications shall be deemed given or delivered (A) three business days following sending by registered or certified 21 mail, postage prepaid, (B) upon delivery by express mail or overnight courier, (C) when sent, if sent by facsimile (but only if such facsimile is actually received) or (D) when delivered, if delivered by hand. 9. Definitions. The following terms, as used herein, shall have the following meanings: "Acceptable Stock" means the Common Stock or, in connection with a Consensual Change of Control, the common stock of another publicly-traded corporation so long as (x) such common stock is listed on the New York Stock Exchange or American Stock Exchange or quoted on the Nasdaq National Market and (y) the issuance of such stock or the transfer or exchange thereof is pursuant to an effective registration statement in accordance with the Securities Act. "Accrued Value" equals, with respect to one share of Series B-1 Preferred Stock on any date, $1,000 (or, in the case of any share issued upon conversion of any Series B-2 Preferred Stock, the amount determined in accordance with 4(a) of the Certificate of Designation for the Series B-2 Preferred Stock) plus the amount of all dividends added to the Accrued Value in accordance with paragraph 2(a) or subtracted from the Accrued Value in accordance with paragraph 4(a)(ii) (which aggregate amount shall be subject to adjustment whenever there shall occur a stock split, combination, re-classification or other similar event involving the Series B-1 Preferred Stock). "Change of Control" means a Consensual Change of Control or a Non-Consensual Change of Control. "Common Stock Voting Power" means the aggregate number of votes to which the holders of Common Stock outstanding on the date immediately prior to the Original Date of Issue are entitled with respect to all matters submitted to the stockholders of the Corporation for vote or action (subject to proportional adjustment for any stock split, stock dividend, recapitalization, reverse stock split or other similar event with respect to the Common Stock). "Consensual Change of Control" means: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than to a wholly-owned subsidiary of the Corporation or (ii) the consummation of any transaction approved by the Board of Directors of the Corporation (including any merger or consolidation) the result of which is that any "person" (as defined above), becomes the beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the Voting Securities of the Corporation; provided, however, that "person" as used in clauses (i) and (ii) shall not include any Purchaser (as defined in the Purchase Agreement). 22 "Change of Control Amount" means, with respect to one share of Series B-1 Preferred Stock, 101% of the Accrued Value on the Change of Control Payment Date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date); provided, that if the Change of Control occurs prior to the third anniversary of the Original Date of Issue, the Change of Control Amount shall be calculated assuming the Change of Control had occurred on the third anniversary of the Original Date of Issue (and assuming that no dividends had been paid in cash or converted into Series B-2 Preferred Stock with respect to such share from the actual date of the Change of Control through the third anniversary of the Original Date of Issue). "Continuing Directors" means individuals who constituted the Board of Directors of the Corporation on the Original Date of Issue after giving effect to the issuance of the Series B-1 Preferred Stock (the "Incumbent Directors"); provided, that any individual becoming a director during any year shall be considered to be an Incumbent Director if (i) such individual's election, appointment or nomination was recommended or approved by at least two-thirds of the other Incumbent Directors continuing in office following such election, appointment or nomination present, in person or by telephone, at any meeting of the Board of Directors of the Corporation, after the giving of a sufficient notice to each Incumbent Director so as to provide a reasonable opportunity for such Incumbent Directors to be present at such meeting or (ii) such individual was nominated, appointed or selected by the holders of Series B-1 Preferred Stock or nominated, appointed or selected in accordance with Section 6.02 of the Purchase Agreement. "Conversion Price" means $8.32, subject to adjustment from time to time as provided in paragraph 4. "Convertible Securities" means any stock or securities directly or indirectly convertible into or exchangeable for Common Stock. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Liquidation Value" on any date means, with respect to one share of Series B-1 Preferred Stock, the greater of (i) the Accrued Value on such date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date) and (ii) the amount that would have been payable in connection with such Liquidation Event on the number of shares of Common Stock into which a share of Series B-1 Preferred Stock was convertible on such date (without regard to any Conversion Cap then in effect). "Market Price" of any security means the average of the closing prices of such security's sales on all securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the closing price on the NASDAQ System, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization (such price, with respect to any particular day, the "Daily Price"), in each such case averaged over a period of 21 business days consisting of the day as of which "Market Price" is being determined and the 20 consecutive business days 23 prior to such day. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the "Market Price" shall be the fair value thereof determined jointly by the Corporation and the holders of a majority of the Series B-1 Preferred Stock. If such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an independent appraiser experienced in valuing securities jointly selected by the Corporation and the holders of a majority of the Series B-1 Preferred Stock. The determination of such appraiser shall be final and binding upon the parties, and the Corporation shall pay the fees and expenses of such appraiser. "Non-Consensual Change of Control" means: (i) the consummation of any transaction the result of which is that any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), becomes the beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the Voting Securities of the Corporation without the approval of the Board of Directors of the Corporation or (ii) the first day on which a majority of the members of the Board of Directors are not Continuing Directors; provided, however, that "person" as used in clause (i) shall not include any Purchaser (as defined in the Purchase Agreement). "Options" means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities. "Person" as used herein means any corporation, limited liability company, partnership, trust, organization, association, other entity or individual. "Pre-Shareholder Approval Minimum" means the number that equals 1/7th of the Series B-1 Preferred Voting Power plus the Common Stock Voting Power. "Post-Shareholder Approval One Director Minimum" means the number that equals 1/7th of the Series B-1 Preferred Voting Power plus the Common Stock Voting Power. "Post-Shareholder Approval Two Director Minimum" means the number that equals 2/7ths of the Series B-1 Preferred Voting Power plus the Common Stock Voting Power. "Purchase Agreement" means the Securities Purchase Agreement dated as of the Original Date of Issue among the Corporation, Welsh, Carson, Anderson & Stowe IX, L.P. and the other purchasers named therein. "Securities Act" means the Securities Act of 1933, as amended. "Series B-1 Preferred Voting Power" means the aggregate number of votes to which the holders of the outstanding Series B-1 Preferred Stock are entitled pursuant to paragraph 7(a). "Shareholder Approval" means the approval of requisite holders of the Common Stock with respect to each of the following: (1) the removal of the Conversion Cap contemplated in 24 paragraph 4(a)(ii) hereof, (2) the automatic conversion of the Series B-2 Preferred Stock into Series B-1 Preferred Stock pursuant to the certificate of designation for the Series B-2 Preferred Stock, (3) the automatic conversion of the Series C-2 Preferred Stock, if any, into Series C-1 Preferred Stock pursuant to the certificate of designation for the Series C-2 Preferred Stock, and (4) the rights of the holders of the Series B-1 Preferred Stock to elect directors to the Board of Directors of the Corporation as described in paragraphs 7(c)(ii) and 7(c)(iii). "Transfer Agent" means the transfer agent for the Series B-1 Preferred Stock appointed by the Corporation, and if none is appointed, the Corporation. "Voting Securities" means securities of the Corporation ordinarily having the power to vote for the election of directors of the Corporation; provided, that when the term "Voting Securities" is used with respect to any other Person it means the capital stock or other equity interests of any class or kind ordinarily having the power to vote for the election of directors or other members of the governing body of such Person. "Warrant Shares" means the shares of Common Stock from time to time issued upon the exercise of the Initial Warrants (as defined in the Purchase Agreement). 25 EX-99 5 exhd.txt CERTIFICATE OF DESIGNATION EXHIBIT D --------- CERTIFICATE OF DESIGNATION OF SERIES B-2 CUMULATIVE CONVERTIBLE PREFERRED STOCK OF LABONE, INC. (Pursuant to Section 351.180 of the General and Business Corporation Law of Missouri) ------------------------------------------------- LabOne, Inc. (hereinafter called the "Corporation"), a corporation organized and existing under the General and Business Corporation Law of Missouri (the "GBCL"), hereby certifies that, pursuant to authority vested in the Board of Directors of the Corporation by Article III of the Articles of Incorporation of the Corporation, the following resolution was duly adopted at a meeting of the Board of Directors of the Corporation duly called and held on August 24, 2001 and August 29, 2001: "RESOLVED, that pursuant to authority vested in the Board of Directors of the Corporation by Article III of the Articles of Incorporation of the Corporation, there is hereby created a series of Preferred Stock designated as "Series B-2 Cumulative Convertible Preferred Stock" (the "Series B-2 Preferred Stock"), consisting of Thirty Thousand (30,000) shares of the authorized but unissued shares of preferred stock, $.01 par value per share, of the Corporation; FURTHER RESOLVED, that the Series B-2 Preferred Stock shall have the powers, preferences and rights, and qualifications, limitations and restrictions thereof set forth in Appendix B-2 attached hereto;" IN WITNESS WHEREOF, this Certificate of Designation has been executed by the Corporation by its President and attested by its Secretary this 29th day of August 2001. LABONE, INC. /s/ W. Thomas Grant II -------------------------------- W. Thomas Grant II President Attest: /s/ Joseph C. Benage - -------------------------------- Joseph C. Benage Secretary 2 STATE OF MISSOURI) ss: COUNTY OF JACKSON) I, Cheryl M. Duren, a Notary Public, do hereby certify that on the 29th day of August 2001, personally appeared before me W. Thomas Grant II who being by me first duly sworn, declared that he is the President of LabOne, Inc., that he signed the foregoing document of the Corporation, and that the statements therein contained are true. /s/ Cheryl M. Duren ----------------------------------- Notary Public My commission expires: August 14, 2002 3 APPENDIX B-2 POWERS, RIGHTS AND PREFERENCES OF SERIES B-2 CUMULATIVE CONVERTIBLE PREFERRED STOCK OF LABONE, INC. 1. RANK. The Series B-2 Preferred Stock shall, with respect to dividend rights and rights on liquidation, dissolution and winding up, rank (i) pari passu with the Corporation's (A) Series B-1 Cumulative Convertible Preferred Stock (the "Series B-1 Preferred Stock"), and (B) to the extent when these shares are authorized and issued by the Board of Directors of the Corporation and the related certificates of designation for such series are filed with the Office of the Secretary of State of the State of Missouri, the Corporation's Series C-1 Cumulative Convertible Preferred Stock (the "Series C-1 Preferred Stock"), and Series C-2 Cumulative Convertible Preferred Stock (the "Series C-2 Preferred Stock", and together with the Series B-1 Preferred Stock, the Series B-2 Preferred Stock, and the Series C-1 Preferred Stock, the "Preferred Stock") and (ii) senior to all classes of the Corporation's common stock, par value $.01 per share ("Common Stock"), and to each other class of capital stock of the Corporation now or hereafter established (collectively, the "Junior Securities"). The definition of Junior Securities shall also include any rights or options exercisable for or convertible into any of the Junior Securities. 2. DIVIDENDS. (a) Each holder of record of Series B-2 Preferred Stock shall be entitled to receive cumulative dividends in an amount per share equal to the Dividend Rate per annum on the Accrued Value. Such dividends shall accrue from and after the date of issue (except that dividends on any amounts added to the Accrued Value shall accrue only from the date such amounts are added to the Accrued Value) and shall be added to the Accrued Value semi-annually, whether or not declared and whether or not there are any funds of the Corporation legally available for the payment of dividends, on February 28th and August 31st of each year (each such date being a "Dividend Accrual Date" and each such semi-annual period being a "Dividend Period"), commencing with the first such date following the date of issue. Dividends for any period shorter than a Dividend Period shall be computed on the basis of the actual number of days elapsed over twelve 30-day months and a 360-day year. (b) In case the Corporation shall make any dividend or distribution to holders of Common Stock, whether payable in cash, securities or other property (other than dividends or distributions payable solely in Common Stock), the holder of each share of Series B-2 Preferred Stock on the record date for such dividend or distribution shall be entitled to receive an equivalent dividend or distribution based on the number of shares of Common Stock underlying such Series B-2 Preferred Stock (after conversion of such Series B-2 Preferred Stock into Series B-1 Preferred Stock and assuming the Approval Date had occurred on such record date). (c) In case the Corporation shall make any dividend or distribution to holders of Series B-1 Preferred Stock, whether payable in cash, securities or other property (other than 4 dividends or distributions referred to in subsection (b), dividends or distributions payable solely in Series B-1 Preferred Stock, or regular accrued dividends on such Series B-1 Preferred Stock), the holder of each share of Series B-2 Preferred Stock on the record date for such dividend or distribution shall be entitled to receive an equivalent dividend or distribution based on the number of shares of Series B-1 Preferred Stock into which such Series B-2 Preferred Stock would be convertible on such record date if the Approval Date had occurred on such record date. (d) So long as any shares of Series B-2 Preferred Stock are outstanding, no Junior Securities shall be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Securities) or any cash dividend made on any Junior Security other than (i) a dividend on the Corporation's Common Stock as determined and declared by the Board of Directors in which the holders of the Series B-2 Preferred Stock participate in accordance with subparagraph (b) above or (ii) repurchases of shares from employees of the Corporation and its subsidiaries upon termination of the holder's employment. (e) The date on which the Corporation initially issues any particular share of Series B-2 Preferred Stock shall be deemed to be its "date of issue" for purposes hereof regardless of the number of times transfer of such share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates that may be issued to evidence such share. The date on which the Corporation initially issues the first share of Series B-2 Preferred Stock shall be referred to as the "Original Date of Issue". 3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (each a "Liquidation Event"), before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, the holder of each share of Series B-2 Preferred Stock shall be entitled to receive an amount per share equal to the Liquidation Value of such share on the date of distribution, and such holders shall not be entitled to any further payment. If, upon any Liquidation Event, the assets of the Corporation, or proceeds thereof, distributable among the holders of the Preferred Stock shall be insufficient to pay in full the preferential amount due on such shares, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares of Preferred Stock if all amounts payable thereon were paid in full. Solely for the purposes of this paragraph 3, a Change of Control shall not be deemed to be a Liquidation Event. (b) After payment shall have been made in full to the holders of the Preferred Stock, as provided in this paragraph 3, any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed to holders of capital stock of the Corporation, and the holders of the Preferred Stock shall not be entitled to share therein. 