As filed with the Securities and Exchange Commission on November 12, 2004
Registration No. 333-118919
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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LABONE, INC.
(Exact name of registrant as specified in its charter)
-------------------------
Missouri 43-1039532
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
10101 Renner Boulevard
Lenexa, Kansas 66219
(913) 888-1770
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
-------------------------
Joseph C. Benage
Executive Vice President, General Counsel and Secretary
LabOne, Inc.
10101 Renner Boulevard
Lenexa, Kansas 66219
(913) 888-1770
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
-------------------------
Copy to:
James S. Swenson, Esq.
Stinson Morrison Hecker LLP
1201 Walnut
Suite 2800
Kansas City, Missouri 64106
(816) 691-2600
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 2004
PROSPECTUS
LabOne
LabOne, Inc.
$103,500,000
Principal Amount of 3.50% Convertible Senior Debentures Due 2034
--------------------
Common Stock Issuable upon Conversion of the Debentures
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We issued and sold $103,500,000 aggregate principal amount of 3.50%
Convertible Senior Debentures Due 2034 in a private offering completed in July
2004. This prospectus may be used by selling security holders to sell the
Debentures and common stock issuable upon conversion of the Debentures. The
shares of common stock include preferred stock purchase rights attached to the
common stock under our stockholder rights plan. We will not receive any proceeds
from the offering of these securities by the selling security holders.
The Debentures are our senior unsecured obligations and will rank equally in
right of payment with all of our other existing and future obligations that are
unsecured and unsubordinated. We will pay interest on the Debentures on June 15
and December 15 of each year, beginning December 15, 2004.
Each $1,000 principal amount of the Debentures will be convertible at the
security holder's option prior to stated maturity only under the following
circumstances:
[] during any fiscal quarter commencing after September 30, 2004, if the
closing sale price of our common stock for at least 20 trading days in the
30 trading-day period ending on the last trading day of the preceding
fiscal quarter exceeds 130% of the conversion price on that 30th trading
day; or
[] subject to certain exceptions, during the five business day period after
any five consecutive trading-day period in which the trading price per
Debenture for each day of such measurement period was less than 98% of the
product of the closing sale price of our common stock and the conversion
rate then in effect; or
[] if we have called the Debentures for redemption; or
[] upon the occurrence of certain specified corporate transactions.
The initial conversion rate is 25.4463 shares of our common stock per $1,000
principal amount of Debentures (equivalent to a conversion price of
approximately $39.30 per share), subject to adjustment upon certain events. Upon
conversion, we will deliver cash equal to the lesser of the aggregate principal
amount of Debentures to be converted and our conversion obligation, and common
stock in respect of the remainder, if any, of our conversion obligation. If
certain corporate transactions occur on or prior to June 15, 2009, we will
increase the conversion rate by a number of additional shares of common stock as
described in this prospectus.
The Debentures mature on June 15, 2034. We may redeem some or all of the
Debentures for cash on or after June 20, 2009. You may require us to repurchase
for cash all or a portion of your Debentures on June 15, 2011, June 15, 2014 and
June 15, 2024 or, subject to specified exceptions, upon a designated event (as
defined in this prospectus) at a purchase price of 100% of the principal amount
of the Debentures, plus accrued but unpaid interest, including liquidated
damages, if any.
We do not presently intend to apply for listing of the Debentures on any
securities exchange or for inclusion of the Debentures on any automated
quotation system. The Debentures are eligible for designation in the PORTAL(R)
Market of NASD, Inc. Debentures sold using this prospectus, however, will no
longer be eligible for trading in the PORTAL(R) Market. Shares of our common
stock are traded on The Nasdaq National Market under the symbol "LABS". The last
reported sale price of our common stock on November 10, 2004 was $29.98 per
share.
Investing in these securities involves risks.
See "Risk Factors" beginning on page 8.
----------------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is _______________, 2004.
TABLE OF CONTENTS
Page
----
ABOUT THIS PROSPECTUS.........................................................ii
FORWARD-LOOKING STATEMENTS....................................................ii
SUMMARY........................................................................1
RISK FACTORS...................................................................8
RATIO OF EARNINGS TO FIXED CHARGES............................................18
USE OF PROCEEDS...............................................................18
DESCRIPTION OF CREDIT FACILITY................................................19
DESCRIPTION OF DEBENTURES.....................................................21
DESCRIPTION OF CAPITAL STOCK..................................................42
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS...............................46
SELLING SECURITY HOLDERS......................................................52
PLAN OF DISTRIBUTION..........................................................55
LEGAL MATTERS.................................................................57
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................................57
WHERE YOU CAN FIND MORE INFORMATION...........................................57
i
ABOUT THIS PROSPECTUS
This prospectus is part of a resale registration statement that we have filed
with the Securities and Exchange Commission using a "shelf" registration
process. Under this prospectus, as it may be amended or supplemented from time
to time, the selling security holders may sell some or all of the securities
described in this prospectus in one or more transactions from time to time.
You should rely only on the information contained or incorporated by
reference in this prospectus and any prospectus supplement. We have not
authorized anyone else to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. You should assume that the information appearing in this prospectus and any
prospectus supplement, as well as the information we file with the Securities
and Exchange Commission and incorporate by reference in this prospectus or any
prospectus supplement, is accurate only as of the date of the documents
containing the information. The securities covered by this prospectus are not
offered in any jurisdiction where offers to sell, or solicitations of offers to
purchase, such securities are unlawful.
In this prospectus, unless the context otherwise requires, the terms "LabOne,
Inc.," "company," "we " "us" and "our" refer only to LabOne, Inc. and not our
subsidiaries, except that, for purposes of the information under "Summary-- Our
Business" below and "Risk Factors-- Risks Related to Our Business", the terms
"LabOne, Inc.," "company," "we," "us" and "our" refer to LabOne, Inc. and its
subsidiaries unless the context otherwise requires. Investors should be aware
that LabOne, Inc.' s subsidiaries are not guaranteeing the Debentures.
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement and the documents incorporated by
reference may contain "forward-looking statements," including, but not limited
to, statements of plans and objectives, statements of future economic
performance and statements of assumptions underlying such statements, and
statements of the company's or management's intentions, hopes, beliefs,
expectations or predictions of the future. In particular, forward-looking
statements include, but are not limited to, statements relating to the
following:
[] our ability to implement our growth strategy;
[] our ability to integrate newly acquired companies;
[] our ability to deliver high quality, timely test results; and
[] our ability to maintain competitive pricing.
Forward-looking statements are not guarantees of future performance or
results. Forward-looking statements are based on estimates, forecasts and
assumptions involving risks and uncertainties that could cause actual results or
outcomes to differ materially from those expressed or implied in such
forward-looking statements. The uncertainties, risks and assumptions referred to
above include, but are not limited to, the following:
[] general economic, financial and market conditions and the duration and
extent of any future economic downturns;
[] the cost of borrowing, availability of credit and terms of and
compliance with debt covenants;
[] changes in economic conditions;
[] renewal of sources of funding as they expire and the availability of
replacement funding;
[] technological changes that could reduce the demand for the services we
provide;
[] our ability to effectively compete for market share;
[] our ability to generate growth;
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[] retention of key executives and personnel;
[] the collectibility of receivables and adequacy of our allowance for
credit losses;
[] changes in laws and regulations to which we are subject;
[] the outlook for markets we serve; and
[] the other risks and uncertainties as are described under "Risk Factors" in
this prospectus, and as may be detailed under "Risk Factors" or "Factors
Affecting Future Performance" or otherwise from time to time in our public
filings with the Securities and Exchange Commission.
All of our forward-looking statements, whether written or oral, are expressly
qualified by these cautionary statements and any other cautionary statements
that may accompany such forward-looking statements. In addition, except to
fulfill our obligations under applicable securities laws, we disclaim any
obligation to update any forward-looking statements.
iii
SUMMARY
The following summary is not intended to be a complete description of the
matters covered in this prospectus and is subject to and is qualified in its
entirety by the more detailed information and historical consolidated financial
statements, including the notes to those financial statements, appearing
elsewhere or incorporated by reference in this prospectus. Investors should
carefully consider the information set forth under "Risk Factors."
Our Business
We are a diagnostic services provider. The services and information we and
our subsidiaries provide include: risk assessment information services for the
life insurance industry; diagnostic health care testing; and substance abuse
testing services and related employee qualification products. Our business plan
is to be the premier provider of certified and accredited, cost effective
laboratory and information services to life and health insurance companies,
employers, third party administrators ("TPAs"), government agencies, hospitals,
physician practices and occupational health clinics.
Our risk assessment services comprise underwriting support services to the
life insurance industry including teleunderwriting, specimen collection and
paramedical examinations, laboratory testing, telephone inspections, motor
vehicle reports and medical record retrieval. The laboratory tests performed and
data gathered by us are specifically designed to assist an insurance company in
objectively evaluating the mortality and morbidity risks posed by policy
applicants. The majority of the testing is performed on specimens of individual
life insurance policy applicants, but also includes specimens of individuals
applying for individual and group medical and disability policies.
Our clinical services include laboratory testing services for the health care
industry as an aid in the diagnosis and treatment of patients. We operate highly
automated and centralized laboratory facilities, which we believe give us
significant economic advantages over other laboratory competitors. We market our
clinical testing services to managed care companies, insurance companies,
self-insured groups, hospitals and physicians.
Our clinical services also include substance abuse testing provided to
employers to support their drug free workplace programs. We are certified by the
Substance Abuse and Mental Health Services Administration ("SAMHSA") to perform
substance abuse testing services for federally regulated employers and currently
market these services throughout the country to both regulated and nonregulated
employers. Additionally, we can provide background checks, social security
number verification and other pre-employment data required by employers. Our
rapid turnaround times and multiple testing options help clients reduce downtime
for affected employees and meet mandated drug screening guidelines.
On January 4, 2004, we acquired, for $43.9 million in cash, substantially all
of the assets associated with the core laboratory operations of The Health
Alliance of Greater Cincinnati (the "Health Alliance"). The core laboratory
operations acquired provide outreach laboratory testing services for physicians
in the Greater Cincinnati area and reference laboratory testing for the six
hospitals affiliated with the Health Alliance. In connection with the
acquisition, we entered into a long-term service agreement to provide reference
testing to the Health Alliance hospitals and management of their six immediate
response laboratories. The service agreement has an initial term of five years
and is automatically renewable for a further two years at the expiration of the
initial term or each renewal term, unless either party gives written notice of
non-renewal at least 90 days prior to the end of the applicable term. The
acquisition was financed through our existing line of credit.
On March 1, 2004, we acquired substantially all of the net assets of the drug
testing division, Northwest Toxicology, of NWT Inc. for $12.2 million in cash,
subject to post-closing adjustments, if any, to beginning working capital. The
acquisition was financed through our existing line of credit.
In connection with our acquisition of the core laboratory operations of the
Health Alliance, we entered into a lease for the Health Alliance's laboratory
facility in Cincinnati, Ohio. This facility is approximately 71,500 square feet.
The initial term of the lease expires December 31, 2004, and we have an option
to extend the lease. The payments under the lease are $1,071,810 per year. We
plan to move the Cincinnati laboratory to a new facility located in Cincinnati,
Ohio. The construction of this facility began in the summer of 2004, and we plan
to occupy the space in the second quarter of 2005. This facility is anticipated
to cost approximately $24 million for land acquisition and construction and to
be
1
furnished and equipped with laboratory testing equipment and technology. We
anticipate that this facility will provide improved backup and disaster recovery
capabilities and better turnaround times for specimens from the eastern region
of the United States. We also anticipate that the new facility will provide us
with a platform to expand our clinical business in the eastern region of the
United States and will increase our anatomic pathology capabilities.
Our business strategy is to grow by (a) acquiring additional risk assessment,
laboratory testing or other related businesses and entering into new strategic
alliances; (b) continuing organic growth in all business segments; (c) expanding
our product offerings to our clients; (d) maintaining centralized laboratory
operations which permit operational economies of scale and allow us to provide
life insurance companies, third-party payers and managed care organizations with
electronic transmissions of results; (e) expanding electronic data connectivity
with insurance companies, physicians, employers and other clients; and (f)
offering and providing high quality, competitively-priced services.
Risk Factors
You should read the "Risk Factors" section, beginning on page 8, to
understand the risks associated with an investment in our securities.
Our Company
Our principal executive offices are located at 10101 Renner Blvd., Lenexa,
Kansas 66219. Our telephone number is (800) 873-8845. Our corporate website is
www.labone.com. The information on our website does not constitute part of this
prospectus.
2
THE OFFERING
The following summary contains basic information about the Debentures and is
not intended to be complete . It may not contain all of the information that may
be important to you. For a more complete description of the Debentures, see the
section of this prospectus entitled "Description of Debentures." For purposes of
the description of Debentures contained in this prospectus, the terms "LabOne,
Inc.," "company," "we " "us" and "our" refer only to LabOne, Inc. and not our
subsidiaries, unless the context otherwise requires.
Selling Security Holders......... The securities to be offered and sold
using this prospectus will be offered
and sold by the selling security
holders. See "Selling Security Holders".
Securities Offered............... $103,500,000 aggregate principal amount
of 3.50% Convertible Senior Debentures
Due 2034, including shares of our common
stock issuable upon conversion of the
Debentures.
Maturity Date.................... June 15, 2034, unless earlier converted,
redeemed or repurchased.
Ranking.......................... The Debentures are senior unsecured
obligations of LabOne, Inc. and rank
equally in right of payment with our
existing and future unsecured and
unsubordinated indebtedness and other
liabilities. As of September 30, 2004,
our senior indebtedness totaled
approximately $113.4 million. The
Debentures are effectively subordinated
to any existing and future secured
indebtedness of LabOne, Inc. to the
extent of the assets securing such
indebtedness.
The Debentures are not guaranteed by any
of our subsidiaries and, accordingly, the
Debentures are structurally subordinated
to all existing and future indebtedness
and other liabilities of our
subsidiaries, including liabilities to
trade creditors.
As of September 30, 2004, we had $165.4
million of total liabilities comprised of
$9.8 million of senior secured
indebtedness, $103.6 million of senior
unsecured indebtedness and $52.0 million
of other unsecured liabilities. This
includes $18.8 million of other unsecured
liabilities belonging to non-guarantor
subsidiaries. The indenture under which
the Debentures were issued does not
restrict the incurrence of secured or
unsecured debt by us or any of our
subsidiaries.
Interest; Liquidated Damages..... We will pay interest on the Debentures
on June 15 and December 15 of each year,
beginning December 15, 2004. Liquidated
damages are payable in cash if we fail
to comply with certain obligations set
forth below under "Description of
Debentures--Registration Rights".
Conversion Rights................ You may convert your Debentures prior to
stated maturity only under the following
circumstances:
3
[] during any fiscal quarter commencing
after September 30, 2004, if the
closing sale price of our common
stock for at least 20 trading days in
the 30 trading-day period ending on
the last trading day of the preceding
fiscal quarter is more than 130% of
the conversion price on that 30th
trading day; or
[] during the five business-day period
after any five consecutive
trading-day period (the "measurement
period") in which the trading price
per Debenture for each day of such
measurement period was less than 98%
of the product of the closing sale
price of our common stock on such day
and the conversion rate in effect on
such day; provided, however, you may
not convert your Debentures in
reliance on this provision after June
15, 2029 if on any trading day during
the measurement period the closing
sale price of our common stock is
greater than or equal to the
conversion price on such day but less
than or equal to 130% of the
conversion price on such day; or
[] if we have called the Debentures for
redemption; or
[] upon the occurrence of specified
corporate transactions described
under "Description of
Debentures--Conversion Rights."
The conversion rate for each $1,000
principal amount of Debentures is 25.4463
shares of our common stock. This
represents an initial conversion price of
approximately $39.30 per share of common
stock. As described in this prospectus,
the conversion rate may be adjusted for
certain reasons.
Upon conversion, we will deliver cash
equal to the lesser of the aggregate
principal amount of Debentures
to be converted and our total conversion
obligation, and shares of our common
stock in respect of the remainder, if
any, of our conversion obligation. See
"Description of Debentures--Conversion
Rights--Payment Upon Conversion."
You will not receive any cash payment
representing accrued and unpaid interest,
if any, upon conversion. Instead, any
such amounts will be deemed paid by the
cash and the common stock, if any,
received by you on conversion. You will,
however, receive accrued and unpaid
liquidated damages, if any, to the
conversion date.
If you elect to convert your Debentures
in connection with certain corporate
transactions that occur on or prior to
June 15, 2009, we will increase the
conversion rate by a number of additional
shares of common stock upon conversion as
described under "Description of
Debentures--Conversion Rights--General."
4
Your ability to convert your Debentures
into cash and shares of our common stock,
if any, is subject to the limitations
imposed by our current credit facility
and by any limitations we may have in any
other credit facilities or indebtedness
we may incur in the future. Under our
current credit facility, we are not
permitted to pay any settlement amounts
with respect to any conversion of
Debentures if a defaultor event of
default exists and is continuing under
the credit facility. See "Description of
Credit Facility" and "Description of
Debentures--General."
Payment at Maturity.............. For each $1,000 principal amount of the
Debentures that you hold, you shall be
entitled to receive $1,000 at maturity,
plus accrued and unpaid interest, if
any, and accrued and unpaid liquidated
damages, if any.
Sinking Fund..................... None.
Optional Redemption by LabOne,
Inc.............................. We may not redeem the Debentures prior
to June 20, 2009. Beginning on June 20,
2009, we may redeem the Debentures for
cash at any time as a whole, or from time
to time in part, upon at least 30 days
but not more than 60 days notice by mail
to the trustee and the holders of
Debentures at a redemption price equal to
the principal amount of the Debentures
redeemed, plus accrued and unpaid
interest, if any, and accrued and unpaid
liquidated damages, if any, to the
redemption date. If the redemption date
falls between a record date and an
interest payment date, any interest
payable on such redemption date
(including liquidated damages, if any)
will be paid to the holder of record on
the record date immediately preceding
such redemption date.