5 4. CONVERSION. (a) Subject to the provisions of this paragraph 4, each share of Series B-2 Preferred Stock shall be automatically converted into one share of Series B-1 Preferred Stock on the Approval Date without any further action required by the Corporation or the holder of such share. The Accrued Value of the share of Series B-1 Preferred Stock into which such share of Series B-2 Preferred Stock shall convert on the Approval Date shall be: (i) if the Approval Date occurs prior to the date which is six months from the Original Date of Issue, equal to the Accrued Value which a share of Series B-1 Preferred Stock issued on the Original Date of Issue would have had on the Approval Date, or (ii) if the Approval Date occurs on or after the date which is six months from the Original Date of Issue, equal to the Accrued Value of such share of Series B-2 Preferred Stock on such date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date). For the avoidance of doubt, the "Conversion Price" (as defined in the certificate of designation for the Series B-1 Preferred Stock) of the share of Series B-1 Preferred Stock into which such share of Series B-2 Preferred Stock shall convert on the Approval Date shall be equal to the Conversion Price which a share of Series B-1 Preferred Stock issued on the Original Date of Issue would have on the Approval Date. (b)(i) Unless the shares issuable on conversion pursuant to this paragraph 4 are to be issued in the same name as the name in which such shares of Series B-2 Preferred Stock are registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the holder or the holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax. (ii) As promptly as possible, but in any event within 5 business days after the Approval Date and after surrender by the holder of the certificates for shares of Series B-2 Preferred Stock, the Corporation shall issue and shall deliver to such holder, or on the holder's written order (upon compliance by such holder with subparagraph (b)(i) hereof and federal and state securities laws applicable thereto which require the holder to take any action) to the holder's transferee, a certificate or certificates for the whole number of shares of Series B-1 Preferred Stock issuable upon the conversion of such shares in accordance with the provisions of this paragraph 4. (iii) All shares of Series B-1 Preferred Stock delivered upon conversion of the Series B-2 Preferred Stock will upon delivery be duly and validly issued and fully paid and non-assessable, free of all liens and charges (other than caused by the holder) and not subject to any preemptive rights. (c) The Corporation shall at all times reserve and keep available, free from preemptive rights, such number of its authorized but unissued shares of Series B-1 Preferred Stock (and shares of Common Stock into which such shares of Series B-1 Preferred Stock may be converted) as shall be required for the purpose of effecting conversion of the Series B-2 Preferred Stock (and the underlying Series B-1 Preferred Stock). (d) Prior to the delivery of any securities which the Corporation shall be obligated to deliver upon conversion of the Series B-2 Preferred Stock, the Corporation shall comply with 6 all applicable federal and state laws and regulations which require action to be taken by the Corporation. (e) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Series B-1 Preferred Stock on conversion of the Series B-2 Preferred Stock pursuant hereto; provided, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Series B-1 Preferred Stock in a name other than that of the holder of the Series B-2 Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (f) In connection with the conversion of any shares of Series B-2 Preferred Stock, no fractional shares of Series B-1 Preferred Stock shall be issued, but in lieu thereof the Corporation shall pay to the holder thereof the value of such Series B-2 Preferred share in cash as determined by reference to the Accrued Value of such share on such date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date). (g) SUBDIVISION OR COMBINATION OF SERIES B-1 PREFERRED STOCK. If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Series B-1 Preferred Stock into a greater number of shares or if the Corporation at any time combines (by reverse stock split or otherwise) its outstanding shares of Series B-1 Preferred Stock into a smaller number of shares, then, in either such case, the number of shares of Series B-1 Preferred Stock into which the Series B-2 Preferred Stock shall be convertible shall be proportionately adjusted. (h) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation's assets or other transaction, in each case which is effected in such a manner that the holders of Series B-1 Preferred Stock or Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Series B-1 Preferred Stock or Common Stock, is referred to herein as an "Organic Change". Prior to the consummation of any Organic Change, the Corporation shall make appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Series B-2 Preferred Stock then outstanding) to insure that each of the holders of Series B-2 Preferred Stock shall thereafter have the right to acquire and receive, upon the obtaining of Shareholder Approval, in lieu of or in addition to (as the case may be) the shares of Series B-1 Preferred Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series B-2 Preferred Stock, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if the Approval Date had occurred on such date and such shares of Series B-2 Preferred Stock had been converted into Series B-1 Preferred Stock immediately prior to such Organic Change. In each such case, the Corporation shall also make appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Series B-2 Preferred Stock then outstanding) to insure that the provisions of paragraph 4 hereof shall thereafter be applicable to the Series B-2 Preferred Stock. The Corporation shall not effect any such consolidation, merger or sale, unless prior to the 7 consummation thereof, the successor entity (if other than the Corporation) resulting from the consolidation or merger or the entity purchasing such assets assumes by written instrument (in form and substance reasonably satisfactory to the holders of a majority of the Series B-2 Preferred Stock then outstanding), the obligation to deliver to each holder of Series B-2 Preferred Stock such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. (i) NOTICES. (i) Immediately upon any adjustment to the number of shares of Series B-1 Preferred Stock into which the Series B-2 Preferred Stock is convertible, the Corporation shall give written notice thereof to all holders of Series B-2 Preferred Stock, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Corporation shall give written notice to all holders of Series B-2 Preferred Stock at least 20 days prior to the date on which the Corporation closes its books or takes a record (a) with respect to any dividend or distribution referred to in Section 2(b) or Section 2(c), (b) with respect to any pro rata subscription offer to holders of Common Stock or Series B-1 Preferred Stock or (c) for determining rights to vote with respect to any Organic Change, dissolution or liquidation. (iii) The Corporation shall also give written notice to the holders of Series B-2 Preferred Stock at least 20 days prior to the date on which any Organic Change shall take place. (j) CERTAIN MERGERS. In connection with any consolidation with or merger with or into, any person in a transaction where the Common Stock and/or Series B-1 Preferred Stock is converted into or exchanged for securities of such person or an affiliate of such person, the Corporation covenants that as a condition precedent to the consummation of any such consolidation or merger it shall provide the holders of the Series B-2 Preferred Stock with a certificate, in form and substance satisfactory to the holders of a majority of the Series B-2 Preferred Stock signed by a duly authorized officer of the Corporation indicating that the person issuing such securities will be organized and existing under the laws of a jurisdiction which allows for the issuance of preference stock and that the Series B-1 Preferred Stock and the Series B-2 Preferred Stock shall be converted into or exchanged for and shall become shares of such person having in respect of such person substantially the same powers, preference and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon that the Series B-1 Preferred Stock and the Series B-2 Preferred Stock had immediately prior to such transaction. 5. CHANGE OF CONTROL OFFER. (a) Not less than 20 days prior to the consummation of any Consensual Change of Control and promptly after the occurrence of any Non-Consensual Change of Control (the date of any such Change of Control being the "Change of Control Date"), the Corporation shall commence (or cause to be commenced) an offer to purchase all outstanding shares of Series B-2 Preferred Stock pursuant to the terms described in subparagraph (d) below (the "Change of 8 Control Offer") at a purchase price equal to the Change of Control Amount on the Change of Control Payment Date, and shall purchase (or cause the purchase of) any shares of Series B-2 Preferred Stock tendered in response to the Change of Control Offer pursuant to the terms hereof; provided, that with respect to any Consensual Change of Control, the Corporation may condition its offer to purchase on consummation of the Consensual Change of Control. (b) The Change of Control Amount payable to each holder of Series B-2 Preferred Stock shall be payable in cash. (c) Prior to the mailing of the Change of Control Notice referred to in subparagraph (d), the Corporation shall (A) promptly determine if the purchase of the Series B-2 Preferred Stock for cash would violate or constitute a default under the indebtedness of the Corporation and (B) either shall repay to the extent necessary all such indebtedness that would prohibit the repurchase of the Series B-2 Preferred Stock pursuant to a Change of Control Offer or obtain any requisite consents or approvals under instruments governing any indebtedness to permit the repurchase of the Series B-2 Preferred Stock for cash. The Corporation shall first comply with this subparagraph (c) before it shall repurchase for cash any Series B-2 Preferred Stock pursuant to this paragraph 5. (d) Not less than 20 days prior to the consummation of any Consensual Change of Control or within 20 days following the date on which any Non-Consensual Change of Control has occurred, the Corporation shall send, by first-class mail, postage prepaid, a notice (a "Change of Control Notice") to each holder of Series B-2 Preferred Stock. Such notice shall contain all instructions and materials necessary to enable such holders to tender Series B-2 Preferred Stock pursuant to the Change of Control Offer. Such notice shall state: (i) that a Change of Control has occurred or will occur, as applicable, that a Change of Control Offer is being made pursuant to this paragraph 5 and that, subject in the case of a Consensual Change of Control to the consummation of the Consensual Change of Control (if the Corporation has so conditioned its Change of Control Offer), all Series B-2 Preferred Stock validly tendered and not withdrawn will be accepted for payment; (ii) the Change of Control Amount to be paid for shares tendered in such offer (estimated as closely as possible in the case of a Consensual Change of Control) and the purchase date (which shall be the Change of Control Date in the case of a Consensual Change of Control and a date no earlier than 30 days nor later than 60 days from the date such notice is mailed in the case of a Non-Consensual Change of Control) (the "Change of Control Payment Date"); (iii) that any shares of Series B-2 Preferred Stock not tendered will continue to accrue dividends; (iv) that, unless the Corporation defaults in making payment therefor, any share of Series B-2 Preferred Stock accepted for payment pursuant to the Change of Control Offer shall cease to accrue dividends after payment therefor on the Change of Control Payment Date; 9 (v) that holders electing to have any shares of Series B-2 Preferred Stock purchased pursuant to a Change of Control Offer will be required to surrender stock certificates representing such shares of Series B-2 Preferred Stock, properly endorsed for transfer, together with such other customary documents as the Corporation and the Transfer Agent may reasonably request to the Transfer Agent at the address specified in the notice prior to the close of business on the Change of Control Payment Date; (vi) that holders will be entitled to withdraw their election if the Corporation receives, not later than five business days prior to the Change of Control Payment Date, a telegram, facsimile transmission or letter setting forth the name of the holder, the number of shares of Series B-2 Preferred Stock the holder delivered for purchase and a statement that such holder is withdrawing its election to have such shares of Series B-2 Preferred Stock purchased; (vii) that holders who tender only a portion of the shares of Series B-2 Preferred Stock represented by a certificate delivered will, upon purchase of the shares tendered, be issued a new certificate representing the unpurchased shares of Series B-2 Preferred Stock; and (viii) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control). (e) The Corporation will comply with any tender offer rules under the Exchange Act which may then be applicable in connection with any offer made by the Corporation to repurchase the shares of Series B-2 Preferred Stock as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with provisions hereof, the Corporation shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligation hereunder by virtue thereof. (f) On the Change of Control Payment Date, subject in the case of a Consensual Change of Control to the consummation of the Consensual Change of Control (if the Corporation has so conditioned its Change of Control Offer), the Corporation shall (A) accept for payment the shares of Series B-2 Preferred Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the holders of shares so accepted the Change of Control Amount in cash and (C) cancel each surrendered certificate and retire the shares represented thereby. Unless the Corporation defaults in the payment for the shares of Series B-2 Preferred Stock tendered pursuant to the Change of Control Offer, dividends will cease to accrue with respect to the shares of Series B-2 Preferred Stock tendered and all rights of holders of such tendered shares will terminate, except for the right to receive payment therefor on the Change of Control Payment Date. (g) To accept the Change of Control Offer, the holder of a share of Series B-2 Preferred Stock shall deliver, prior to the close of business on the Change of Control Payment Date, written notice to the Corporation (or an agent designated by the Corporation for such purpose) of such holder's acceptance, together with certificates evidencing the shares of Series B- 10 2 Preferred Stock with respect to which the Change of Control Offer is being accepted, duly endorsed for transfer. 6. REDEMPTION. (a)(i) If the Approval Date has not occurred prior to the third anniversary of the Original Date of Issue, the holders of a majority of the shares of Series B-2 Preferred Stock then outstanding may require the Corporation to redeem all of the outstanding shares of Series B-2 Preferred Stock at a redemption price, payable in cash, equal to the Accrued Value of such shares on the Redemption Payment Date for such shares (treating the Redemption Payment Date for such shares as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date). In order to require such redemption, the stockholders requesting such redemption (the "Requesting Stockholders") shall deliver a notice of redemption (the "Redemption Notice") to the Corporation no later than 30 days following the third anniversary of the Original Date of Issue. If the Redemption Notice is delivered to the Corporation in a timely manner, the shares of Series B-2 Preferred Stock shall be redeemed in two installments, with 50% of the shares then outstanding to be redeemed (and the redemption price for such shares paid) on the third business day following delivery of the Redemption Notice and with all of the shares outstanding one year following delivery of the Redemption Notice to be redeemed (and the redemption price for such shares paid) on such one-year anniversary (each such date of payment, as applicable, a "Redemption Payment Date"), subject, in each case, to any limitations on such redemption that may be contained in the terms of the senior credit arrangements of the Corporation in effect on the Original Date of Issue (the "Senior Credit Arrangements"). If the Corporation is of the opinion that any such redemption would be in violation of the terms of the Senior Credit Arrangements, the Requesting Stockholders may require the Corporation to use its best efforts to consummate the sale and issuance of subordinated debt securities as soon as practicable after the third anniversary of the Original Date of Issue and to use the proceeds from such sale and issuance to redeem all of the shares of Series B-2 Preferred Stock. The first installment of the redemption shall be made on a pro rata basis among all the holder of Series B-2 Preferred Stock based on the number of shares of Series B-2 Preferred Stock then held of record by such holders. For the avoidance of doubt, it is understood that if a redemption occurs, the shares of Series B-2 Preferred Stock to be redeemed in the second installment on the date that is one year from the delivery of the Redemption Notice shall continue to accrue dividends in accordance with Section 2 hereof until the Redemption Payment Date for such shares. (ii) At any time (a) following the third anniversary (but before the fifth anniversary) of the Original Date of Issue, the Corporation may, at its option, redeem all, but not less than all, of the outstanding shares of Series B-2 Preferred Stock at a redemption price per share, payable in cash, equal to 105% of the Accrued Value of such share on the date of payment therefor (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date), and (b) following the fifth anniversary (but before the seventh anniversary) of the Original Date of Issue, the Corporation may, at its option, redeem all, but not less than all, of the outstanding shares of Series B-2 Preferred Stock at a redemption price per share, payable in cash, equal to the Accrued Value of such share on the date of payment therefor (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date). 11 (iii) On the seventh anniversary of the Original Date of Issue, the Corporation will be required to redeem, and the holders of the Series B-2 Preferred Stock shall be required to deliver for redemption, all of the outstanding shares of Series B-2 Preferred Stock at a redemption price per share, payable in cash, equal to the Accrued Value of such share on such date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date). (b) In the case of subparagraphs (ii) and (iii) above, notice of any redemption shall be given by the Corporation not less than 30 days nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed; provided, that neither the failure to give such notice nor any defect therein shall affect the validity of the giving of notice for the redemption of any share of Series B-2 Preferred Stock to be redeemed except as to the holder to whom the Corporation has failed to give said notice or except as to the holder whose notice was defective. Each such notice shall state: (i) the redemption date (which, in the case of a redemption pursuant to clause (iii) shall be such seventh anniversary); (ii) the redemption price; (iii) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (iv) that dividends on the shares to be redeemed will cease to accrue from and after such redemption date (unless default shall be made by the Corporation in providing for the payment of the redemption price for the shares called for redemption on such redemption date). (c) Notice having been given as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing for the payment of the redemption price of the shares called for redemption), dividends on the shares of Series B-2 Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such share shall be redeemed by the Corporation at the redemption price. 7. VOTING RIGHTS. (a) Except as required by law, each holder of Series B-2 Preferred Stock shall not be entitled to vote on any matter subject to the vote of the holders of the Corporation's Voting Securities. (b) So long as any of the Series B-2 Preferred Stock is outstanding, the affirmative vote of the holders of (x) 66 2/3% of the outstanding shares of Series B-2 Preferred Stock, voting together as a single class, shall be necessary to alter or change the preferences, rights or powers of the Series B-1 Preferred Stock or the Series B-2 Preferred Stock, and (y) a majority of the outstanding shares of Series B-2 Preferred Stock, voting together as a single class, shall be necessary to: (i) increase or decrease the authorized number of shares of the Series B-1 Preferred Stock or the Series B-2 Preferred Stock, (ii) amend, alter, repeal or waive any provision of the Corporation's articles of incorporation (including any certificate of designation or articles of amendment and whether by amendment, merger or otherwise) or by-laws so as to adversely affect the preferences, rights or powers of the Series B-1 Preferred Stock or the Series 12 B-2 Preferred Stock, including, without limitation, the voting powers, dividend rights and liquidation preference of the Series B-1 Preferred Stock or the Series B-2 Preferred Stock, or change the Series B-1 Preferred Stock or the Series B-2 Preferred Stock into any other securities, cash or other property (other than the conversion of Series B-2 Preferred Stock into Series B-1 Preferred Stock upon Shareholder Approval), or (iii) issue (other than, prior to the Approval Date, in lieu of accrued dividends on the Series B-1 Preferred Stock) any additional Series B-2 Preferred Stock or create, authorize or issue any capital stock that ranks prior to or pari passu with (whether with respect to dividends or upon liquidation, dissolution, winding up or otherwise) the Series B-1 Preferred Stock or the Series B-2 Preferred Stock (other than Series C-1 Preferred Stock or Series C-2 Preferred Stock). (c) So long as any of the Series B-2 Preferred Stock or Series C-2 Preferred Stock is outstanding, unless such compliance is waived in writing by the affirmative vote of the holders of a majority of the outstanding shares of Series B-2 Preferred Stock and Series C-2 Preferred Stock, voting together as a single class, the Corporation will comply with all provisions of Section 6.09 of the Purchase Agreement, which provisions are incorporated by reference herein with the same effect as if set forth in full herein. Any amendments to the Purchase Agreement shall be ineffective with respect to the Series B-2 Preferred Stock unless consented to by the holders of 66 2/3% of the outstanding shares of Series B-2 Preferred Stock. Copies of the Purchase Agreement are available upon request from the Secretary of the Corporation. (d) If the Corporation shall fail to comply with any one or more of the provisions in paragraphs 7(b) or 7(c), then upon and during the continuance of any such default, the Dividend Rate shall be increased to 23%. 8. MISCELLANEOUS (a) Notwithstanding anything to the contrary herein contained, if in connection with any conversion of shares of Series B-2 Preferred Stock pursuant to Section 4 hereof, the amount of Series B-1 Preferred Stock to be received by one or more holders of the Series B-2 Preferred Stock would result in such conversion being subject to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder, or any successor thereto (the "HSR Act"), then compliance with the HSR Act shall be a condition precedent to the consummation of such conversion. The provisions of this paragraph 8(a) shall in no way limit the obligation of the Corporation to comply with the provisions of Sections 5 and 6 hereof. (b) Each holder of Series B-2 Preferred Stock hereby agrees, by acceptance of its shares of Series B-2 Preferred Stock, to use its commercially reasonable efforts to make all filings required by the HSR Act and comply with all other provisions of the HSR Act as promptly as practicable to the extent necessary in connection with any conversion of Series B-2 Preferred Stock. (c) REACQUIRED SHARES. Any shares of Series B-2 Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by an amendment or amendments of the Corporation's articles of 13 incorporation adopted by the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. (d) Notices. (i) All notices, requests, demands and other communications to the Corporation hereunder shall be in writing and shall be delivered personally, sent by facsimile or sent by certified mail (return receipt requested) or by express mail or overnight courier, addressed to the President of the Corporation at the Corporation's principal executive offices. (ii) All notices, requests, demands and other communications to the holders of Series B-2 Preferred Stock hereunder shall be in writing and shall be delivered personally, sent by facsimile or sent by certified mail (return receipt requested) or by express mail or overnight courier, addressed to each holder of record at such holder's address appearing on the stock transfer register of the Corporation. (iii) Such notices, requests, demands and other communications shall be deemed given or delivered (A) three business days following sending by registered or certified mail, postage prepaid, (B) upon delivery by express mail or overnight courier, (C) when sent, if sent by facsimile (but only if such facsimile is actually received) or (D) when delivered, if delivered by hand. 9. DEFINITIONS. The following terms, as used herein, shall have the following meanings: "Accrued Value" equals, with respect to one share of Series B-2 Preferred Stock on any date, $1,000 plus the amount of all dividends added to the Accrued Value in accordance with paragraph 2(a) (which aggregate amount shall be subject to adjustment whenever there shall occur a stock split, combination, re-classification or other similar event involving the Series B-2 Preferred Stock). "Approval Date" means the date on which Shareholder Approval is obtained. "Change of Control" means a Consensual Change of Control or a Non-Consensual Change of Control. "Consensual Change of Control" means: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), other than to a wholly-owned subsidiary of the Corporation or (ii) the consummation of any transaction approved by the Board of Directors of the Corporation (including any merger or consolidation) the result of which is that any "person" (as defined above), becomes the beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the Voting Securities of the Corporation; provided, however, that "person" as used in clauses (i) and (ii) shall not include any Purchaser (as defined in the Purchase Agreement). 14 "Change of Control Amount" means, with respect to one share of Series B-2 Preferred Stock, 101% of the Accrued Value on the Change of Control Payment Date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date); provided, that if the Change of Control Payment Date falls on a date prior to the third anniversary of the Original Date of Issue, the Change of Control Amount shall be calculated assuming the Change of Control Payment Date was on the third anniversary of the Original Date of Issue (and assuming that no dividends had been paid in cash with respect to such share from the actual date of the Change of Control Payment Date through the third anniversary of the Original Date of Issue). "Continuing Directors" means individuals who constituted the Board of Directors of the Corporation on the Original Date of Issue, after giving effect to the issuance of the Series B-1 Preferred Stock (the "Incumbent Directors"); provided, that any individual becoming a director during any year shall be considered to be an Incumbent Director if such individual's election, appointment or nomination was recommended or approved by at least two-thirds of the other Incumbent Directors continuing in office following such election, appointment or nomination present, in person or by telephone, at any meeting of the Board of Directors of the Corporation, after the giving of a sufficient notice to each Incumbent Director so as to provide a reasonable opportunity for such Incumbent Directors to be present at such meeting or (ii) such individual was nominated, appointed or selected by the holders of Series B-1 Preferred Stock or nominated, appointed or selected in accordance with Section 6.02 of the Purchase Agreement. "Dividend Rate" means eighteen percent (18%), or if adjusted pursuant to Section 7(d), twenty-three (23%) percent. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Liquidation Value" on any date means, with respect to one share of Series B-2 Preferred Stock, the greater of (i) the Accrued Value on such date (treating such date as a Dividend Accrual Date for purposes of calculating the Accrued Value on such date) and (ii) the amount that would have been payable in connection with such Liquidation Event on the number of shares of Common Stock into which the number of shares of Series B-1 Preferred Stock resulting from the conversion of the Series B-2 Preferred Stock was convertible on such date (as if the Approval Date had occurred on such date). "Non-Consensual Change of Control" means: (i) the consummation of any transaction the result of which is that any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), becomes the beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the Voting Securities of the Corporation without the approval of the Board of Directors of the Corporation or (ii) the first day on which a majority of the members of the Board of Directors are not Continuing Directors; provided, however, that "person" as used in clause (i) shall not include any Purchaser (as defined in the Purchase Agreement). 15 "Person" as used herein means any corporation, limited liability company, partnership, trust, organization, association, other entity or individual. "Purchase Agreement" means the Securities Purchase Agreement dated as of the Original Date of Issue among the Corporation, Welsh, Carson, Anderson & Stowe IX, L.P. and the other purchasers named therein. "Securities Act" means the Securities Act of 1933, as amended. "Shareholder Approval" means the approval of requisite holders of the Common Stock with respect to each of the following: (1) the removal of the Conversion Cap contemplated in paragraph 4(a)(iii) of the certificate of designations for the Series B-1 Preferred Stock, (2) the automatic conversion of the Series B-2 Preferred Stock into Series B-1 Preferred Stock pursuant to the terms hereof, (3) the automatic conversion of the Series C-2 Preferred Stock, if any, into Series C-1 Preferred Stock pursuant to the certificate of designation for the Series C-2 Preferred Stock, and (4) the rights of the holders of the Series B-1 Preferred Stock to elect directors to the Board of Directors of the Corporation as described in paragraphs 7(c)(ii) and 7(c)(iii) of the certificate of designations for the Series B-1 Preferred Stock. "Transfer Agent" means the transfer agent for the Series B-2 Preferred Stock appointed by the Corporation, and if none is appointed, the Corporation. "Voting Securities" means securities of the Corporation ordinarily having the power to vote for the election of directors of the Corporation; provided, that when the term "Voting Securities" is used with respect to any other Person it means the capital stock or other equity interests of any class or kind ordinarily having the power to vote for the election of directors or other members of the governing body of such Person. 16 EX-99 6 exhe.txt WARRANT AGREEMENT EXHIBIT E --------- - -------------------------------------------------------------------------------- WARRANT AGREEMENT Among LABONE, INC., WELSH, CARSON, ANDERSON & STOWE IX, L.P. and THE OTHER HOLDERS NAMED ON THE SIGNATURE PAGES HERETO Dated as of August 31, 2001 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page SECTION 1. Warrant Certificates..............................................1 SECTION 2. Execution of Warrant Certificates.................................1 SECTION 3. Registration......................................................2 SECTION 4. Registration of Transfers and Exchanges...........................2 SECTION 5. Warrants; Exercise of Warrants....................................3 SECTION 6. Payment of Taxes..................................................4 SECTION 7. Mutilated or Missing Warrant Certificates.........................5 SECTION 8. Reservation of Warrant Shares.....................................5 SECTION 9. Obtaining Stock Exchange Listings.................................6 SECTION 10. Adjustment of Number of Warrant Shares Issuable..................6 SECTION 11. Fractional Interests............................................14 SECTION 12. Notices to Warrant Holders......................................14 SECTION 13. Notices to Company and Warrant Holder...........................16 SECTION 14. Supplements and Amendments......................................16 SECTION 15. Successors......................................................16 SECTION 16. Termination.....................................................16 SECTION 17. Governing Law...................................................16 SECTION 18. Benefits of This Agreement......................................17 SECTION 19. Counterparts....................................................17 i WARRANT AGREEMENT (the "Warrant Agreement" or this "Agreement") dated as of August 31, 2001 (the "Original Issue Date") among LABONE, INC., a Missouri corporation (the "Company"), WELSH, CARSON, ANDERSON & STOWE IX, L.P., a Delaware limited partnership ("WCAS"), and the other parties named on the signature pages hereto (such other parties, together with WCAS and their respective successors and assigns, the "Holders"). Terms defined in the Securities Purchase Agreement (the "Securities Purchase Agreement") dated as of August 31, 2001 among the Company, WCAS and the other purchasers named therein, unless otherwise defined herein, are used herein as therein defined. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company proposes to issue (i) on the Original Issue Date, in connection with the issuance of the Series B-1 Preferred Shares and the Series B-2 Preferred Shares on the Original Issue Date pursuant to the Securities Purchase Agreement, warrants to purchase 350,000 shares (the "Initial Warrants") of Common Stock, par value $.01 per share, of the Company ("Common Stock") and (ii) from time to time after the Original Issue Date, in connection with the issuance of Series B Notes in accordance with the provisions of Section 6.05 of the Securities Purchase Agreement, certain additional warrants to purchase Common Stock (the "Additional Warrants" and, together with the Initial Warrants, the "Warrants"); and WHEREAS, subject to adjustment as set forth herein, each Warrant shall initially entitle the Holder thereof to purchase one share of Common Stock (the shares of Common Stock issuable upon exercise of the Warrants being referred to herein as the "Warrant Shares"); NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. Warrant Certificates . The certificates evidencing the Warrants (the "Warrant Certificates") shall be in registered form only and shall be substantially in the form of Exhibit A attached hereto. SECTION 2. Execution of Warrant Certificates. (a) Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its Chief Executive Officer or its President or its Chief Financial Officer and by its Secretary or an Assistant Secretary under its corporate seal. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of such person shall have ceased to hold such office. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. (b) In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been disposed of by the Company, such Warrant Certificates nevertheless may be delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such person was not such an officer. SECTION 3. Registration. The Company shall number and register the Warrant Certificates in a register as they are issued. The Company may deem and treat the registered Holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and shall not be affected by any notice to the contrary or bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person or entity. The Company shall act as the registrar for the Warrants. SECTION 4. Registration of Transfers and Exchanges. The Company shall from time to time register the transfer of any outstanding Warrant Certificates in a Warrant register to be maintained by the Company at its office designated for such purposes (the address of which is set forth in Section 13 hereof), upon surrender thereof accompanied by the assignment form on the reverse of the Warrant Certificate (the "Assignment Form"), duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be canceled and disposed of by the Company. No transfer or exchange of any Warrant shall be valid unless (x) made in the foregoing manner at such office and (y) registered under the Securities Act of 1933, as amended, or any applicable state securities laws or unless an exemption from registration is available. (b) The Holders agree that each Warrant Certificate and any certificate representing the Warrant Shares will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH OTHER SECURITIES LAWS OR UNLESS EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE APPLICABLE WITH RESPECT TO SUCH DISPOSITION." 2 (c) Warrant Certificates may be exchanged at the option of the Holder(s) thereof, when surrendered to the Company at its office for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Upon any sale or transfer of any Warrant Certificate or Warrant Shares pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act") or in a transaction meeting the requirements of Rule 144 under the Securities Act, the Company shall permit the Holder thereof to exchange such Warrant Certificate or such Warrant Shares for another Warrant Certificate or certificate evidencing Warrant Shares, as applicable, that does not bear the legend set forth in Section 4(b) above. Warrant Certificates surrendered for exchange shall be canceled and disposed of by the Company. SECTION 5. Warrants; Exercise of Warrants. (a) Subject to the terms of this Agreement, each Holder shall have the right, which may be exercised at any time prior to 5:00 p.m. (EST) on August 31, 2008, to receive from the Company the number of fully paid and nonassessable Warrant Shares and any other capital stock of the Company issuable upon exercise of the Warrant as provided for in Section 10(a) ("Additional Warrant Shares") which the Holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price (as hereinafter defined) then in effect for such Warrant Shares (if such exercise is not a Cash-Less Exercise (as hereinafter defined). Each Warrant not exercised prior to 5:00 p.m. (EST) on August 31, 2008 shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. (b) A Warrant may be exercised upon surrender to the Company at its office designated for such purpose (the address of which is set forth in Section 13 hereof) of the Warrant Certificate or Certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed, and upon payment to the Company of the exercise price (the "Exercise Price") which is set forth in the form of Warrant Certificate attached hereto as Exhibit A as adjusted as herein provided, for the number of Warrant Shares and Additional Warrant Shares, if any, in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made in cash or by certified or official bank check to the order of the Company. In lieu of exercising a Warrant by paying in full the Exercise Price, the Holder may, from time to time, convert a Warrant, in whole or in part, into a number of shares of Common Stock determined by dividing (i) the aggregate current market price of the number of shares of Common Stock represented by the Warrants converted, minus the aggregate Exercise Price for such shares of Common Stock by (ii) the current market price of one share of Common Stock (a "Cash-Less Exercise"). The current market price shall be determined pursuant to Section 10(f). (c) Subject to the provisions of Section 6 hereof, upon such surrender of Warrant Certificates and payment of the Exercise Price (if such exercise is not a Cash-Less Exercise) the Company shall issue and cause to be delivered with all reasonable dispatch (and in any event within five business days after such receipt) to or upon the written order of the Holder and, subject to compliance with all applicable securities laws, in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Share and Additional Warrant Shares, if any, issuable upon the exercise of such Warrants together with cash as provided in Section 11. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a Holder of record of such Warrant Shares and Additional Warrant Shares, if any, as of the date of the surrender of such Warrant Certificates and payment of the Exercise Price (if such exercise is not a Cash-Less Exercise). (d) Prior to the exercise of the Warrants, except as may be specifically provided for herein, (i) no Holder of a Warrant Certificate, as such, shall be entitled to any of the rights of a holder of Common Stock of the Company, including, without limitation, the right to vote at or to receive any notice of any meetings of stockholders; (ii) the consent of any such Holder shall not be required with respect to any action or proceeding of the Company; (iii) except as provided in Section 10(i), no such Holder, by reason of the ownership or possession of a Warrant or the Warrant Certificate representing the same, shall have any right to receive any cash dividends, stock dividends, allotments or rights or other distributions paid, allotted or distributed or distributable to the stockholders of the Company prior to, or for which the relevant record date preceded, the date of the exercise of such Warrant; and (iv) no such Holder shall have any right not expressly conferred by the Warrant or Warrant Certificate held by such Holder. (e) The holders of the Warrant Shares issuable upon exercise of the Warrants will not be entitled to vote or give or withhold consent with respect to any matter submitted to the stockholders of the Company for a vote or action at any time that the Series B-1 Preferred Shares are outstanding and each Warrant Share shall bear a legend to such effect. (f) The Warrants shall be exercisable, at the election of the Holders thereof, either in full or from time to time in part (but not for fractional shares unless the Warrant is exercised in full) and, in the event that a Warrant Certificate is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new Warrant Certificate evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section 5 and of Section 2 hereof. (g) All Warrant Certificates surrendered upon exercise of Warrants shall be canceled and disposed of by the Company. The Company shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the Holders during normal business hours at its office. SECTION 6. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares and Additional Warrant Shares, if any, upon the exercise of Warrants; provided, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares or Additional Warrant Shares, if any, in a name other than that of the registered Holder of a Warrant Certificate surrendered for registration of transfer or upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance 4 thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. SECTION 7. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also reasonably satisfactory to it. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 8. Reservation of Warrant Shares. (a) The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or other capital stock of the class with respect to Additional Warrant Shares, if any, or its authorized and issued Common Stock or other capital stock of the class with respect to Additional Warrant Shares, if any, held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares and Additional Warrant Shares, if any, upon exercise of Warrants, the maximum number of shares of Common Stock and other capital stock with respect to Additional Warrant Shares, if any, which may then be deliverable upon the exercise of all outstanding Warrants. (b) The Company or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each Holder pursuant to Section 12 hereof. (c) Before taking any action which would cause an adjustment pursuant to Section 10 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. (d) The Company represents and warrants that the initial Warrant Shares issuable upon conversion of Warrants have been duly authorized and covenants that all Warrant Shares and Additional Warrant Shares, if any, which may be issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free of preemptive rights and, subject to Section 6, free from all 5 taxes, liens, charges and security interests (other than caused by the holder) with respect to the issue thereof. (e) If at any time after conversion of the Series B-1 Preferred Shares into Common Stock and prior to Company Shareholder Approval, the aggregate number of Warrant Shares that are issuable upon exercise of the Warrants would, together with the number of shares of Common Stock issued upon such conversion of the Series B-1 Preferred Shares (the "Aggregate Conversion Shares"), exceed the Conversion Cap Number (as defined in the Series B-1 Preferred Certificate of Designation), then the Company shall, at the option of the majority in interest of the Holders, redeem a number of Warrant Shares (following exercise by the Holders of the appropriate portion of the Warrants) equal to the excess of the Aggregate Conversion Shares over the Conversion Cap Number (the "Excess Shares") and, on a pro rata basis, pay the Holders in cash the fair market value of such Excess Shares or exchange such Excess Shares for a number of Series B-2 Preferred Shares equal to the fair market value of the such Excess Shares divided by $1,000. SECTION 9. Obtaining Stock Exchange Listings. The Company will from time to time take all action which may be necessary so that the Warrant Shares and the Additional Warrant Shares, if any, immediately upon their issuance upon the exercise of Warrants, will be listed on the Nasdaq Stock Market and/or any other principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock or the Additional Warrant Shares, if any, as the case may be, are then listed. SECTION 10. Adjustment of Number of Warrant Shares Issuable. The number of Warrant Shares issuable upon the exercise of each Warrant is subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 10. For purposes of this Section 10, "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount (other than the Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares and Series C-2 Preferred Shares). (a) Adjustment for Change in Capital Stock. If the Company, after the Original Issue Date: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; (3) combines its outstanding shares of Common Stock into a smaller number of shares; 6 (4) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or (5) issues by reclassification of its Common Stock any shares of its capital stock; then the number and kind of shares of its capital stock issuable upon exercise of any Warrant in effect immediately prior to such action shall be proportionately adjusted so that the Holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of the Company which he or she would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If, after an adjustment, a Holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the exercise privilege of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 10. Such adjustment shall be made successively whenever any event listed above shall occur. (b) Adjustment for Rights Issue. If after the Original Issue Date the Company distributes any rights, options or warrants to all holders of its Common Stock entitling them to purchase shares of Common Stock or securities directly or indirectly convertible into or exchangeable for Common Stock (or options or rights with respect to such securities) at a price per share less than the current market price per share on the record date for the determination of stockholders entitled to receive the rights, options or warrants, the number of Warrant Shares issuable upon exercise of one Warrant shall be adjusted in accordance with the formula: N' = N x (O + A) ------------------ (O + (A x P)) - M where: N' = the adjusted number of Warrant Shares issuable upon exercise of one Warrant. N = the current number of Warrant Shares issuable upon exercise of one Warrant. O = the number of shares of Common Stock outstanding on the record date. A = the number of additional shares of Common Stock offered pursuant to such rights issuance. P = the offering price per share of the additional shares. 7 M = the current market price per share of Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the number of Warrant Shares issuable upon exercise of the Warrants shall be immediately readjusted to what it would have been if the shares represented by "A" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If after the Original Issue Date the Company distributes to all holders of its Common Stock any of its assets (including but not limited to cash), debt securities, or any rights or warrants to purchase debt securities, assets or other securities of the Company (other than Common Stock), the number of Warrant Shares issuable upon exercise of one Warrant shall be adjusted in accordance with the formula: N' = N x M --- M-F where: N' = the adjusted number of Warrant Shares issuable upon exercise of one Warrant. N = the current number of Warrant Shares issuable upon exercise of one Warrant. M = the current market price per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the assets, securities, rights or warrants applicable to one share of Common Stock. The Board of Directors shall determine the fair market value thereof in good faith. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. No adjustment shall be made pursuant to this Section 10(c) if the fair market value on the applicable record date of the assets, securities, rights or warrants applicable to one share of Common Stock is equal to or greater than the current market price per share of Common Stock on such record date. This subsection (c) does not apply to regular quarterly cash dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company prepared in accordance with generally accepted accounting principles consistently applied. Also 8 this subsection does not apply to rights, options or warrants referred to in subsection (b) of this Section 10. If any adjustment is made pursuant to this subsection (c) as a result of the issuance of rights, options or warrants and at the end of the period during which any rights, options or warrants are exercisable, not all such rights, options or warrants shall have been exercised, the Warrant shall be immediately readjusted as if "F" in the above formula was the fair market value on the record date of the indebtedness or assets actually distributed upon exercise of such rights, options or warrants divided by the number of shares of Common Stock outstanding on the record date. (d) Adjustment for Common Stock Issue. If after the Original Issue Date the Company issues shares of Common Stock for a consideration per share less than the current market price per share on the date the Company fixes the offering price of such additional shares, the number of Warrant Shares issuable upon exercise of one Warrant shall be adjusted in accordance with the formula: N' = N x A ------ O + P - M where: N' = the adjusted number of Warrant Shares issuable upon exercise of one Warrant. N = the then current number of Warrant Shares issuable upon exercise of one Warrant. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. M = the current market price per share on the date of sale of such additional shares. A = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This Section 10(d) does not apply to the issuance of shares of Common Stock: (1) in connection with any transaction of the type described in Section 10(a) above, upon exercise of any securities of the type referred to in Section 10(b) above, or upon the conversion or exchange of any securities of the type referred to in Section 10(e) below, (2) upon the exercise of any Warrants, 9 (3) upon the conversion of any Series B-1 Preferred Shares or Series C-1 Preferred Shares, (4) upon the exercise of any option or warrant outstanding on the Original Issue Date and disclosed in Item 6.04(b) of the Disclosure Schedule delivered in connection with the Securities Purchase Agreement, (5) upon the exercise of warrants or other rights issued to banks or institutional lenders in connection with debt financings, equipment financings or similar transactions or to strategic partners in primarily non-financing transactions, in all such cases as approved by the Board of Directors of the Company so long as the aggregate number of such shares of Common Stock does not exceed 400,000 in the aggregate (as hereinafter adjusted for stock dividends, stock splits, subdivisions and combinations of shares and like transactions), (6) issued as a dividend on any Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares or Series C-2 Preferred Shares, (7) issued pursuant to the Company's Rights Agreement, dated as of February 11, 2000, as amended (the "Rights Plan") as a result of a Holder becoming an Acquiring Person within the meaning of the Rights Plan, or (8) issued to WCAS, and/or any of its partners or Affiliates (as such terms are defined in the Securities Purchase Agreement). (e) Adjustment for Convertible Securities Issue. If after the Original Issue Date the Company issues any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in Section 10(b) above) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the current market price per share on the date of issuance of such securities, the number of Warrant Shares issuable upon exercise of one Warrant shall be adjusted in accordance with this formula: N' = N x O + D ------- O + P - M where: N' = the adjusted number of Warrant Shares issuable upon exercise of one Warrant. N = the then current number of Warrant Shares issuable upon exercise of one Warrant. O = the number of shares outstanding immediately prior to the issuance of such securities. 10 P = the aggregate consideration received for the issuance of such securities. M = the current market price per share on the date of sale of such securities. D = the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, then the number of Warrant Shares issuable upon exercise of one Warrant shall promptly be readjusted to the number of Warrant Shares issuable upon exercise of one Warrant which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion or exchange of such securities. This Section 10(e) does not apply to: (1) convertible or exchangeable securities issued in a transaction described in Section 10(a) or (c) above or upon exercise of any securities of the type referred to in Section 10(b) above, (2) the issuance of options, rights, warrants and other securities that are exercisable for Common Stock (it being understood that adjustment shall be made upon the exercise of such securities to the extent required by Section 10(d) above), (3) Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares or Series C-2 Preferred Shares, (4) convertible or exchangeable securities issued as a dividend on any Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares, or Series C-2 Preferred Shares in accordance with the stated terms of such preferred stock, (5) convertible or exchangeable securities issued pursuant to the Rights Plan as a result of a Holder becoming an Acquiring Person within the meaning of the Rights Plan, or (6) convertible or exchangeable securities issued to WCAS, and/or any of its partners or Affiliates (as such terms are defined in the Securities Purchase Agreement). (f) Current Market Price. In Sections 5 and 11 and in Sections 10(b), (c), (d) and (e) the current market price per share of Common Stock on any date is the average of the Quoted Prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of 11 the Common Stock as reported by NASDAQ Stock Market, or if the Common Stock is listed on a securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of such quotations, the value of the security shall be determined in good faith by the Board of Directors of the Company, which determination shall be described in a Board resolution or, if requested by the holder, by an independent nationally recognized investment banking firm or appraisal firm. (g) Consideration Received. For purposes of any computation respecting consideration received pursuant to Sections 10(d) and (e), the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be described in a Board resolution; (3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection). (h) When De Minimis Adjustment May Be Deferred. No adjustment in the number of Warrant Shares issuable upon exercise of one Warrant need be made unless the adjustment would require an increase or decrease of at least 1% in the number of Warrant Shares issuable upon exercise of one Warrant. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section shall be made to the nearest 1/100th of a share. (i) When No Adjustment Required. No adjustment need be made for a transaction referred to in Section 10(a), (b), (c), (d) or (e), if the holders hereof is to participate (without being required to exercise their Warrants) in the transaction on a basis and with notice that the Board of Directors of the Company determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common 12 Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. (j) Notice of Adjustment. Whenever the number of Warrant Shares issuable upon exercise of one Warrant is adjusted, the Company shall provide the notices required by Section 12 hereof. (k) Reorganization of Company. If the Company consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the Holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the Holder had exercised the Warrant immediately before the effective date of the transaction. If, in connection with any such merger, consolidation or sale, holders of Common Stock are entitled to elect to receive either securities, cash, or other property upon completion of such transaction, the Company shall provide or cause to be provided to each holder of Warrants the right to elect the securities, cash, or other property into which the Warrants shall be convertible, subject to the same conditions applicable to holders of shares of Common Stock (including, without limitation, notice of the right to elect, limitations on the period in which such election shall be made, and the effect of failing to exercise the election). Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger if other than the Company, or the person to which such sale or conveyance shall have been made, shall enter into a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section. The successor company shall mail to Holders a notice describing the supplemental Warrant Agreement as soon as reasonably practicable after the execution of any such supplemental Warrant Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. If this Section 10(k) applies, the provisions of Sections 10(a), (b), (c), (d) and (e) do not apply. (l) When Issuance or Payment May Be Deferred. In any case in which this Section 10 shall require that an adjustment in the number of Warrant Shares issuable upon exercise of one Warrant be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the Holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the current number of Warrant Shares issuable upon exercise of one Warrant and (ii) paying to such Holder any amount in cash in lieu of a fractional share pursuant to Section 11; provided, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. 