Repurchase of Debentures by
LabOne, Inc.
at the Option of the Holder...... You may require us to repurchase all or
a portion of your Debentures on June 15,
2011, June 15, 2014 and June 15, 2024 at
a price equal to 100% of the principal
amount of the Debentures plus accrued and
unpaid interest, if any, and accrued and
unpaid liquidated damages, if any, to the
date of repurchase. If the repurchase
date falls between a record date and an
interest payment date, any interest
payable on such repurchase date
(including liquidated damages, if any)
will be paid to the holder of record on
the record date immediately preceding
such repurchase date.
Our ability to repurchase Debentures for
cash on a repurchase date is subject to
important limitations, including
limitations imposed by our current credit
facility and by any limitations we may
have in any other credit facilities or
indebtedness we may incur in the future.
Under the terms of our current credit
facility, we are not permitted to
repurchase any Debentures that might be
delivered by holders of Debentures
seeking to exercise the repurchase right
described above. In addition, our ability
to repurchase the Debentures for cash may
be limited by restrictions on the ability
of LabOne, Inc. to obtain funds for such
repurchase and the terms of our then
existing borrowing agreements.
5
Designated Event Put............. If a designated event (as described
under "Description of
Debentures--Repurchase at Option of the
Holder Upon a Designated Event") occurs
prior to June 15, 2034, you may require
us to purchase all or part of your
Debentures at a repurchase price equal
to 100% of their principal amount, plus
accrued and unpaid interest and
liquidated damages, if any, to the
designated event repurchase date. If
the designated event repurchase date
falls between a record date and an
interest payment date, any interest
payable on such designated event
repurchase date (including liquidated
damages, if any) will be paid to the
holder of record on the record date
immediately preceding such designated
event repurchase date.
As described above under "--Repurchase of
Debentures by LabOne, Inc. at the Option
of the Holder", our ability to
repurchase Debentures for cash is
subject to important limitations,
including limitations imposed by our
current credit facility and by any
limitations we may have in any other
credit facilities or indebtedness we may
incur in the future. Under the terms of
our current credit facility, we are
prohibited from repurchasing any
Debentures that might be delivered by
holders of Debentures seeking to
exercise their designated put right if a
default or event of default exists and
is continuing under the facility. In
addition, the occurrence of a designated
event that constitutes a change of
control is an event of default under our
current credit facility and could cause
an event of default under, or be
prohibited or limited by the terms of,
our then existing borrowing arrangements.
United States Federal Income Tax
Considerations................... We and each holder of Debentures agree
to treat the Debentures as debt
instruments for U.S. federal income tax
purposes. Based on this treatment, a
U.S. Holder of a Debenture will be
required to report interest paid on a
Debenture as ordinary interest income at
the time it accrues or is received in
accordance with the Holder's method of
accounting for federal income tax
purposes. We believe that the
Debentures were issued without original
issue discount for federal income tax
purposes. See "United States Federal
Income Tax Considerations--Contingent
Payment Debt Instrument Regulations."
Further, upon a sale, exchange,
conversion, repurchase or redemption of
a Debenture, you will be required to
recognize gain or loss equal to the
difference between your amount realized
(which will include the value of any
common stock received if you exercise
your conversion rights) and your
adjusted tax basis in the Debenture,
with any such gain (and with all or a
portion of any such loss) being
classified as capital gain except to the
extent of any accrued interest taxed as
ordinary income. You should consult
your tax advisor as to the United States
federal, state and local (as well as
foreign) tax consequences of acquiring,
owning and disposing of the Debentures.
See "United States Federal Income Tax
Considerations."
6
Use of Proceeds.................. We will not receive any proceeds from
the sale by any selling security holder
of Debentures or shares of common stock
issued upon conversion of Debentures.
Form of Debentures............... The Debentures were issued in fully
registered form in denominations of
$1,000 principal amount and integral
multiples thereof. The Debentures are
represented by one or more global
Debentures, deposited with the trustee
as custodian for The Depository Trust
Company and registered in the name of
Cede & Co., DTC's nominee. Beneficial
interests in any of the Debentures are
shown on, and transfers are effected
only through, records maintained by DTC
or its nominee and any such interest may
not be exchanged for certificated
securities except in limited
circumstances. See "Description of
Debentures--Form, Denomination and
Registration."
Absence of a Public Market for
the Debentures; Trading.......... The Debentures are designated for
inclusion in the PORTAL(R) Market of
NASD, Inc. Debentures sold using this
prospectus, however, will not longer be
eligible for trading in the PORTAL(R)
Market. We do not presently intend to
list the Debentures on any national
securities exchange or include them in
any automated quotation system. We
cannot assure you that any active or
liquid market will develop for the
Debentures. See "Plan of Distribution."
Trading of Common Stock.......... Our common stock is traded on the Nasdaq
National Market under the symbol "LABS".
7
RISK FACTORS
This section describes risks involved in purchasing our securities, including
the Debentures and our common stock. Before you invest in our securities, you
should consider carefully the following risks, in addition to the other
information presented elsewhere in this prospectus and the documents
incorporated by reference into this prospectus, in evaluating us and our
business. Any of the following risks could seriously harm our business and
financial results and cause the value of our securities to decline, which in
turn could cause you to lose all or part of your investment. For purposes of the
information below under the section, "Risk Factors--Risks Related to Our
Business", the terms "LabOne, Inc.," "company," "we," "us" and "our" refer to
LabOne, Inc. and its subsidiaries unless the context otherwise requires. You
should be aware that our subsidiaries will not guarantee the Debentures.
Risks Related to Our Business
If we cannot effectively implement our growth strategy, this would
materially adversely affect our business and results of operations.
Our growth strategy assumes we will acquire additional risk assessment,
laboratory testing or other related businesses and enter into new strategic
alliances. We cannot assure that we will be able to continue to identify risk
assessment, laboratory testing or other related service companies to acquire or
enter into alliances with or otherwise negotiate acceptable terms with respect
to any transaction.
Integration of acquired businesses may be more difficult than anticipated
and may not result in anticipated benefits.
We may have difficulty integrating acquired businesses with existing
operations, retaining key customers or vendors or retaining key personnel of the
acquired businesses. The acquisition and integration of acquired businesses
require the dedication of significant management resources that could adversely
affect business activities or customer service. We have not fully completed the
integration of the operations of the Health Alliance and Northwest Toxicology,
and we may not be able to realize all or any of the benefits that we expect to
result from such integration, either in monetary terms or in a timely manner.
Our use of equity securities to make strategic acquisitions or alliances may
be dilutive to our existing equity holders.
To facilitate our acquisition of businesses or strategic alliances, we may
issue equity securities, including our common stock. These issuances could be
dilutive to our existing shareholders.
Many of our customer contracts are terminable at will or on short notice for
any reason.
We derive a significant portion of revenue from risk assessment and
laboratory testing services contracts. Many contracts are terminable at will or
on short notice by customers. Our other contracts may be terminated or are
subject to significant penalties if performance standards are not met.
Competition, interruption or deterioration in services or a change in management
or ownership of a customer could result in a customer's decision to stop using
our services in whole or in part. Termination of these contracts could also
indirectly result in loss of a large base of physicians in an area, which could
adversely affect our results of operations and financial condition.
Lower prices offered by competitors may undercut our competitive advantage
and reduce profits.
Some competitors in the life insurance risk assessment business are offering
lower prices. If these competitors continue to reduce prices and customers
refuse to pay higher prices for our services, revenues and/or profits may be
reduced. Increased competition from other providers of risk assessment,
laboratory testing or other related services may materially harm our business
and results of operations.
8
LabOne has numerous competitors, including two larger national laboratory
companies with significantly greater financial and technical resources.
These national laboratory companies have national and regional contracts
with managed care networks, some on an exclusive basis. They also have exclusive
arrangements for the distribution of certain esoteric tests applicable to the
clinical market. The strategies and other efforts of our competitors, if
successful, may erode our customer base, limit our access to users and payors of
laboratory services, reduce our existing and future sources of revenue and
access to local and regional markets, and cause us to reduce prices or increase
marketing and other costs of doing business, each of which could have a material
adverse effect on our business and results of operations.
Any adverse change in the number and types of tests ordered by life
insurance companies could reduce profits.
Currently, our largest and most profitable business segment is providing
risk assessment services to the life insurance industry. The level of demand for
these services is influenced by a number of factors, including:
[] the number of life insurance applications underwritten,
[] the policy amount thresholds at which insurance companies order testing
and other services,
[] the type and costs of tests and other services requested,
[] testing and specimen collection innovations, and
[] the extent to which insurance companies may create in-house testing
facilities and provide in-house underwriting services.
These factors are beyond our control. Any adverse change in life insurance
industry demand for testing or other services provided by us could significantly
reduce our profits.
Efforts by managed-care organizations, Medicare, Medicaid, insurance
companies and other payors to reduce the cost and utilization of health care
services could adversely effect our results of operations.
If these efforts result in reductions in the price or use of health care
services, including our laboratory testing or other services, this could
adversely affect our results of clinical laboratory operations.
Our substance abuse testing business is sensitive to general economic
conditions and levels of hiring and employment.
The marketing of our substance abuse testing services is primarily directed
at Fortune 1000 companies, occupational health clinics and TPAs. This substance
abuse testing business is sensitive to general economic conditions and levels of
hiring and employment.
Impairment of goodwill on our books could depress the stock price.
As of September 30, 2004, we had $137.7 million of goodwill, including $23.6
million from our merger with Lab Holdings, Inc. in 1999, recorded on our balance
sheet. If this goodwill is impaired in the future, we would be required to take
a non-cash charge to earnings. This could depress the market price of our stock
if investors focus on our net earnings as opposed to other financial measures.
Our failure to provide accurate laboratory test results and other data or
follow accepted procedures may result in claims that may not be covered by
insurance.
Clients rely on the accuracy of our testing and other services to make
significant insurance, treatment and employment decisions. In addition, federal
and state laws regulate the disclosure of specimen testing results and other
nonpublic personal information. If we do not provide accurate test results using
accepted scientific methods, or do not provide other data accurately, we could
incur significant liability. We have insurance to cover these types of claims,
but cannot assure that this coverage is adequate or will continue to be
available at reasonable prices.
9
Our business could be harmed by disruptions in express delivery services.
We generally rely on express couriers to transport specimens to our
laboratories quickly and safely. A disruption in these couriers' businesses
resulting from a labor dispute, natural disaster, malicious human act or other
event could harm our business and results of operations.
The development of more attractive on-site rapid assay tests may reduce
demand for laboratory testing services.
We serve customers through laboratory-based testing facilities. Although
there are some on-site rapid assay testing products available in the
marketplace, rapid assays have not achieved broad market acceptance due to the
high cost of such assays, liability concerns, regulatory limitations, less
accurate testing results and the absence of a broad testing menu. If more
competitive assays become available, such products could be substituted for
laboratory-based testing and have an adverse impact on our business and results
of operations.
Our business and results of operations could be adversely affected if our
primary testing facility in Lenexa, Kansas or any of our other testing
facilities are temporarily shut down or severely damaged because of a natural
disaster, telecommunications failure or other serious event.
We carry business interruption insurance to compensate for losses which might
occur, but we cannot provide assurance that this insurance coverage will be
enough to compensate for damages resulting from any such disruption to business.
Our organizational documents and other agreements contain restrictions that
might prevent a takeover or change in management.
Provisions of our articles of incorporation and by-laws might have the effect
of discouraging a potential acquirer from attempting a takeover on terms that
some shareholders might favor, reducing the opportunity for shareholders to sell
shares at a premium over then-prevailing market prices and preventing or
frustrating attempts to replace or remove current management. These provisions
include:
[] a fair price provision,
[] a requirement that the board of directors be classified,
[] the authorization of a "blank check" preferred stock to be issued at the
discretion of the board of directors, and
[] a requirement that we receive advance notice of shareholder nominees for
director and shareholder proposals.
In addition, we have a shareholder rights plan, which grants shareholders
other than the acquiring person the right to purchase common stock at one-half
of market price if any person becomes the beneficial owner of 15% or more of the
outstanding shares of common stock, subject to a number of exceptions set forth
in the plan.
We are dependent on our ability to attract and retain management and
operations personnel.
Our success is dependent upon our ability to attract and retain qualified and
experienced management and operations personnel. There can be no assurance that
we will be able to attract and retain key personnel in the future. Any failure
by us to attract and retain qualified personnel may have a material adverse
effect on our results of operations. Our current Chief Financial Officer, John
W. McCarty, has announced his intention to resign effective March 31, 2005. We
have begun a search for a successor and have retained an executive search firm
to assist in the search.
10
Failure to timely or accurately bill for our services could have a material
adverse impact on our net revenues and bad debt expense.
Billing for laboratory services is extremely complicated. We provide testing
services to a broad range of health care providers. We consider a "payer" to be
the party that pays for the test and a "customer" to be the party who refers
tests to us. Depending on the billing arrangement and applicable law, we must
bill various payers, such as patients, insurance companies, Medicare, Medicaid,
doctors and employer groups, all of which have different billing requirements.
Additionally, auditing for compliance with applicable laws and regulations as
well as internal compliance policies and procedures add further complexity to
the billing process. Among many other factors complicating billing are:
[] pricing differences between our fee schedules and the reimbursement
rates of the payers;
[] disputes with payers as to which party is responsible for payment; and
[] disparity in coverage and information requirements among various
carriers.
We incur significant additional costs as a result of our participation in
Medicare and Medicaid programs, as billing and reimbursement for clinical
laboratory testing is subject to considerable and complex federal and state
regulations. These additional costs include those related to: (1) complexity
added to our billing processes; (2) training and education of our employees and
customers; (3) compliance and legal costs; and (4) costs related to, among other
factors, medical necessity denials and advanced beneficiary notices. Compliance
with applicable laws and regulations, as well as internal compliance policies
and procedures, adds further complexity and costs to the billing process.
Changes in laws and regulations could negatively impact our ability to bill our
clients. The Center for Medicare and Medicaid Services, or CMS (formerly the
Health Care Financing Administration), establishes procedures and continuously
evaluates and implements changes in the reimbursement process.
Missing or incorrect information on requisitions adds complexity to and slows
the billing process, creates backlogs of unbilled requisitions, and generally
increases the aging of accounts receivable. When all issues relating to the
missing or incorrect information are not resolved in a timely manner, the
related receivables are written off to the allowance for doubtful accounts.
Compliance with the HIPAA "standard transactions" regulations, security
regulations and privacy regulations may increase our costs.
Pursuant to HIPAA, the Secretary of the Department of Health and Human
Services, or HHS, has issued final regulations designed to improve the
efficiency and effectiveness of the health care system by facilitating the
electronic exchange of information in certain financial and administrative
transactions while protecting the privacy and security of the information
exchanged. Three principal regulations have been issued in final form: standards
for electronic transactions, security regulations and privacy regulations.
The regulations on electronic transactions, which we refer to as the
transaction standards, establish uniform standards for electronic transactions
and code sets, including the electronic transactions and code sets used for
claims, remittance advices, enrollment and eligibility. The HIPAA transaction
standards are complex, and certain components of the regulations may be subject
to differences in interpretation by payers. As a result of inconsistent
application and interpretation of transaction standards by payers, or our
inability to obtain certain billing information not usually provided to us by
physicians, we could face increased costs and complexity, a temporary disruption
in receipt of revenue, and ongoing reductions in reimbursements and net
revenues.
The final HIPAA security regulations, which establish detailed requirements
for safeguarding electronic patient information, were published on February 20,
2003 and became effective on April 21, 2003, although health care providers have
until April 20, 2005 to comply with these regulations. We are conducting an
analysis to determine the proper security measures to reasonably and
appropriately comply with the standards and implementation specifications of the
security regulations by the compliance deadline of April 20, 2005.
11
The HIPAA privacy regulations, which fully came into effect in April 2003,
establish comprehensive federal standards with respect to the uses and
disclosures of protected health information by health plans, health care
providers and health care clearinghouses. We have implemented the HIPAA privacy
regulations, as required by law.
Compliance with the HIPAA requirements may require significant capital and
personnel resources from all health care organizations. While we believe our
total costs to comply with HIPAA will not be material to our operations or cash
flow, additional customer requirements resulting from different interpretations
of the current regulations could impose significant additional costs on us.
Failure in our information technology systems, including failures resulting
from our systems conversions, could significantly increase turnaround time and
otherwise disrupt our operations, which could reduce our customer base and
result in lost net revenues.
Information systems are used extensively in virtually all aspects of our
business, including laboratory testing, billing, customer service, logistics and
management of medical data. Our success depends, in part, on the continued and
uninterrupted performance of our information technology, or IT, systems.
Computer systems are vulnerable to damage from a variety of sources, including
telecommunications or network failures, malicious human acts and natural
disasters. Moreover, despite network security measures, some of our servers are
potentially vulnerable to physical or electronic break-ins, computer viruses and
similar disruptive problems. During the third quarter of 2004, our internal
auditors identified a reportable condition in the design and operation of
general computer controls related to program changes and access security. The
condition was not considered a material weakness. We believe that we have
mitigating controls and procedures in place, have implemented certain changes in
security access and change control, have remediated the issues concerning
program changes and have plans for completion of remediation of the issues
concerning access security during the fourth quarter of 2004. Despite the
precautionary measures we have taken to prevent unanticipated problems that
could affect our IT systems, sustained or repeated system failures that
interrupt our ability to process test orders, deliver test results or perform
tests in a timely manner could adversely affect our reputation and result in a
loss of customers and net revenues.