13 (m) Adjustment in Exercise Price. Upon each adjustment of the number of Warrant Shares pursuant to this Section 10, the Exercise Price for each Warrant outstanding prior to the making of the adjustment in the number of Warrant Shares shall thereafter be adjusted to the Exercise Price (calculated to the nearest hundredth of one cent) obtained from the following formula: E'= E x N - N' where: E' = the adjusted Exercise Price. E = the Exercise Price prior to adjustment. N' = the adjusted number of Warrant Shares issuable upon exercise of a Warrant. N = the number or Warrant Shares previously issuable upon exercise of a Warrant prior to adjustment. (n) Form of Warrants. Irrespective of any adjustments in the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 11. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so requested to be exercised. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the product of (i) such fraction of a Warrant Share and (ii) the difference between the current market price of a share of Common Stock and the Exercise Price. SECTION 12. Notices to Warrant Holders. (a) Upon any adjustment of the Exercise Price or the number of Warrant Shares issuable upon exercise of one Warrant pursuant to Section 10, the Company shall promptly thereafter (i) cause to be filed with the Company a certificate which includes the report of a firm of independent public accountants of recognized standing selected by the Board of Directors of the Company (who may be the regular auditors of the Company) setting forth the Exercise Price and the number of Warrant Shares issuable upon exercise of one Warrant after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and (ii) cause to be given to each 14 of the registered Holders of the Warrant Certificates at his or her address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 12. (b) In case: (i) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (ii) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (iii) the Company proposes to take any action which would require an adjustment of the number of Warrant Shares issuable upon exercise of one Warrant pursuant to Section 10; then the Company shall cause to be given to each of the registered Holders of the Warrant Certificates at his or her address appearing on the Warrant register, at least 20 days (or 10 days in any case specified in clauses (b)(i) or (b)(iii) above) prior to the applicable record date hereafter specified, or promptly in the case of events for which there is no record date, by first class mail, postage prepaid, a written notice stating (A) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, (B) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (C) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 12 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. (c) Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the Holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company. 15 SECTION 13. Notices to Company and Warrant Holder. (a) Any notice or demand authorized by this Agreement to be given or made by the registered Holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class, certified or registered, postage prepaid, addressed to the office of the Company expressly designated by the Company at its office for purposes of this Agreement (until the Holders are otherwise notified in accordance with this Section by the Company), as follows: LabOne, Inc. 10101 Renner Boulevard Lenexa, KS 66219 Attention: General Counsel (b) Any notice pursuant to this Agreement to be given by the Company to the registered Holder(s) of any Warrant Certificate shall be sufficiently given when and if deposited in the mail, first class, certified or registered, postage prepaid, addressed (until the Company is otherwise notified in accordance with this Section by such Holder) to such Holder at the address appearing on the Warrant register of the Company. (c) Such notices, requests, instructions and other documents shall be deemed given or delivered (i) five business days following sending by registered or certified mail, postage prepaid, (ii) one business day following sending by national overnight courier service, (iii) when sent, if sent by facsimile (but only if such facsimile is actually received) or (iv) when delivered, if delivered by hand. SECTION 14. Supplements and Amendments. Any amendment or supplement to this Agreement shall require the written consent of the Company and the registered Holders of a majority of the then outstanding Warrant Shares issued or issuable upon exercise of the Warrants (excluding Warrant Shares held by the Company or any of its Affiliates). The consent of each Holder of a Warrant affected shall be required for any amendment pursuant to which the number of Warrant Shares purchasable upon exercise of Warrants would be decreased or the Exercise Price increased (other than in accordance with Section 10 or 11 hereof). SECTION 15. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company shall bind and inure to the benefit of its respective successors and assigns hereunder. SECTION 16. Termination. This Agreement shall terminate at 5:00 p.m. (EST) on August 31, 2008. SECTION 17. Governing Law. THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE. 16 SECTION 18. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the registered Holders of the Warrant Certificates or Warrant Shares any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the registered Holders of the Warrant Certificates and the Warrant Shares. SECTION 19. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. LABONE, INC. By: /s/ W. Thomas Grant II --------------------------------- Name: W. Thomas Grant II Title: President WELSH, CARSON, ANDERSON & STOWE IX, L.P. By: WCAS IX Associates LLC, Its General Partner By: /s/ Jonathan M. Rather --------------------------------- Jonathan M. Rather Managing Member WCAS MANAGEMENT CORPORATION By: /s/ Jonathan M. Rather -------------------------------- Jonathan M. Rather Treasurer Patrick J. Welsh Russel Carson Bruce K. Anderson Thomas E. McInerney Robert A. Minicucci Lawrence B. Sorrel Anthony J. De Nicola Paul B. Queally IRA FBO Jonathan M. Rather D. Scott Mackesy Sanjay Swani John D. Clark IRA FBO James R. Mathews Sean Traynor John Almeida Eric J. Lee By: /s/ Jonathan M. Rather -------------------------------- Jonathan M. Rather as Attorney-in-Fact EXHIBIT A [Form of Warrant Certificate] [Face] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH OTHER SECURITIES LAWS OR UNLESS EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE APPLICABLE WITH RESPECT TO SUCH DISPOSITION. EXERCISABLE ON OR BEFORE 5:00 P.M. (EST) TIME ON AUGUST 31, 2008. No.[__] [____] Warrants Warrant Certificate LabOne, Inc. This Warrant Certificate certifies that [_____________], or registered assigns, is the registered holder of [______] Warrants expiring August 31, 2008 (the "Warrants") to purchase Common Stock, par value $.01 per share, of LabOne, Inc., a Missouri corporation (the "Company"). Each Warrant entitles the holder upon exercise to receive from the Company on or before 5:00 p.m. (EST) on August 31, 2008, one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the exercise price (the "Exercise Price") of $.01 for each Warrant Share payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. In lieu of exercising this Warrant by paying in full the Exercise Price, the Warrant holder may, from time to time, convert this Warrant, in whole or in part, into a number of Warrant Shares determined by dividing (a) the aggregate current market price of the number of shares of Common Stock represented by the Warrants converted, minus the aggregate Exercise Price for such shares of Common Stock by (b) the current market price of one share of Common Stock. The current market price shall be determined pursuant to Section 10(f) of the Warrant Agreement. The number of Warrant Shares and Additional Warrant Shares, if any, issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m. (EST) on August 31, 2008, and to the extent not exercised by such time such Warrants shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, LabOne, Inc. has caused this Warrant Certificate to be signed by the appropriate officers, each by a facsimile of his signature, and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 31, 2001 LABONE, INC. By_____________________________ Name: W. Thomas Grant II Title: President ATTEST: Joseph C. Benage Secretary [Form of Warrant Certificate] [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring August 31, 2008, entitling the holder on exercise to receive shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement dated as of August 31, 2001 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Subject to the terms of the Warrant Agreement, Warrants may be exercised from time to time until 5:00 p.m. (EST) on August 31, 2008. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price in cash at the office of the Company designated for such purpose. In lieu of exercising this Warrant by paying in full the Exercise Price, the Warrant holder may, from time to time, convert this Warrant, in whole or in part, into a number of shares of Common Stock determined by dividing (a) the aggregate current market price of the number of Warrant Shares represented by the Warrants converted, minus the aggregate Exercise Price for such shares of Common Stock by (b) the current market price of one share of Common Stock. The current market price shall be determined pursuant to Section 10(f) of the Warrant Agreement. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares issuable upon exercise of one Warrant set forth on the face hereof and the Exercise Price of a Warrant may, subject to certain conditions, be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entities any holder hereof to any rights of a stockholder of the Company. ASSIGNMENT FORM If you the Holder want to assign this Warrant, fill in and execute the form below: I or we assign and transfer this Warrant to: _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint _____________________________________________________, agent to transfer this Warrant on the books of the Company. The agent may substitute another to act for him. Date: Signed: (Signed exactly as your name appears on the other side of this Warrant) [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the Warrant, represented by this Warrant Certificate, to receive [ ] shares of Common Stock and herewith (check item) (i) tenders payment for such shares to the order of LabOne, Inc. in the amount of $[ ] in accordance with the terms hereof; or (ii) converts this Warrant, in whole or in part, into a number of shares of Common Stock determined by dividing (a) the aggregate current market price of the number of shares of Common Stock represented by this Warrant, minus the aggregate Exercise Price for such shares of Common Stock by (b) the current market price of one share of Common Stock. The undersigned requests that a certificate for such shares be registered in the name of [ ], whose address is [ ], and that such shares be delivered to [ ], whose address is [ ]. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of [ ],whose address is [ ] and that such Warrant Certificate be delivered to [ ] whose address is [ ]. Signature: Date: EX-99 7 exhf.txt CERTIFICATE OF AMENDMENT EXHIBIT F --------- CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF LABONE, INC. ---------------------------------- Pursuant to the provisions of the General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following: (1) The name of the corporation is LabOne, Inc. (the "Corporation"). (2) The amendment to the Corporation's Articles of Incorporation set forth below was adopted by the shareholders of the Corporation on [___________] [___], [20__]. (3) Article X of the Company's Articles of Incorporation is hereby amended by deleting in its entirety Section B(2) and replacing it with the following: "2. The term "Related Person" shall mean any individual, corporation, partnership or other person or entity which, as of the record date for the determination of shareholders entitled to notice of and to vote on any Business Combination, or immediately prior to the consummation of any such Business Combination, is a "Beneficial Owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect at the date of the adoption of this Article X by the shareholders of the Corporation) (collectively and as so in effect, the "Exchange Act") of shares of any class or series of capital stock of the Corporation which, when combined with the shares of such class or series of stock of which any "Affiliates" or "Associates" (as defined in Rule 12b-2 of the Exchange Act) of such individual, corporation, partnership or other person or entity are Beneficial Owners, amount to ten percent (10%) or more of the outstanding shares of such class or series of stock, and any Affiliate or Associate of such Related Person; provided, however, that neither Welsh, Carson, Anderson & Stowe IX, L.P. ("WCAS") nor any of its general partners or Controlled Entities ("WCAS Parties") shall be considered a Related Person. "Controlled Entities" shall mean entities in which any one or more of the WCAS Parties owns a majority of the voting shares or securities or has the ability (whether through the ownership of voting securities, contracts or otherwise) to elect a majority of the board of directors or similar governing body or of which any one or more of the WCAS Parties has the authority to control or direct investment decisions." (4) Article X of the Company's Articles of Incorporation is hereby amended by deleting in its entirety Section B(3) and replacing it with the following: "3. The term "Continuing Directors" shall mean the individuals who constituted the Board of Directors of the Corporation on the date of this amendment to Article X (the "Incumbent Directors"); provided, that any individual becoming a director during any year shall be considered to be an Incumbent Director if (i) such individual's election, appointment or nomination was recommended or approved by at least two-thirds of the other Incumbent Directors continuing in office following such election, appointment or nomination present, in person or by telephone, at any meeting of the Board of Directors of the Corporation, after the giving of a sufficient notice to each Incumbent Director so as to provide a reasonable opportunity for such Incumbent Directors to be present at such meeting or (ii) such individual was nominated, appointed or selected by the holders of Series B-1 Preferred Stock or nominated, appointed or selected in accordance with Section 6.02 of that certain Securities Purchase Agreement dated August 31, 2001 among the Company, WCAS and the other purchasers named on Schedule I thereto." (5) On the record date for the shareholders meeting held on [_____________] [___], [20__], the Corporation had [____________] shares outstanding. All [____________] shares were entitled to vote on the amendment. IN WITNESS WHEREOF, the President of LabOne, Inc. has executed this instrument and the Secretary of LabOne, Inc. has affixed its corporate seal hereto and attested said seal on the [____] day of [__________], [20__]. LABONE, INC. By:_______________________ W. T. Grant II President ATTEST: __________________________ Joseph C. Benage Secretary STATE OF KANSAS ) ) ss. COUNTY OF JOHNSON ) I, _______________________, a Notary Public do hereby certify that on this ____ day of _____________, 20__, personally appeared before me ________________, who being by me first sworn, declared that he is the President of LabOne, Inc., that he signed the foregoing document as President of the corporation, and that the statements therein contained are true. _________________________ Notary Public My commission expires: ______________________ EX-99 8 exhg.txt AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT EXHIBIT G --------- AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT THIS AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT, dated as of August 31, 2001, is made between LabOne, Inc., a Missouri corporation (the "Company"), and American Stock Transfer & Trust Company (the "Rights Agent"). W I T N E S S E T H WHEREAS, on February 11, 2000, the Company and the Rights Agent entered into a Rights Agreement (the "Rights Agreement") to provide certain Rights to holders of Common Stock; and WHEREAS, the parties hereto desire to amend the Rights Agreement; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 1. Subsection (a) of Section 1 is hereby deleted in its entirety, and the following new subsection (a) is hereby inserted in lieu thereof: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, without the Prior Written Approval of the Company granted after the date hereof, shall be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, other than as a result of a Qualifying Offer, whether or not such Person together with all Affiliates and Associates of such Person continues to be the Beneficial Owner of 15% or more of such shares. Notwithstanding the foregoing, (i) the term "Acquiring Person" shall not include any Exempt Person (as hereinafter defined), (ii) a Person shall not become an Acquiring Person solely as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company, unless and until such Person (together with all Affiliates and Associates of such Person) shall purchase or otherwise become the Beneficial Owner of additional shares of Common Stock, other than pursuant to a Qualifying Offer or with the Prior Written Approval of the Company, (iii) the term "Acquiring Person" shall not include any of the Grant Family Members, acting individually or as a group, unless and until such Person or Persons (together with all Affiliates and Associates of such Person or Persons) shall become (other than pursuant to a Qualifying Offer or with the Prior Written Approval of the Company) the Beneficial Owners of 20% or more of the shares of Common Stock then outstanding, provided that such Person or Persons or Affiliates or Associates shall not be deemed the Beneficial Owners of shares of Common Stock or other securities acquired on or after the Rights Dividend Declaration Date pursuant to any employee or director benefit plan of the Company or any Subsidiary of the Company; (iv) the term "Acquiring Person" shall not include Welsh, Carson, Anderson & Stowe, IX, L.P. ("WCAS"), any general partner of WCAS, any member of the general partner of WCAS (collectively the "WCAS Parties") or any Controlled Entity, only so long as the WCAS Parties comply with Section 6.03 of that certain Securities Purchase Agreement dated August 31, 2001 among the Company, WCAS and the other purchasers named on Schedule I thereto ("Securities Purchase Agreement"); (v) notwithstanding any other provision hereof to the contrary, a Person shall not be deemed to be an Acquiring Person if, within ten Business Days after the Board of Directors is given written notice that such Person has become an Acquiring Person, the Board of Directors determines in good faith that such Person who would otherwise be an "Acquiring Person" has become such inadvertently and the Board of Directors provides such Person a period not to exceed thirty days to divest a sufficient number of securities so that such Person would no longer be an Acquiring Person, as defined in the foregoing provisions of this paragraph (a), and such Person has so divested prior to the end of such period. Notwithstanding anything in this Agreement to the contrary, the term "then outstanding," when used with reference to a Person's beneficial ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to beneficially own hereunder. 