FDA regulation of laboratory/developed testing could lead to increased costs
and delay in introducing new tests.
The FDA has regulatory responsibility over instruments, test kits, reagents
and other devices used by clinical laboratories. In the past, the FDA has
claimed regulatory authority over laboratory-developed tests, but has exercised
enforcement discretion in not regulating tests performed by high complexity
CLIA-certified laboratories. If in the future the FDA were to increase its
regulation of the reagents used in laboratory-developed testing, it could lead
to substantial business interruption and increased costs and delays in
introducing new tests.
If we fail to comply with applicable laws and regulations, we could suffer
fines and penalties, be required to make significant changes to our operations
and lose material licenses.
We are subject to extensive and frequently changing federal, state and local
laws and regulations. We are licensed under the Clinical Laboratory Improvement
Amendments of 1988, and we are certified by SAMHSA to perform testing to detect
drug use in federal employees and in workers governed by federal regulations.
Legislative provisions relating to health care fraud and abuse give federal
enforcement personnel substantial funding, powers and remedies to pursue
suspected fraud and abuse. While we believe that we are in material compliance
with all applicable laws, many of the regulations applicable to us, including
those relating to billing and reimbursement of tests and those relating to
relationships with physicians and hospitals, are vague or indefinite and have
not been interpreted by the courts. They may be interpreted or applied by a
prosecutorial, regulatory or judicial authority in a manner that could require
us to make changes in our operations, including our billing practices. If we
fail to comply with applicable laws and regulations, we could suffer civil and
criminal fines and penalties, including the loss of licenses or our ability to
participate in Medicare, Medicaid and other federal and state health care
programs.
12
Our tests and business processes may infringe on the intellectual property
rights of others, which could cause us to engage in costly litigation, pay
substantial damages or prohibit us from selling certain of our tests.
While we use commercially reasonable efforts to license technology,
intellectual property and systems not owned or developed by us, other companies
or individuals, including our competitors, may obtain patents or other property
rights that would prevent, limit or interfere with our ability to develop,
perform or sell our tests or operate our business. As a result, we may be
involved in intellectual property litigation and we may be found to infringe on
the proprietary rights of others, which could force us to do one or more of the
following:
[] cease developing, performing or selling products or services that
incorporate the challenged intellectual property;
[] obtain and pay for licenses from the holder of the infringed
intellectual property right;
[] redesign or reengineer our tests;
[] change our business processes; or
[] pay substantial damages, court costs and attorneys' fees, including
potentially increased damages for any infringement held to be willful.
Patents generally are not issued until several years after an application is
filed. The possibility that, before a patent is issued to a third party, we may
be performing a test or other activity covered by the patent is not a defense to
an infringement claim. Thus, even tests that we develop could become the subject
of infringement claims if a third party obtains a patent covering those tests.
Infringement and other intellectual property claims, regardless of their
merit, can be expensive and time-consuming to litigate. In addition, any
requirement to reengineer our tests or change our business processes could
substantially increase our costs, force us to interrupt product sales or delay
new test releases.
Changes in securities laws and regulations have increased our costs and could
diminish our profitability.
We are subject to significant new regulatory requirements regarding public
disclosure, corporate governance and compliance practices. These new legal
requirements include the Sarbanes-Oxley Act of 2002, together with new rules
implemented by the SEC and Nasdaq. These additional rules and regulations have
increased and will continue to increase our legal, accounting and compliance
costs. For example, we will incur substantial costs and expend significant
resources to comply with the new regulations promulgated under Section 404 of
the Sarbanes-Oxley Act of 2002 regarding internal controls over financial
reporting. Section 404 will require our management to report on the
effectiveness of our internal controls over financial reporting and require our
registered public accountant to attest to this report.
We are currently reviewing and testing our internal control systems,
processes and procedures in compliance with the requirements of Section 404.
There can be no assurance that such a review will not result in the
identification of significant deficiencies or material weaknesses in our
internal controls or that our auditors will be able to attest to the adequacy of
our internal controls. As described above, during the third quarter of 2004, our
internal auditors identified a reportable condition in the design and operation
of general computer controls related to program changes and access security;
however, the condition was not considered a material weakness. If we are not
able to meet the requirements of Section 404, we may incur further costs and
spend further management time to meet the requirements and may also suffer
adverse effects as a result of such failure.
Risks Related to the Debentures
Our current credit facility contains prohibitions on our ability to make
payment of settlement amounts to holders of Debentures upon conversion of the
Debentures under certain circumstances.
Your ability to convert your Debentures into cash and shares of our common
stock, if any, is subject to the limitations imposed by our current credit
facility and by any limitations we may have in any other credit facilities or
indebtedness we may incur in the future. See "Description of Credit Facility".
Under our current credit facility, we are not permitted to pay any settlement
amounts with respect to any conversion of Debentures if a default or event of
13
default exists and is continuing under the credit facility. The occurrence of a
change of control constitutes an event of default under our current credit
facility. Accordingly, we will be prohibited from paying any settlement amounts
following the effective date of such a transaction unless we seek a waiver from
our lenders or refinance the credit facility in connection with such change of
control. For example, in the event of a change of control as described under
"Description of Debentures--Repurchase of Debentures at the Option of
Holders--Designated Event Put," or if we are unable to comply with certain
financial ratios, unable to comply with other negative covenants or there occurs
any other event of default, you will not be able to convert your Debentures.
Our current credit facility contains restrictions on our ability to incur
additional indebtedness, issue equity or acquire additional financing without
lender consent.
In addition, future credit facilities may have similar or more restrictive
covenants. In the event that the maturity date or repurchase request occurs at a
time when we have maximized our borrowing under existing facilities, we may not
have sufficient funds on hand or available through existing borrowing facilities
to meet our obligations under the Debentures. In such case, we could attempt to
obtain the consent of the lenders under those arrangements to repay or purchase
the Debentures or could attempt to refinance the borrowings that contain the
restrictions. If we do not obtain the necessary consents or refinance these
borrowings, we will be unable to repay or repurchase the Debentures. Failure by
us to repay or repurchase the Debentures when required will result in an event
of default with respect to the Debentures.
The Debentures will be structurally subordinated to indebtedness and
liabilities of our subsidiaries.
Because we operate a portion of our business through subsidiaries, we derive
some revenues from, and hold some of our assets through, those subsidiaries. In
general, these subsidiaries are separate and distinct legal entities and will
have no obligation to pay any amounts due on our debt securities, including the
Debentures, or to provide us with funds for our payment obligations, whether by
dividends, distributions, loans or otherwise. Our right to receive any assets of
any subsidiary in the event of a bankruptcy or liquidation of the subsidiary,
and therefore the right of our creditors to participate in those assets, will be
structurally subordinated to the claims of that subsidiary's creditors,
including trade creditors, to the extent that we are not a creditor of such
subsidiary. In addition, even where we are a creditor of a subsidiary, our
rights as a creditor with respect to certain amounts are subordinated to other
indebtedness of that subsidiary, including secured indebtedness to the extent of
the assets securing such indebtedness. As of September 30, 2004, our
subsidiaries had total liabilities of approximately $18.9 million, $0.1 million
of which was secured indebtedness, excluding intercompany indebtedness.
The Debentures are unsecured, and existing and future secured indebtedness
will rank effectively senior to the Debentures.
The Debentures are unsecured and are effectively subordinated to our existing
and future secured debt to the extent of the value of the assets that secure
that indebtedness. Our existing credit facility is secured by a lien on
substantially all of our assets. In addition, we may incur additional secured
indebtedness.
The Debentures do not restrict our ability to incur additional debt or to
take other action that could negatively impact holders of the Debentures.
We are not restricted under the terms of the indenture and the Debentures
from incurring additional indebtedness or securing indebtedness other than the
Debentures. In addition, the Debentures do not require us to achieve or maintain
any minimum financial results relating to our financial position or results of
operations. Our ability to recapitalize, incur additional debt, secure existing
or future debt and take a number of other actions that are not limited by the
terms of the indenture and the Debentures could have the effect of diminishing
our ability to make payments on the Debentures when due. In addition, we are not
restricted from repurchasing subordinated indebtedness or common stock by the
terms of the indenture and the Debentures.
At maturity, the entire outstanding principal amount of the Debentures will
become due and payable by us. In addition, each holder of the Debentures may
require us to repurchase all or a portion of that holder's Debentures on June
15, 2011, June 15, 2014 and June 15, 2024, or, if a "Designated Event," as
defined in the indenture, occurs. A "Designated Event" that constitutes a change
of control is an event of default under our current credit facility and also
14
may constitute an event of default under, and result in the acceleration of the
maturity of, indebtedness under another indenture or other indebtedness that we
have or may incur in the future. Accordingly, at maturity or upon a repurchase
request a substantial cash payment will be due. If we have maximized our
borrowing under our current facility or incurred other substantial obligations,
we may not have sufficient funds on hand or available through existing borrowing
facilities to meet our obligations under the Debentures. In such case, we will
need to seek additional financing. Additional financing may not be available to
us on terms favorable to us, if at all. Failure by us to repay or repurchase the
Debentures when required will result in an event of default with respect to the
Debentures.