2. Subsection (b) of Section 1 is hereby amended by adding at the end of subsection (b) the following: Notwithstanding the foregoing, (i) no Affiliate or Associate of any of the WCAS Parties that is not a Controlled Entity shall be deemed to be the Beneficial Owner of shares of Common Stock beneficially owned by the WCAS Parties solely by reason of such Person being an Affiliate or Associate of any of the WCAS Parties and (ii) none of the Grant Family Members, on the one hand, and WCAS Parties, on the other hand, shall be deemed to beneficially own the shares of Common Stock beneficially owned by the other as a result of (A) the execution, delivery and performance of the Voting Agreement dated August 31, 2001 between certain WCAS Parties and certain Grant Family Members or (B) compliance by the Company and any of the WCAS Parties with Section 6.02 of the Securities Purchase Agreement. 3. Subsection (y) of Section 1 is hereby deleted in its entirety, and the following new subsection (y) is hereby inserted in lieu thereof: (y) "Prior Written Approval" shall mean the prior express written consent of the Company to any Person becoming an Acquiring Person, executed on behalf of the Company by a duly authorized officer of the Company following express approval by action of the 2 Board of Directors (and approval of a majority of the Non-WCAS Directors with respect to WCAS or any Controlled Entity becoming an Acquiring Person and approval of a majority of the WCAS Directors with respect to any Grant Family Member becoming an Acquiring Person), provided that all conditions precedent and subsequent established by the Board of Directors (and not waived by the Board of Directors prior to violation of any such condition) in connection with such approval shall be satisfied. 4. Section 1 is hereby amended to include the following new subsection after subsection (pp): (qq) "Controlled Entity" shall mean any entity in which any one or more of the WCAS Parties owns a majority of the voting shares or securities or has the ability (whether through the ownership of voting securities, contract or otherwise) to elect a majority of the board of directors or similar governing body or of which any one or more of the WCAS Parties has the authority to control or direct investment decisions. 5. Section 1 is hereby amended to include the following new subsection after subsection (qq): (rr) "WCAS Director" shall mean each member of the Board of Directors who is: (i) directly elected by the Series B-1 Preferred Stock and/or Series C-1 Preferred Stock of the Company or (ii) nominated or designated for nomination by the Purchaser Representative (as defined in such agreement) pursuant to Section 6.02 of the Securities Purchase Agreement dated August 31, 2001 among the Company, WCAS and the other purchasers named on Schedule I thereto. 6. Section 1 is hereby amended to include the following new subsection after subsection (rr): (ss) "Non-WCAS Director" shall mean each member of the Board of Directors who is not a WCAS Director. 7. Section 27 is hereby deleted in its entirety, and the following new Section 27 is hereby inserted in lieu thereof: At any time and from time to time prior to the close of business on the tenth Business Day after the Stock Acquisition Date, the Board of Directors, upon vote of a majority of the Board of Directors then in office, may in its sole and absolute discretion amend or supplement this Agreement without the approval of any holders of Rights; provided that any amendment that deletes, modifies, supersedes or otherwise affects Sections 1(a)(iv), 1(y), 1(qq), 1(rr), 1(ss) or 27 shall also require the approval of a majority of the Non-WCAS Directors, and provided, further that any amendment that deletes, modifies, supersedes or otherwise affects Sections 1(a)(iii), 1(y), 1(rr), 1(ss) or 27 shall also require the approval of a majority of the WCAS Directors. At any time and from time to time after the close of business on the tenth Business Day after the Stock Acquisition Date, the Board of Directors, upon vote of a majority of the Board of Directors then in office, may 3 supplement or amend this Agreement without the approval of any holders of the Rights, provided that no such supplement or amendment adversely affects the interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment; provided, however, that the Rights Agent may, but shall not be obligated to, enter into any such supplement or amendment which adversely affects the Rights Agent's own rights, duties or immunities under this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.1 to the Rights Agreement to be duly executed as of the day and year first above written. LABONE, INC. By: /s/ W. Thomas Grant II ____________________________________________ Name: W. Thomas Grant II Title: Chairman of the Board, President and Chief Executive Officer AMERICAN STOCK TRANSFER & TRUST COMPANY By: /s/ Herbert Lemmer ____________________________________________ Name: Herbert J. Lemmer Title: Vice President EX-99 9 exhh.txt VOTING AGREEMENT EXHIBIT H --------- VOTING AGREEMENT VOTING AGREEMENT, dated as of August 31, 2001, between Welsh, Carson, Anderson & Stowe IX, L.P., a Delaware limited partnership ("WCAS") and the holders of the Grant family interest (the "Stockholders"). Capitalized terms used without definition herein having the meanings ascribed thereto in the Purchase Agreement. WHEREAS, concurrently herewith, WCAS is entering into a Securities Purchase Agreement (the "Purchase Agreement") with LabOne, Inc., a Missouri corporation (the "Company") and the several other purchasers named on Schedule I thereto; WHEREAS, each Stockholder is the record and beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of the number of shares of Company Common Stock set forth opposite such Stockholder's name on Schedule I hereto; and WHEREAS, the Purchasers are unwilling to enter into the Purchase Agreement unless the Stockholders enter into this Agreement concurrently with the execution of the Purchase Agreement, and the Stockholders desire and are willing to induce the Purchasers to enter into the Purchase Agreement by their entry into this Agreement; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: SECTION 1. AGREEMENT TO VOTE; IRREVOCABLE PROXY. (a) The Stockholders hereby agree that, during the period commencing on the date hereof and continuing until the termination of this Agreement, at any stockholders' meeting of the Company at which any of the following matters is submitted to a vote of the stockholders, they shall vote (or cause to be voted) their shares of Company Common Stock (or shall execute and deliver a written consent pursuant to Section 351.273 of the Missouri Code): (i) in favor of Company Shareholder Approval; (ii) in favor of any director nominated, appointed or selected as a WCAS Director in accordance with Section 6.02 of the Purchase Agreement; and (iii) against any action which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the approval by the stockholders of the Company of the actions described in (i) and (ii), including any action which seeks to cause the removal of any WCAS Director. (b) WCAS hereby agrees that, during the period commencing on the date hereof and continuing until the termination of this Agreement, at any stockholders' meeting of the Company at which any of the following matters is submitted to a vote of the stockholders, it shall vote (or cause to be voted) its shares of Company Common Stock and Company Preferred Stock voting on an as-converted basis (or shall execute and deliver a written consent pursuant to Section 351.273 of the Missouri Code): 1 (i) in favor of any director nominated, appointed or selected as a Company Director in accordance with Section 6.02 of the Purchase Agreement; and (ii) against any action which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the approval by the stockholders of the Company of the actions described in (i), including any action which seeks to cause the removal of any Company Director. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The Stockholders represent and warrant to the Purchasers as follows: (a) Schedule I sets forth, opposite each Stockholder's name, the number and kind of Voting Securities of which such Stockholder is the record or beneficial owner. Each such Stockholder is the record or beneficial owner of such Securities and has entered into no other voting agreements or commitments with respect thereto, other than the trust instruments, Company stock option agreements and Company employee benefit plans governing the Stockholder's beneficial ownership of such securities. (b) Each Stockholder has full power and authority to make, enter into and carry out the terms of this Agreement. SECTION 3. COVENANTS. The parties to this Agreement hereby agree that they will not make transfers of Company Common Stock to third parties for the purposes of circumventing the voting agreements contained in Section 1 hereof. SECTION 4. EFFECTIVENESS AND TERMINATION. This Agreement shall automatically terminate and be of no further force or effect on August 31, 2008. Upon such termination, except for any rights any party may have in respect of any breach by any other party of its obligations hereunder, none of the parties hereto shall have any further obligation or liability hereunder. SECTION 5. MISCELLANEOUS. (a) Further Assurances. Each party shall execute and deliver such additional instruments and other documents and shall take such further actions as may be necessary or appropriate to effectuate, carry out and comply with all of its obligations under this Agreement. Without limiting the generality of the foregoing, none of the parties hereto shall enter into any agreement or arrangement (or alter, amend or terminate any existing agreement or arrangement) if such action would materially impair the ability of such party to effectuate, carry out or comply with all of the terms of this Agreement. (b) Notices, Etc. All notices, requests, instructions and other documents that are required to be or may be given or delivered pursuant to the terms of this Agreement shall be in writing and shall be sufficient in all respects if delivered by hand or national overnight courier service, transmitted by facsimile or mailed by registered or certified mail, postage prepaid, as follows: If to WCAS, to it at: c/o Welsh, Carson, Anderson & Stowe IX, L.P. 320 Park Avenue Suite 2500 New York, New York 10022-6815 Facsimile: 212-893-9575 with a copy to: Othon A. Prounis, Esq. Reboul, MacMurray, Hewitt, Maynard & Kristol 45 Rockefeller Plaza New York, New York 10111 Facsimile: 212-841-5725 If to the Stockholders, to them at: c/o W. Thomas Grant II 6400 Indian Lane Shawnee Mission, Kansas 66208 with a copy to: Whitney Miller, Esq. Morrison & Hecker L.L.P. 2600 Grand Ave Kansas City, Missouri 64108 Facsimile: 816-474-4208 or to such other address as such party shall have designated by notice received by the other party. (c) Amendments, Waivers, Etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or, except as expressly set forth in Section 4, terminated, except by an instrument in writing signed by each party hereto. (d) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties and their respective successors and assigns; provided, that neither the rights nor the obligations of any party may be assigned or delegated without the prior written consent of the other parties, and provided, further, that this Agreement shall be binding upon transferees of Company Common Stock and Company Preferred Stock who are Affiliates of the transferor with respect to the shares so transferred and shall not be binding upon any transferee who is not an Affiliate of the transferor or any transferee who acquires shares through sales by the transferor in the open market. It shall be a condition to any transfer by a party hereto of shares of Company Common Stock or Company Preferred Stock to an Affiliate of the transferor that the transferee sign an instrument agreeing to be bound by this Agreement. (e) Entire Agreement. This Agreement embodies the entire agreement and understanding among the parties relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. (f) Severability. If any term of this Agreement or the application thereof to any party or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such term to the other parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by applicable law; provided, that in such event, the parties shall negotiate in good faith in an attempt to agree to another provision (in lieu of the term or application held to be invalid or unenforceable) that will be valid and enforceable and will carry out the parties' intentions hereunder. (g) Specific Performance. The parties acknowledge that money damages are not an adequate remedy for violations of this Agreement and that any party may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunctive or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief or any requirement for a bond. (h) Remedies Cumulative. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. (i) No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. (j) No Third Party Beneficiaries. This Agreement is not intended to be for the benefit of and shall not be enforceable by any person or entity who or which is not a party hereto. (k) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto. (l) Governing Law. This Agreement and all disputes arising out of or relating to this Agreement, its subject matter, the performance by the parties of their respective obligations hereunder or the claimed breach hereof, whether in tort, contract or otherwise, shall be governed by and construed in accordance with the internal laws of the State of Missouri without giving effect to its choice of law principles. IN WITNESS WHEREOF, the parties have duly executed this Voting Agreement as of the date first above written. WELSH, CARSON, ANDERSON & STOWE IX, L.P. BY: WCAS IX Associates LLC, Its General Partner By: /s/ Jonathan M. Rather ____________________________________ Name: Jonathan M. Rather Title: Managing Member /s/ W. D. Grant _________________________________________ W.D. GRANT, as trustee of the Trusts for which he is acting as Trustee identified on Schedule I UMB BANK, N.A., as Trustee of the Trusts for which it is acting as Trustee identified on Schedule I BY: /s/ Earl D. Tjaden ____________________________________ Name: Earl D. Tjaden Title: Senior Vice President Attest: /s/ Kevin Conley ________________________________ Name: Kevin Conley Title: Assistant Secretary /s/ W. Thomas Grant II _________________________________________ W. THOMAS GRANT II, individually, as Custodian for his children under the Kansas UGTMA and as Trustee of the Trust for which he is listed as Trustee on Schedule I /s/ Laura G. Gamble _________________________________________ LAURA G. GAMBLE, as Trustee of the Trust for which she is listed as Trustee on Schedule I SCHEDULE I Company Common Stock Ownership - -------------------------------------------------------- ---------------------- Number of Shares Record/Beneficial Owner Beneficially Owned - -------------------------------------------------------- ---------------------- - -------------------------------------------------------- ---------------------- Frances D. Grant Trust dated September 29, 1964 for the benefit of W. D. Grant (Account Number 24-0039-00-8) 60,649 W. D. Grant and UMB Bank, N.A., Co-trustees - -------------------------------------------------------- ---------------------- Frances D. Grant Trust dated December 24, 1958 for the benefit of W.D. Grant (Account Number 23-2305-00-3) 168,234 W. D. Grant and UMB Bank, N.A., Co-trustees - -------------------------------------------------------- ---------------------- William D. Grant Restatement of Trust Agreement dated April 12, 1992 901,695 W. D. Grant, Trustee - -------------------------------------------------------- ---------------------- Frances D. Grant Trust dated September 29, 1964 for the benefit of Frances Peterson (Account Number 24-0042-00-2) 60,648 W. D. Grant and UMB Bank, N.A., Co-trustees - -------------------------------------------------------- ---------------------- Frances D. Grant Trust dated December 24, 1958 for the benefit of Frances Peterson (Account Number 24-2303-00-8) 126,924 W. D. Grant and UMB Bank, N.A., Co-trustees - -------------------------------------------------------- ---------------------- W.T. Grant Testamentary Trust for Frances Peterson dated November 19, 1953 (Account Number 22-0226-00-5) 356,940 UMB Bank, N.A. and W. D. Grant Co-Trustees - -------------------------------------------------------- ---------------------- Frances D. Grant Trust dated September 29, 1964 for Barbara Coyle, heir to Lucy Latimer (Account Number 24-0040-00-6) 60,649 UMB Bank, N.A. and W. D. Grant Co-Trustees - -------------------------------------------------------- ---------------------- W. D. Grant Trust for the benefit of Frances Peterson, dated February 4, 1977 67,500 W. Thomas Grant II and Laura Grant Gamble, Co-Trustees - -------------------------------------------------------- ---------------------- W. Thomas Grant II as custodian for his children under Kansas UGTMA. 31,773 - -------------------------------------------------------- ---------------------- W. Thomas Grant II individually 172,145 - -------------------------------------------------------- ---------------------- Total Beneficial Ownership 2,007,157 --------- EX-99 10 exhi.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT I --------- REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT dated as of August 31, 2001 among LABONE, INC., a Missouri corporation (the "Company"), WELSH, CARSON, ANDERSON & STOWE IX, L.P., a Delaware limited partnership ("WCAS"), and the several other persons listed on the signature pages hereto (together with WCAS and their respective successors and assigns, each individually an "Investor" and collectively, the "Investors"). Defined terms used herein but not otherwise defined herein shall have the meanings provided for them in the Securities Purchase Agreement referred to below. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Investors and the Company are party to a Securities Purchase Agreement dated as of August 31, 2001 (the "Securities Purchase Agreement") pursuant to which the Company has agreed to (A) sell to the Investors, the Series B-1 Preferred Shares, the Series B-2 Preferred Shares, the Initial Warrants and the Series A Notes and (B) grant to the Investors certain rights to acquire, subject to the terms and conditions set forth in the Securities Purchase Agreement, (i) the Series C-1 Preferred Shares and/or the Series C-2 Preferred Shares and (ii) the Series B Notes and the Additional Warrants (together with the Initial Warrants, the "Warrants"); and WHEREAS, in order to induce the Investors to enter into the Securities Purchase Agreement and to consummate the transactions contemplated thereby, the Company has agreed to grant to the Investors the registration rights set forth herein with respect to (A) the Series B-1 Preferred Shares, the Series B-2 Preferred Shares, the Series C-1 Preferred Shares, the Series C-2 Preferred Shares (collectively, the "Preferred Shares") and (B) the shares of common stock, par value $.01 per share, of the Company ("Common Stock") issuable upon conversion of the Preferred Shares and the exercise of the Warrants; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings set forth below: "Commission" means the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "Exchange Act" means the Securities Exchange Act of 1934, or any successor federal statute, and the rules and regulations of the Commission thereunder, as the same shall be in effect at the time. "Registrable Stock" means, at any time, (i) the Series B-1 Preferred Shares, the Series B-2 Preferred Shares, the Series C-1 Preferred Shares and the Series C-2 Preferred Shares, (ii) the Series B-1 Preferred Shares issuable upon conversion of the Series B-2 Preferred Shares, (iii) the Series C-1 Preferred Shares issuable upon conversion of the Series C-2 Preferred Shares, (iv) the Common Stock issuable upon conversion or exchange of the Series B-1 Preferred Shares (including any shares issued upon conversion of the Series B-2 Preferred Shares) and/or the Series C-1 Preferred Shares (including any shares issued upon conversion of the Series C-2 Preferred Shares) under the terms of the certificates of designation relating thereto, (v) the Common Stock issuable upon exercise of the Warrants and (vi) any shares of stock issuable with respect to the foregoing by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise, in each case only so long as such shares have not been sold by the Investors to the public pursuant to an effective registration statement under, or pursuant to Rule 144 under, the Securities Act. "Securities Act" means the Securities Act of 1933, or any successor federal statute, and the rules and regulations of the Commission thereunder, as the same shall be in effect at the time. SECTION 2. Registration Rights. (a) Demand Registration Rights. Subject to paragraph 2(c) below, if the Company shall at any time be requested by a majority-in-interest of the Investors, in a writing that states the number and kind of shares of Registrable Stock to be sold and the intended method of disposition thereof (each such written request, a "Demand Request"), to effect a registration under the Securities Act of all or any portion of the Registrable Stock then held by such requesting Investors, the Company shall immediately notify in writing (each such notice, a "Demand Registration Notice") each Investor (other than the requesting Investors) of such proposed registration and shall use its reasonable best efforts to register under the Securities Act (each such registration, a "Demand Registration"), for public sale in accordance with the method of disposition specified in such Demand Request, the number and kind of shares of Registrable Stock specified in such Demand Request (plus the number and kind of shares of Registrable Stock specified in any written requests for registration of shares of Registrable Stock that are received from other Investors receiving the Demand Registration Notice within 30 days after receipt by such other Investors of such Demand Registration Notice); provided, that no Investor or group of Investors shall have the right to request a Demand Registration unless the reasonably anticipated aggregate net proceeds to the requesting Investor(s) (which shall be specified in the Demand Request delivered in connection therewith) exceeds $2,500,000. The Company shall not be obligated pursuant to this paragraph 2(a) to effect more than two Demand Registrations. (b) Short-Form Registration Rights. The Company shall use its reasonable best efforts to continue to qualify at all times for registration of secondary offerings on Form S-3 or any successor thereto. Subject to Section 2(c) below, if (x) the Company is eligible to register shares of Registrable Stock on Form S-3 or a successor form and (y) it is requested by one or more 2 Investor(s), in a writing that states the number and kind of shares of Registrable Stock to be sold and the intended method of disposition thereof (each such written request, a "Short Form Request"), to effect a registration on Form S-3 or such successor form (a "Short Form Registration") of all or any portion of the Registrable Stock then held by such requesting Investor, the Company shall immediately notify in writing (each such notice, a "Short Form Registration Notice") each Investor (other than the requesting Investors) of such proposed registration and shall use its reasonable best efforts to register on Form S-3 or such successor form, for public sale in accordance with the method of disposition specified in such Short Form Request, the number and kind of shares of Registrable Stock specified in such Short Form Request (plus the number and kind of shares of Registrable Stock specified in any written requests for registration of shares of Registrable Stock that are received from other Investors receving the Short Form Registration Notice within 30 days after receipt by such other Investors of such Short Form Registration Notice); provided, that no Investor or group of Investors shall have the right to request a Short Form Registration unless the reasonably anticipated aggregate net proceeds to the requesting Investor(s) (which shall be specified in the Short Form Request delivered in connection therewith) exceeds $2,500,000. (c) Certain Provisions Relating to Demand Registrations and Short Form Registrations. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be obligated to effect any registration under Section 2(a) or 2(b) above except in accordance with the following provisions: (i) the obligations of the Company under Section 2(a) or 2(b) above, as the case may be, to effect a registration shall be deemed satisfied only (A) when a registration statement covering all of the shares of Registrable Stock specified (except that such number of shares may be reduced, if necessary, pursuant to Section 2(c)(iii) by up to twenty (20%) percent) in the applicable Demand Request or Short Form Request, as the case may be, and in each notice delivered by any other Investor requesting registration of Registrable Stock in response to the Demand Registration Notice or Short Form Registration Notice, as the case may be, for sale in accordance with the intended method of disposition specified by the requesting Investors, shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, (x) all such shares of Registrable Stock shall have been sold pursuant thereto or (y) all of the conditions to closing specified in the underwriting agreement shall have been satisfied or shall not have been satisfied solely as a result of an act or omission of an Investor or (B) if a Demand Request or Short-Form Demand Request is withdrawn at any time by Investors other than as a result of a material adverse change in the business, results of operations, financial condition or prospects of the Company or other than pursuant to paragraph 2(f) hereof following receipt of a Deficiency Notice; (ii) so long as the Company has provided written notice to each Investor in compliance with Section 2(d) below of a prior registration statement or of its good faith intention to file within thirty (30) days thereafter a registration statement pursuant to which shares of Common Stock or any other equity securities (or other securities convertible into equity securities) of the Company are to be (or were to be) sold to the 3 public (other than a registration statement on Form S-4 or Form S-8 promulgated under the Securities Act (or any successor forms thereto) or any other form not available for registering the Registrable Stock for sale to the public), the Company shall not be obligated under Section 2(a) or 2(b) above to file and cause to become effective any registration statement if such prior registration statement was filed prior to the delivery of the applicable Demand Request or Short Form Request or is filed within thirty (30) days after such Demand Request or Short Form Request, as the case may be (and such prior registration statement has not been withdrawn); provided, that the Company shall not be permitted to delay a requested registration under Section 2(a) or 2(b) above in reliance on this Section 2(c)(ii) for more than 90 days following the effective date of such registration statement or more than once in any twelve month period; (iii) if the proposed method of disposition specified by the requesting Investors shall be an underwritten public offering, the number of shares of Registrable Stock to be included in such an offering may be reduced (pro rata among the Investors seeking to include Registrable Stock in such offering based on the number of shares of Registrable Stock so requested to be registered by such Investors) if and to the extent that, in the good faith opinion of the managing underwriter of such offering, inclusion of all shares would adversely affect the marketing (including, without limitation, the offering price) of the Registrable Stock to be sold; provided, that the number of shares of Registrable Stock to be included therein by the Investors may not be reduced if any other securities are to be included in such offering on behalf of Company or any other person; (iv) in the event that the proposed method of disposition specified by the requesting Investors shall be an underwritten public offering, the managing underwriter (which shall be a nationally recognized investment banking firm reasonably acceptable to the Company) shall be selected by a majority-in-interest of the Investors seeking to include Registrable Stock in such offering; (v) the Company shall be entitled to include in any registration referred to in Section 2(a) or 2(b) above, as the case may be, for sale in accordance with the method of disposition specified by the requesting Investors, shares of Common Stock to be sold by the Company for its own account, except as and to the extent that, in the opinion of the managing underwriter of such offering (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing (including, without limitation, the offering price) of the Registrable Stock to be sold; (vi) except as provided in Section 2(c)(ii) and Section 2(c)(v) above and except for registrations on Forms S-4 or S-8 or any successor form, the Company will not effect any other registration of its Common Stock or any other equity securities (or other securities convertible into equity securities) of the Company, whether for its own account or that of other holder(s), from the date of receipt of a Demand Request or the date of receipt of a Short Form Request, as the case may be, until the completion of the period of distribution of the registration contemplated thereby; 4 (vii) if any Investor (other than the requesting Investors) requests that some or all of such Investor's shares of Registrable Stock be included in an offering initiated pursuant to Section 2(a) or 2(b) above, and the registration is to be, in whole or in part, an underwritten public offering, such request by such other Investor shall specify that such Investor's Registrable Stock is to be included in the underwriting on the same terms and conditions as the shares of Registrable Stock otherwise being sold through the underwriter; and (viii) if, while a Demand Request or Short-Form Request is pending, the Company determines in good faith that the filing of a registration statement would require the disclosure of a material transaction or another set of material facts and such disclosure would either have a material adverse effect on such material transaction or the Company and its subsidiaries (taken as a whole), then the Company shall not be required to effect a registration pursuant to Section 2(a) or 2(b) above, as the case may be, until the earlier of (A) the date upon which such material information is otherwise disclosed to the public or ceases to be material and (B) 90 days after the Company makes such good faith determination; provided, that the Company shall not be permitted to delay a requested registration under Section 2(a) or 2(b) above in reliance on this Section 2(c)(viii): (x) more than twice in any consecutive twelve-month period or for more than an aggregate of 90 days in any consecutive twelve-month period, (y) unless all directors and senior officers of the Company have also agreed to refrain from selling, exercising, or converting any equity securities, or other securities convertible into equity securities, of the Company they may own during the period of such delay and (z) within a six-month period after the Company has delayed a requested registration pursuant to Section 2(c)(ii) above or an Investor is required to refrain from selling Registrable Stock pursuant to Section 2(e) hereof. (d) Piggyback Registration Rights. If at any time the Company proposes to register any of its Common Stock or any other equity securities (or other securities convertible into equity securities) of the Company under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (other than a registration on Form S-4 or Form S-8 promulgated under the Securities Act (or any successor forms thereto) or any other form not available for registering the Registrable Stock for sale to the public), it will give written notice (each such notice a "Piggyback Notice") at such time to each Investor of its intention to do so. Upon the written request of any Investor, given within 30 days after receipt by such Investor of the Piggyback Notice, to register any of its Registrable Stock (which request shall state the amount and kind of Registrable Stock to be so registered and the intended method of disposition thereof), the Company will use its reasonable best efforts to cause the Registrable Stock, as to which registration shall have been so requested, to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition by such Investor (in accordance with its written request) of such Registrable Stock so registered; provided, that nothing herein shall prevent the Company from abandoning or delaying such registration at any time. In the event that any registration referred to in this Section 2(d) shall be, in whole or in part, an underwritten public offering, such Registrable Stock shall be included in the underwriting on the same terms and 5 conditions as the shares otherwise being sold through underwriters under such registration. The number of shares of Registrable Stock to be included in such an underwritten offering may be reduced (pro rata among the requesting Investors based upon the number of shares of Registrable Stock so requested to be registered), but only after any amounts requested to be included by security holders other than the Company have been reduced to zero and if and to the extent that the managing underwriter of such offering shall be of the good faith opinion that such inclusion would adversely affect the marketing (including, without limitation, the offering price) of the securities to be sold by the Company in such offering. (e) Holdback Agreement. Notwithstanding anything to the contrary contained in this Agreement, (A) if there is a firm commitment underwritten public offering of securities of the Company pursuant to a registration covering Registrable Stock and an Investor is offered an opportunity to sell in compliance with Section 2(a), 2(b) or 2(d) above, as applicable, but does not elect to sell its Registrable Stock to the underwriters of the Company's securities in connection with such offering, such Investor shall refrain from selling such Registrable Stock during the period of distribution of the Company's securities by such underwriters and the period in which the underwriting syndicate participates in the after market; provided, that such Investor shall, in any event, be entitled to sell its Registrable Stock commencing on the 90th day after the effective date of such registration statement; and (B) if there is a firm commitment underwritten public offering of securities of the Company by the Company, each Investor agrees that, except to the extent otherwise permitted to participate in such offering pursuant to Section 2(d) above, upon the request of the managing underwriter in such offering, such Investor shall not sell Registrable Stock held by such Investor for a period of 90 days from the effective date of the registration statement relating thereto. (f) Certain Registration Procedures. If and whenever the Company is required by the provisions of this Section 2 to use its reasonable best efforts to effect the registration of Registrable Stock under the Securities Act, the Company will, as expeditiously as possible: (i) prepare (and afford counsel for the selling Investors reasonable opportunity to review and comment thereon) and file with the Commission a registration statement with respect to such securities and use its reasonable best efforts to cause such registration statement to become and remain effective for the period of distribution contemplated thereby (determined as hereinafter provided); (ii) prepare (and afford counsel for the selling Investors reasonable opportunity to review and comment thereon) and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period of distribution contemplated thereby (determined as hereinafter provided) and comply with the provisions of the Securities Act with respect to the disposition of all Registrable Stock covered by such registration statement in accordance with the selling Investors' intended method of disposition set forth in such registration statement for such period of distribution; 6 (iii) furnish to each selling Investor and to each underwriter such number of copies of the registration statement and the prospectus included therein (including, without limitation, each preliminary prospectus) as such persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Stock covered by such registration statement; (iv) use its reasonable best efforts to register or qualify the Registrable Stock covered by such registration statement under the securities or blue sky laws of such jurisdictions as the sellers of Registrable Stock or, in the case of an underwritten public offering, the managing underwriter, shall reasonably request; provided, that the Company will not be required to (x) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 2(f)(iv), (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any jurisdiction; (v) immediately notify each selling Investor under such registration statement and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (vi) use its reasonable best efforts (if the offering is underwritten) to furnish, at the request of any selling Investor, on the date that Registrable Stock is delivered to the underwriters for sale pursuant to such registration: (A) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to each selling Investor, stating that such registration statement has become effective under the Securities Act and that (1) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (2) the registration statement, the related prospectus, and each amendment or supplement thereof, comply as to form in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder (except that such counsel need express no opinion as to financial statements, the notes thereto, and the financial schedules and other financial and statistical data contained therein) and (3) to such other effects as may reasonably be requested by counsel for the underwriters or by the selling Investors or their counsel, and (B) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including, without 7 limitation, information as to the period ending no more than five business days prior to the date of such letter) with respect to the registration in respect of which such letter is