We have a substantial amount of indebtedness, which could adversely affect
our financial performance and impact our ability to make payments on the
Debentures.
As of September 30, 2004, we, including our subsidiaries, had total
indebtedness of approximately $113.4 million. Our level of indebtedness could
have important consequences to the holders of the Debentures. For example, it:
[] may limit our ability to obtain additional financing for working
capital, capital expenditures or general corporate purposes;
[] will require us to dedicate a portion of our cash from operations to the
payment of principal and interest on our debt, reducing the funds
available to us for other purposes, including expansion through
acquisitions, capital expenditures, marketing spending and expansion of
our product offerings; and
[] may limit our flexibility to adjust to changing business and market
conditions and make us more vulnerable to a downturn in general economic
conditions as compared to our competitors.
Our ability to make scheduled payments or to refinance our obligations with
respect to our indebtedness will depend on our financial and operating
performance, which, in turn, is subject to prevailing economic conditions and to
financial, business and other factors beyond our control.
Our stock price, and therefore the price of the Debentures, may be subject to
significant fluctuations and volatility.
The market price of the Debentures is expected to be significantly affected
by the market price of our common stock. This may result in greater volatility
in the trading value of the Debentures than would be expected for
non-convertible debt securities that we issue. Among the factors that could
affect our common stock price are those discussed above under "--Risks Related
to Our Business", as well as:
o interest rate volatility;
o variations in our operating results;
o federal or state legislative, licensing or regulatory changes;
o changes in revenue or earnings estimates or publication of research
reports by analysts;
o speculation in the press or investment community;
o strategic actions by us or our competitors;
o general market conditions; and
o domestic and international factors unrelated to our performance.
In addition, the stock markets have experienced extreme volatility that has
often been unrelated to the operating performance of particular companies. These
broad market fluctuations may adversely affect the trading price of our common
stock and of the Debentures.
15
The trading prices for the Debentures will be directly affected by the
trading prices for our common stock, which are impossible to predict.
The price of our common stock could be affected by possible sales of our
common stock by investors who view the Debentures as a more attractive means of
equity participation in our company and by hedging or arbitrage trading activity
that may develop involving our common stock. The hedging or arbitrage could, in
turn, affect the trading prices of the Debentures.
We may issue additional shares of common stock or equity-related securities,
which could adversely affect the trading price of our common stock and the value
of the Debentures.
We are not restricted from issuing common stock, preferred stock or
securities convertible into or exchangeable for common stock, prior to maturity
of the Debentures. If we issue additional shares of common stock or preferred
stock or such convertible or exchangeable securities, the price of our common
stock and, in turn, the price of the Debentures may be adversely affected.
The conditional conversion feature of the Debentures could result in you not
receiving the value of the common stock that may be issuable upon conversion of
the Debentures.
The Debentures are convertible into cash and shares of common stock only if
specific conditions are met. If the specific conditions for conversion are not
met, you may not be able to receive the value of the common stock that may be
issuable upon conversion of the Debentures.
There may be no public market for the Debentures.
There has been no trading market for the Debentures. We do not presently
intend to apply for listing of the Debentures on any securities exchange or any
automated quotation system. Although certain of the initial purchasers of the
Debentures have advised us that they currently intend to make a market in the
Debentures, they are not obligated to do so and may discontinue their
market-making activities at any time without notice. Consequently, we cannot be
sure that any market for the Debentures will develop or, if one does develop,
that it will be maintained. If an active market for the Debentures fails to
develop or be sustained, the trading price and liquidity of the Debentures could
be adversely affected.
If you are able to resell your Debentures, many other factors may affect the
price you receive, which may be lower than you believe to be appropriate.
The price you receive will depend on many other factors that may vary over
time, including:
o the number of potential buyers;
o the level of liquidity of the Debentures;
o ratings, if any, published by major credit rating agencies;
o our financial performance;
o the amount of indebtedness we have outstanding;
o the level, direction and volatility of market interest rates generally;
o the market for similar securities;
o the redemption and repayment features of the Debentures to be sold; and
o the time remaining to the maturity of your Debentures.
As a result of these factors, you may only be able to sell your Debentures at
prices below those you believe to be appropriate, including prices below the
price you paid for them.
16
The conversion rate of the Debentures may not be adjusted for all dilutive
events.
The conversion rate of the Debentures is subject to adjustment for certain
events, including, but not limited to, the issuance of stock dividends on our
common stock, the issuance of rights or warrants, subdivisions, combinations,
distributions of capital stock, indebtedness or assets, certain cash dividends
and certain tender or exchange offers as described under "Description of
Debentures--Conversion Rights--Conversion Rate Adjustments." The conversion rate
will not be adjusted for other events, such as an issuance of common stock for
cash, that may adversely affect the trading price of the Debentures or the
common stock. There can be no assurance that an event that adversely affects the
value of the Debentures, but does not result in an adjustment to the conversion
rate, will not occur.
If we adjust the conversion rate, you may have to pay taxes with respect to
amounts that you do not receive.
The conversion rate of the Debentures is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends, certain cash
dividends and certain other actions by us that modify our capital structure. See
"Description of Debentures --Conversion Rights--Conversion Rate Adjustments." If
the conversion rate is adjusted as a result of a distribution that is taxable to
our common stock holders, such as a cash dividend, you will be required to
include an amount in income for federal income tax purposes, notwithstanding the
fact that you do not actually receive such distribution. If the conversion rate
is increased at our discretion or in certain other circumstances, such increase
also may be deemed to be the payment of a taxable dividend to you,
notwithstanding the fact that you do not receive a cash payment. See "United
States Federal Income Tax Considerations--Adjustment of Conversion Rate."
Our reported earnings per share may be more volatile because of the
conversion contingency provision of the Debentures.
Holders of the Debentures may convert the Debentures into our common stock
during any fiscal quarter commencing after September 30, 2004, if the closing
sale price of our common stock for at least 20 trading days in the 30
trading-day period ending on the last trading day of the preceding fiscal
quarter is more than 130% of the conversion price on that 30th trading day.
Under existing application of accounting literature, until this contingency is
met, the shares underlying the Debentures are not included in the calculation of
reported earnings per share. Should this contingency be met, reported earnings
per share would be expected to decrease as a result of the inclusion of the
underlying shares in the earnings per share calculation. An increase in
volatility in our stock price could cause this condition to be met in one
quarter and not in a subsequent quarter, increasing the volatility of reported
fully diluted earnings per share.
Conversion of the Debentures may dilute the ownership interest of existing
stockholders, including holders who had previously converted their Debentures.
Upon conversion of the Debentures, we will deliver cash equal to the lesser
of the aggregate principal amount of Debentures to be converted and our
conversion obligation, and common stock in respect of the remainder, if any, of
our conversion obligation. If we issue common stock upon conversion of the
Debentures, the conversion of some or all of the Debentures will dilute the
ownership interests of existing stockholders. Any sales in the public market of
the common stock issuable upon such conversion could adversely affect prevailing
market prices of our common stock. In addition, the existence of the Debentures
may encourage short selling by market participants because the conversion of the
Debentures could depress the price of our common stock.
If you hold Debentures, you will not be entitled to any rights with respect
to our common stock, but you will be subject to all changes made with respect to
our common stock.
If you hold Debentures, you will not be entitled to any rights with respect
to our common stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions on our common stock), but you will
be subject to all changes affecting the common stock. You will have rights with
respect to our common stock only if and when we deliver shares of common stock
to you upon conversion of your Debentures and, in limited cases, under the
conversion rate adjustments applicable to the Debentures. For example, in the
event that an amendment is proposed to our articles of incorporation or by-laws
requiring shareholder approval and the record date for determining the
shareholders of record entitled to vote on the amendment occurs prior to
delivery of common stock to you, you will not be entitled to vote on the
amendment, although you will nevertheless be subject to any changes in the
powers, preferences or special rights of our common stock.
17
The additional shares of common stock payable on Debentures converted in
connection with certain corporate transactions may not adequately compensate you
for the lost option time value of your Debentures as a result of such corporate
transactions.
If certain corporate transactions occur on or prior to June 15, 2009, we will
increase the conversion rate on Debentures converted in connection with such
corporate transaction by a number of additional shares of common stock. The
number of such additional shares of common stock will be determined based on the
date on which the corporate transaction becomes effective and the price paid per
share of our common stock in the corporate transaction as described below under
"Description of Debentures-Conversion Rights-General". While the increase in the
conversion rate upon conversion is designed to compensate you for the lost
option time value of your Debentures as a result of such corporate transactions,
such increase is only an approximation of such lost value and may not adequately
compensate you for such loss. In addition, if the corporate transaction occurs
after June 15, 2009 or if the price paid per share of our common stock in the
corporate transaction is less than the common stock price at the date of
issuance, there will be no such increase in the conversion rate.
You should consider the United States federal income tax consequences of
owning Debentures.
We are taking the position that the regulations pertaining to contingent
payment debt instruments should not apply to the Debentures, because we believe
that all the possible payment schedules under the Debentures are known and there
is a single payment schedule that is significantly more likely than not to
occur. However, the U.S. federal income tax characterization of the Debentures
is uncertain and, thus, no assurance can be given that the Internal Revenue
Service will not assert that the Debentures should be subject to the contingent
debt regulations. Such an alternative characterization could affect the amount,
timing and character of income, gain or loss in respect of an investment in the
Debentures.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for the
indicated periods.
Nine Months
Ended
Year Ended December 31, September 30,
---------------------------------------- ----------------
1999 2000 2001 2002 2003 2003 2004
------- ----- ------ ----- ----- ------ ------
5.22 1.48 1.12 2.87 4.20 3.83 6.41
For purposes of computing the ratios of earnings to fixed charges, earnings
consist of income before taxes plus fixed charges, and fixed charges consist of
interest expense, preferred stock dividends and the portion of rental expense
under operating leases representative of an interest factor.
USE OF PROCEEDS
The securities to be offered and sold using this prospectus will be offered
and sold by the selling security holders. We will not receive any proceeds from
the sale by the selling security holders of Debentures or shares of our common
stock issued upon conversion thereof that are offered pursuant to this
prospectus.
18
DESCRIPTION OF CREDIT FACILITY
We have a $175 million revolving credit agreement with a syndicate of banks
with JPMorgan Chase Bank, as administrative agent and collateral agent, and
Wachovia Bank, N.A., as syndication agent. As of September 30, 2004,
approximately $0.8 million was outstanding under the credit facility and, based
upon the covenant for leverage capacity, approximately $70.3 million of the
remaining $174.2 million was available for borrowing. In general, borrowings
under the credit facility may be repaid at any time without penalty. The credit
facility requires a commitment fee ranging from 0.375% to 0.5% on the unused
portion of the commitment depending upon the ratio of our total indebtedness to
our consolidated earnings before interest, taxes, depreciation and amortization
(EBITDA) for the most recent four consecutive fiscal quarters.
Borrowings under the credit facility bear interest at our option at either
the Eurodollar rate or the alternate base rate. Interest accrues with respect to
our Eurodollar rate borrowings at a rate equal to (a) the rate for dollar
deposits with a comparable maturity by reference to the British Bankers'
Association Interest Settlement Rates, plus (b) a margin ranging from 1.25% to
2.00%, depending upon the ratio of our total consolidated indebtedness to our
consolidated EBITDA for the most recent four consecutive fiscal quarters.
Interest accrues with respect to our alternate base rate borrowings at a rate
equal to (i) the greater of JPMorgan Chase Bank's "prime rate" and the federal
funds effective rate published by the Federal Reserve Bank of New York plus
0.5%, plus (ii) a margin ranging from 0.25% to 1.00%, depending upon the ratio
of our total consolidated indebtedness to our consolidated EBITDA for the most
recent four consecutive fiscal quarters.
The credit facility is secured by a lien on substantially all of our assets.
Under the terms of the credit facility, we must comply with certain financial
covenants. A leverage covenant requires that the ratio of total indebtedness to
the sum of four consecutive fiscal quarters of our consolidated EBITDA, as
defined, be less than 3.00 times. An interest coverage covenant requires that
the ratio of the sum of four consecutive quarters of consolidated EBITDA be at
least 4.0 times the net interest expense, as defined, for those quarters. Other
covenants limit annual cash capital expenditures to 30% of consolidated EBITDA
and require the maintenance of a certain level of consolidated net worth.
The credit facility contains affirmative and negative covenants that are
typical for a credit agreement of this type. The covenants in the credit
facility include:
[] provision of financial and other information;
[] restrictions on the incurrence of additional debt;
[] restrictions on the granting of liens;
[] restrictions on certain fundamental corporate changes, including mergers
and consolidations, liquidations and dissolutions;
[] restrictions on the disposition of our assets;
[] restrictions on making investments, loans and extending guarantees;
[] restrictions on transactions with affiliates that are not on an arms
length basis; and
[] restrictions on making certain restricted payments and certain payments of
indebtedness, including the payment to any person of indebtedness, cash or
assets (other than common stock, warrants or rights to purchase common
stock).
In addition, the covenant restricting certain payments and the repayment of
indebtedness will preclude us from paying any settlement amounts upon conversion
of the Debentures or repurchasing Debentures upon the exercise thereof of a
designated event put right if a default or event of default exists and is
continuing under the credit facility.
19
See "Description of Debentures--Conversion Rights--Conversion Upon Specified
Corporate Transactions--Certain Distributions".
Events of default under the credit facility are typical for a credit
agreement of this type and include, without limitation:
[] the non-payment of amounts owed under the credit facility;
[] material breaches of representations and warranties;
[] failure to comply with the provisions of the credit agreement;
[] cross default with other indebtedness of more than $3 million;
[] certain events of bankruptcy and insolvency; and
[] a change of control.
Under the credit facility, we are not permitted to pay any settlement amounts
with respect to any conversion of Debentures if there is a default or event of
default under the credit facility. For example, if we are unable to meet the
financial ratios described above, unable to comply with the other negative or
affirmative covenants described above or there occurs any other event of
default, such as a "change of control" as described under "Description of
Debentures--Repurchase of Debentures at the Option of Holders--Designated Event
Put," under the credit facility, you will not be able to convert your
Debentures.
20
DESCRIPTION OF DEBENTURES
We issued $103,500,000 in aggregate principal amount of the Debentures under
an indenture, dated as of June 25, 2004, between us and Wells Fargo Bank,
National Association, a national banking association duly organized under the
laws of the United States of America, as trustee. Initially, Wells Fargo Bank,
National Association will also act as paying agent and conversion agent for the
Debentures. Both the Debentures and the shares of common stock issuable upon
conversion of the Debentures are covered by a registration rights agreement.
The following description is only a summary of the material provisions of the
Debentures, the indenture and the registration rights agreement. This summary is
subject to and is qualified by reference to all of the provisions of the
Debentures and the indenture, and to all of the provisions of the registration
rights agreement. We urge you to read these documents in their entirety because
they, and not this description, define your rights as holders of the Debentures.
You may request a copy of the indenture and the registration rights agreement
from the trustee. In addition, we have incorporated by reference the indenture,
the form of Debenture and the registration rights agreement as exhibits to the
registration statement on Form S-3 of which this prospectus is a part.
When we refer to "LabOne, Inc.," "we," "our" or "us" in this "Description of
Debentures", we refer only to LabOne, Inc., a Missouri corporation, and not our
subsidiaries.
Brief Description of the Debentures
The Debentures:
o bear interest at a rate of 3.50% per annum, payable on each June 15 and
December 15, beginning December 15, 2004;
o are senior unsecured obligations of LabOne, Inc., ranking equally with
all of our existing and future unsecured and unsubordinated indebtedness
(including indebtedness to our subsidiaries);
o are not guaranteed by any of our subsidiaries, and consequently are
structurally subordinated to all existing and future indebtedness and
other liabilities of our subsidiaries;
o are effectively subordinated to any existing and future secured
indebtedness of LabOne, Inc. to the extent of the assets securing such
indebtedness;
o are convertible initially at a conversion rate of 25.4463 shares of our
common stock per $1,000 principal amount of Debentures (equivalent to an
initial conversion price of approximately $39.30 per share), under the
conditions and subject to such adjustments as are described under
"--Conversion Rights", and are subject to settlement upon conversion in
cash and shares of common stock, if any, as described under "--Conversions
Rights";
o are redeemable at our option in whole or in part beginning on June 20,
2009 upon the terms set forth under "--Optional Redemption by Us";
o are subject to repurchase by us at your option on June 15, 2011, June 15,
2014 and June 15, 2024 or upon a designated event with respect to LabOne,
Inc., upon the terms and at the repurchase price set forth below under
"--Repurchase of Debentures at the Option of Holders";
o are due on June 15, 2034, unless earlier converted, redeemed by us at
our option or repurchased by us at your option; and
o benefit from the provisions of a registration rights agreement and bear
liquidated damages if we fail to comply with certain of our obligations
under such agreement as set forth under "-- Registration Rights."
The indenture does not contain any financial covenants and does not restrict
us from paying dividends, incurring additional indebtedness or issuing or
repurchasing our securities. The indenture also does not protect you in the
event of a highly leveraged transaction or a change of control of LabOne, Inc.,
except to the extent described under "--Repurchase of Debentures at the Option
of Holders--Designated Event Put" below.
No sinking fund is provided for the Debentures and the Debentures will not be
subject to defeasance.
21
The Debentures were issued only in registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof. The
Debentures were issued in the form of one or more global Debentures deposited
with the trustee as custodian for The Depository Trust Company ("DTC"), and
registered in the name of Cede & Co. as DTC's nominee. For information regarding
conversion, registration of transfer and exchange of global Debentures, see
"--Form, Denomination and Registration." We will make all payments on global
Debentures to the DTC in immediately available funds.