being given as such underwriters or such selling Investors may reasonably request; and (vii) make available for inspection by each selling Investor, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by the selling Investors or underwriters, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any of such selling Investors, underwriters, attorneys, accountants or agents in connection with such registration statement and permit such selling Investors, underwriters, attorneys, accountants or agents to participate in the preparation of such registration statement. For purposes of Sections 2(f)(i) and 2(f)(ii) above (as well as Sections 2(c)(vi) and 2(e) above), the "period of distribution" of Registrable Stock in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Registrable Stock in any other registration shall be deemed to extend until the sale of all Registrable Stock covered thereby, but in either case, such period shall not extend beyond the 90th day after the effective date of the registration statement filed in connection therewith. If an Investor receives a notification from the Company pursuant to Section 2(f)(v) that a registration statement or prospectus contains an untrue statement or omission (a "Deficiency Notice"), then such Investor shall: (i) keep the fact of such notification and its contents confidential and (ii) immediately suspend all sales of securities of the Company and any use of the registration statement or prospectus as to which the notification applies, until such time as such Investor receives notification (a "Cure Notice") from the Company that an amendment to the registration statement or a supplement to the prospectus has been filed correcting said untrue statement or omission. In the event the Company shall give a Deficiency Notice, (x) the maximum time period for the period of distribution set forth above shall be extended by the number of days during the period from and including the date of the giving of the Deficiency Notice to and including the date when each such Investor shall have received the copies of the supplemented or amended prospectus and (y) unless each such Investor receives a Cure Notice within two (2) business days following its receipt of such Deficiency Notice, then, in the case of a Demand Registration, the majority-in-interest of the Investors requesting such Demand Registration may withdraw their Demand Request and preserve it for use at a later date. (g) Information From Selling Investors. In connection with each registration hereunder, Investors selling Registrable Stock will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as shall be reasonably necessary in order to assure compliance with federal and applicable state securities laws. (h) Underwriting Agreement. In connection with any registration pursuant to this Section 2 that covers an underwritten public offering, the Company and Investors selling Registrable Stock each agree to enter into a written agreement with the managing underwriter 8 selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between major underwriters, selling stockholders and a company of the Company's size and investment stature; provided, that (i) such agreement shall not contain any such provision applicable to the Company which is inconsistent with the provisions hereof and (ii) the time and place of the closing under said agreement shall be as mutually agreed upon among the Company, such managing underwriter and, except in the case of a registration pursuant to Section 2(d) above, Investors holding a majority of the Registrable Stock being sold in such offering. (i) Expenses. The Company will pay all Registration Expenses (as defined below) incurred in complying with Section 2 of this Agreement. All Selling Expenses (as defined below) incurred in connection with any registered offering of securities that, pursuant to this Section 2, includes Registrable Stock, shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such persons other than the Company (except to the extent the Company shall be a seller) as they may agree. All expenses incident to performance of or compliance by the Company with Section 2 hereof, including, without limitation, all Commission, stock exchange, Nasdaq or National Association of Securities Dealers, Inc. ("NASD") registration and filing fees (including, without limitation, fees and expenses incurred in connection with the listing of the Common Stock of the Company on any securities exchange or exchanges or Nasdaq), printing, distribution and related expenses, fees and disbursements of counsel and independent public accountants for the Company, all fees and expenses incurred in connection with compliance with state securities or blue sky laws and the rules of the NASD or any securities exchange, transfer taxes and fees of transfer agents and registrars, but excluding any Selling Expenses, are herein called "Registration Expenses". All underwriting discounts and selling commissions and stock transfer taxes applicable to the sale of Registrable Stock are herein called "Selling Expenses". SECTION 3. INDEMNIFICATION RIGHTS AND OBLIGATIONS IN RESPECT OF REGISTERED OFFERINGS OF REGISTRABLE STOCK. (a) Company Indemnification of Selling Investors. In the event of a registration of any of the Registrable Stock under the Securities Act pursuant to Section 2 of this Agreement, the Company will indemnify and hold harmless each seller of Registrable Stock thereunder and each other person, if any, who controls such seller within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, (or actions in respect thereof) to which such seller or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Stock was registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that 9 the Company will not be liable in any such case if and to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such seller or such controlling person in writing specifically for use in such registration statement or prospectus, and provided, further, that the indemnity agreement contained in this Section 3(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld). (b) Selling Investor Indemnification of the Company and the Other Selling Stockholders. In the event of a registration of any of the Registrable Stock under the Securities Act pursuant to Section 2 of this Agreement, each seller of such Registrable Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, and each other seller of Registrable Stock and each person who controls any such other seller of Registrable Stock, against all losses, claims, damages or liabilities, joint or several, (or actions in respect thereof) to which the Company or such officer or director or underwriter or other seller or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Stock was registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter, other seller of Registrable Stock and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus; provided, further, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not to exceed the proceeds (net of underwriting discounts and commissions) received by such seller from the sale of Registrable Stock covered by such registration statement; provided, further, that the indemnity agreement contained in this Section 3(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of such seller of Registrable Stock (which consent shall not be unreasonably withheld). 10 (c) Indemnification Procedures. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 3. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 3 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding the foregoing, any indemnified party shall have the right to retain its own counsel in any such action, but the fees and disbursements of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party shall have failed to retain counsel for the indemnified person as aforesaid or (ii) the indemnifying party and such indemnified party shall have mutually agreed to the retention of such counsel. It is understood that the indemnifying party shall not, in connection with any action or related actions in the same jurisdiction, be liable for the fees and disbursements of more than one separate firm qualified in such jurisdiction to act as counsel for the indemnified party. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of such indemnified party, which consent shall not be unreasonably withheld, consent to entry of any judgment or enter into any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity was sought hereunder by such indemnified party unless such judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. The indemnification of underwriters provided for in this Section 3 shall be on such other terms and conditions as are at the time customary and reasonably required by such underwriters. (d) Contribution. If the indemnification provided for in Sections 3(a) and 3(b) above is unavailable or insufficient to hold harmless an indemnified party under such Sections in respect of any losses, claims, damages or liabilities or actions in respect thereof referred to therein, then each indemnifying party shall in lieu of indemnifying such indemnified party contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, 11 damages, liabilities or actions in such proportion as appropriate to reflect the relative fault of the Company, on the one hand, and the underwriters and the sellers of such Registrable Stock, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations, including, without limitation, the failure to give any notice under Section 3(c) above. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Company, on the one hand, or the underwriters and the sellers of such Registrable Stock, on the other, and to the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each of the Investors agrees that it would not be just and equitable if contributions pursuant to this Section were determined by pro rata allocation (even if all of the sellers of such Registrable Stock were treated as one entity for such purpose) or by any other method of allocation which did not take account of the equitable considerations referred to above in this Section. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or action in respect thereof, referred to above in this Section, shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section, the sellers of such Registrable Stock shall not be required to contribute any amount in excess of the amount, if any, by which the total price at which the Registrable Stock sold by each of them was offered to the public exceeds the amount of any damages which they are otherwise required to pay by reason of such untrue or alleged untrue statement or omission. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act), shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. SECTION 4. Rule 144. The Company agrees with the Investors it shall file any and all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, or, if the Company is not required to file any such reports, it shall, upon the written request of any Investor, make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the Securities Act. Upon the written request of any Investor, the Company shall promptly furnish to such Investor a written statement by the Company as to its compliance with the reporting requirements set forth in this Section 4. SECTION 5. Duration of Agreement. The provisions of Section 2 of this Agreement shall terminate at such time as the Investors own in the aggregate Registrable Stock or securities convertible into or exerciseable for Registrable Stock constituting less than one percent (1%) of the outstanding Common Stock (on a Common Stock equivalent basis). SECTION 6. Miscellaneous. (a) Additional Registration Rights. Without the consent of a majority-in-interest of the Investors, the Company shall not grant any registration rights to any other person that are inconsistent or conflict with the registration rights granted hereunder. 12 (b) Headings. Headings of sections of this Agreement are inserted for convenience of reference only and shall not affect the interpretation hereof. (c) Severability. Each provision of this Agreement shall be treated as a separate and independent clause, and the unenforceability of any one clause shall in no way impair the enforceability of any of the other clauses contained herein. If one or more of the provisions contained in this Agreement shall for any reason be held to be unenforceable, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with applicable law, and no other provision hereof shall be affected by such holding, limitation or reduction. (d) Benefits of Agreement. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns and nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto, their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. The rights and obligations of the parties hereto shall not be assigned without the consent of the Company, in the case of any assignment by an Investor, or a majority-in-interest of the Investors, in the case of any assignment by the Company, and any attempted assignment in violation of this Section 6(d) shall be null and void; provided, that, the Investors' rights hereunder are assignable to any transferee of the Preferred Shares or the Warrants or any Registrable Stock issued or issuable upon conversion thereof other than (i) transfers pursuant to an effective registration statement under, or pursuant to Rule 144 under, the Securities Act and (ii) transfers of less than one percent (1%) of the Registrable Stock then issued or issuable upon conversion or exercise of outstanding securities, determined on a Common Stock equivalent basis (except any such transfer to any other Investor, any Affiliate of WCAS or, in the case of any Investor other than WCAS, to any family member or trust for the benefit of such Investor or such family members). Notwithstanding the foregoing, such rights may only be assigned provided that the following additional conditions are satisfied: (a) such transfer is effected in accordance with applicable securities laws, (b) such transferee agrees in writing to be subject to the terms of this Agreement as an "Investor" hereunder and (c) the Company is given written notice of such transfer, specifying the name and address of the transferee and identifying the securities transferred with respect to which rights are being assigned. (e) Entire Agreement; Modification. This Agreement together with the Securities Purchase Agreement supercede all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof. This Agreement may not be modified or amended except by a writing signed by the Company and a majority-in-interest of the Investors. Any waiver of any provision of this Agreement must be in a writing signed by the party against whom enforcement of such waiver is sought. (f) Notices. All notices, requests, instructions and other documents that are required to be or may be given or delivered pursuant to the terms of this Agreement shall be in writing and shall be sufficient in all respects if delivered by hand or national overnight courier 13 service, transmitted by facsimile or mailed by registered or certified mail, postage prepaid, as follows: If to the Company, to it at: 10101 Renner Boulevard Lenexa, Kansas 66219 Attention: Joseph C. Benage, Esq. Facsimile: (913) 859-6832 with a copy to: Morrison & Hecker LLP 2600 Grand Avenue Kansas City, MO 64108-4606 Attention: Whitney F. Miller, Esq. Facsimile: (816) 474-4208 If to any Investor, to such Investor: c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, New York 10022-6815 Attention: Paul B. Queally Facsimile: (212) 893-9566 with a copy to: Reboul, MacMurray, Hewitt, Maynard & Kristol 45 Rockefeller Plaza New York, New York 10111 Attention: Othon A. Prounis, Esq. Fax: (212) 841-5725 or such other address or addresses as any party hereto shall have designated by notice in writing to the other parties hereto. Such notices, requests, instructions and other documents shall be deemed given or delivered (i) five business days following sending by registered or certified mail, postage prepaid, (ii) one business day following sending by national overnight courier service, (iii) when sent, if sent by facsimile (but only if such facsimile is actually received) or (iv) when delivered, if delivered by hand. (g) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any or all such counterparts may be executed by facsimile. 14 (h) Changes in Registrable Stock. If, and as often as, there are any changes in the Registrable Stock by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof as may be required so that the rights and privileges granted hereby shall continue with respect to the Registrable Stock as so changed and the Company shall make appropropriate provision in connection with any merger, consolidation, reorganization or recapitalization that any successor to the Company (or resulting Parent thereof) shall agree, as a condition to the consummation of any such transaction, to expressly assume the Company's obligations hereunder. (i) Specific Performance. Each party hereto agrees that a remedy at law for any breach or threatened breach by such party of this Agreement would be inadequate and therefore agrees that any other party hereto shall be entitled to specific performance of this Agreement in addition to any other available rights and remedies in case of any such breach or threatened breach. (j) Governing Law. This Agreement and all disputes arising out of or relating to this Agreement, its subject matter, the performance by the parties of their respective obligations hereunder or the claimed breach hereof, whether in tort, contract or otherwise, shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to its choice of law principles. (k) Interpretation. As used herein, the words "hereof", "herein", "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and the word "Section" refers to a Section of this Agreement unless otherwise specified. Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation". The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. References herein to a "majority-in-interest" of the Investors or to a"majority-in-interest" of the requesting Investors shall refer to those Investors holding a majority of the shares of Registrable Stock or securities convertible into or exchangeable for Registrable Stock (determinated on a Common Stock equivalent (i.e., as converted, as exercised) basis) held by all such Investors or requesting Investors, as the case may be. [signature pages follow] 15 IN WITNESS WHEREOF, the Company and the Investors have executed this Registration Rights Agreement as of the day and year first above written. The Company: ----------- LABONE, INC. By: /s/ W. Thomas Grant II ---------------------------------- Name: W. Thomas Grant II Title: President The Investors: ------------- WELSH, CARSON, ANDERSON & STOWE IX, L.P. By: WCAS IX Associates LLC, Its General Partner By: /s/ Jonathan M. Rather ---------------------------------- Jonathan M. Rather Managing Member WCAS MANAGEMENT CORPORATION By: /s/ Jonathan M. Rather ---------------------------------- Jonathan M. Rather Treasurer Patrick J. Welsh Russel Carson Bruce K. Anderson Thomas E. McInerney Robert A. Minicucci Lawrence B. Sorrel Anthony J. De Nicola Paul B. Queally IRA FBO Jonathan M. Rather D. Scott Mackesy Sanjay Swani John D. Clark IRA FBO James R. Mathews Sean Traynor John Almeida Eric J. Lee By: /s/ Jonathan M. Rather ---------------------------------- Jonathan M. Rather as Attorney-in-Fact -----END PRIVACY-ENHANCED MESSAGE-----