Definitive Debentures will only be issued under the limited circumstances
described under "--Form, Denomination and Registration." In the event definitive
Debentures are issued, you may present definitive Debentures for conversion and
registration of transfer and exchange at our office or agency in New York, New
York, which shall initially be the principal corporate trust office of the
trustee currently located at 55 Water Street, New York, New York 10041. No
service charge will be made for any registration of transfer or exchange of
Debentures, but we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
Interest
The Debentures bear interest at a rate of 3.50% per annum from June 25, 2004.
We will pay interest semiannually on June 15 and December 15 of each year,
beginning December 15, 2004, to the holders of record at the close of business
on the preceding June 1 and December 1, respectively. There is one exception to
the preceding sentence: In general, we will not pay accrued and unpaid interest
on any Debentures that are tendered for conversion. Instead, accrued interest
will be deemed paid by the cash and common stock, if any, received by holders on
conversion. You will receive, however, accrued and unpaid liquidated damages, if
any, to, but not including, the conversion date, provided that if you convert
some or all of your Debentures into common stock when there exists a
registration default, you will not be entitled to receive liquidated damages on
such common stock, but will receive additional shares upon conversion, as set
forth under "Payments Upon Conversion" below. However, if you surrender
Debentures for conversion after a record date for an interest payment but prior
to the corresponding interest payment date, you will receive on that interest
payment date accrued and unpaid interest on those Debentures, notwithstanding
your conversion of those Debentures prior to that interest payment date, because
you will have been the holder of record on the corresponding record date. If
that occurs, at the time you surrender Debentures for conversion, you must pay
to us an amount equal to the interest that has accrued and that will be paid on
the related interest payment date. No such payment need be made (1) if we have
specified a redemption date that is after a record date for an interest payment
but on or prior to the corresponding interest payment date, (2) if we have
specified a designated event repurchase date that is after a record date for an
interest payment but on or prior to the corresponding interest payment date or
(3) to the extent of any overdue interest, if any overdue interest exists, at
the time of conversion with respect to the Debentures converted.
Except as provided below, we will pay interest on:
[] global Debentures to DTC in immediately available funds;
[] any definitive Debentures having an aggregate principal amount of
$5,000,000 or less by check mailed to the holders of those Debentures;
and
[] any definitive Debentures having an aggregate principal amount of more
than $5,000,000 by wire transfer in immediately available funds if
requested by the holders of those Debentures at least five business days
prior to the payment date.
At maturity we will pay interest on the definitive Debentures at our office
or agency in New York, New York, which initially will be the principal corporate
trust office of the trustee presently located at 55 Water Street, New York, New
York 10041.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
If any interest payment date of a Debenture falls on a day that is not a
business day, such interest payment date will be postponed to the next
succeeding business day without any interest or other payment in respect of the
delay. The term "business day" means, with respect to any Debenture, any day
other than a Saturday, a Sunday or a day on which banking institutions in The
City of New York are authorized or required by law, regulation or executive
order to close.
22
Conversion Rights
General
Subject to the conditions and during the periods described below, you may
convert any outstanding Debentures, initially at a conversion rate of 25.4463
shares of our common stock per $1,000 principal amount of the Debentures (equal
to an initial conversion price of approximately $39.30 per share). The
conversion rate and the corresponding conversion price in effect at any given
time will be subject to adjustments as described below. You may convert
Debentures with denominations of $1,000 principal amount and integral multiples
thereof.
Your ability to convert your Debentures into cash and shares of our common
stock, if any, is subject to the limitations imposed by our current credit
facility and by any limitation we may have in any other credit facilities or
indebtedness we may incur in the future. Under our current credit facility, we
are not permitted to pay any settlement amounts with respect to any conversion
of Debentures if a default or event of default exists and is continuing under
the credit facility. For example, if we are unable to meet certain financial
ratios, unable to comply with other negative covenants or there occurs any other
event of default, such as a "change of control" as described under "Repurchase
of Debentures at the Option of Holders--Designated Event Put," under the credit
facility, you will not be able to convert your Debentures. See "Description of
Credit Facility."
If you have the right to convert your Debentures and you have exercised your
right to require us to repurchase your Debentures in the circumstances described
under "--Repurchase of Debentures at the Option of Holders," you may convert
your Debentures only if you withdraw your repurchase notice or designated event
repurchase notice and convert your Debentures prior to the close of business on
the repurchase date or designated event repurchase date, as applicable.
If you elect to convert your Debentures in connection with certain corporate
transactions as described under "--Conversion Upon Specified Corporate
Transactions--Certain Corporate Transactions" that occur on or prior to June 15,
2009 and 10% or more of the consideration for the common stock in the corporate
transaction consists of cash, securities or other property that is not traded or
scheduled to be traded immediately following such transaction on a U.S. national
securities exchange or the Nasdaq National Market, we will increase the
conversion rate for the Debentures surrendered for conversion by a number of
additional shares (the "additional shares") as described below.
The number of additional shares will be determined by reference to the table
below, based on the date on which the corporate transaction becomes effective
(the "effective date") and the price (the "stock price") paid per share of our
common stock in the corporate transaction. If holders of our common stock
receive only cash in the corporate transaction, the stock price shall be the
cash amount paid per share. Otherwise, the stock price shall be the average of
the closing sale prices of our common stock on the five trading days prior to
but not including the effective date of the corporate transaction.
The stock prices set forth in the first row of the table below (i.e., column
headers) will be adjusted as of any date on which the conversion rate of the
Debentures is adjusted, as described below under "--Conversion Rate
Adjustments." The adjusted stock prices will equal the stock prices applicable
immediately prior to such adjustment, multiplied by a fraction, the numerator of
which is the conversion rate immediately prior to the adjustment giving rise to
the stock price adjustment and the denominator of which is the conversion rate
as so adjusted. The number of additional shares will be adjusted in the same
manner as the conversion rate as set forth under "-Conversion Rate Adjustments."
The following table sets forth the hypothetical stock price and number of
additional shares to be received per $1,000 principal amount of Debentures:
23
Stock Price
----------------------------------------------------------------------------------------------------------------------------
Effective
Date $29.11 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 $65.00 $70.00 $75.00 $80.00 $85.00 $90.00 $95.00 $100.00
------------------------------------------------------------------------------------------------------------------------------------
June 15, 9.4 6.6 5.1 4.1 3.4 2.8 2.4 2.0 1.8 1.6 1.4 1.2 1.1 1.0 0.9
2004
June 15, 9.1 6.3 4.7 3.7 3.0 2.4 2.1 1.8 1.5 1.3 1.2 1.0 0.9 0.8 0.8
2005
June 15, 8.8 5.8 4.2 3.2 2.5 2.0 1.6 1.4 1.2 1.0 0.9 0.8 0.7 0.7 0.6
2006
June 15, 8.5 5.2 3.5 3.2 1.9 1.4 1.1 0.9 0.8 0.7 0.6 0.5 0.5 0.4 0.4
2007
June 15, 7.9 4.2 2.5 1.5 1.0 0.7 0.5 0.4 0.4 0.3 0.3 0.3 0.2 0.2 0.2
2008
June 15, 7.8 2.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2009
The stock prices and additional share amounts set forth above are based upon
a common stock price of $29.11 at June 21, 2004 and an initial conversion price
of $39.30. The maximum amount of additional shares payable is 9.4 per $1,000
principal amount of Debentures.
-------------------------------------------------------------------------------
Notwithstanding the foregoing, in no event will the total number of shares of
common stock issuable upon conversion exceed 34.3525 per $1,000 principal amount
of Debentures or 2,633,692 shares of our common stock in the aggregate,
whichever is less, subject to adjustments in the same manner as the conversion
rate as set forth under "-Conversion Rate Adjustments."
The exact stock prices and effective dates may not be set forth in the table
above, in which case:
[] If the stock price is between two stock price amounts in the table or the
effective date is between two effective dates in the table, the number of
additional shares will be determined by a straight-line interpolation
between the number of additional shares set forth for the higher and lower
stock price amounts and the two dates, as applicable, based on a 365-day
year.
[] If the stock price is equal to or in excess of $100.00 per share (subject
to adjustment), no additional shares will be issued upon conversion.
[] If the stock price is less than $29.11 per share (subject to adjustment),
no additional shares will be issued upon conversion.
You may surrender Debentures for conversion prior to the stated maturity only
under the following circumstances:
Conversion Upon Satisfaction of Market Price Condition
You may surrender any of your Debentures for conversion during any fiscal
quarter (and only during such fiscal quarter) commencing after September 30,
2004 if the closing sale price of our common stock for at least 20 trading days
in the 30 trading-day period ending on the last trading day of the preceding
fiscal quarter is more than 130% of the conversion price as of that 30th trading
day.
The "closing sale price" of our common stock on any date means the closing
price per share (or if no closing price is reported, the average of the closing
bid and ask prices or, if there is more than one closing bid or ask price, the
average of the average closing bid and the average closing ask prices) as
reported in composite transactions for the principal United States securities
exchange on which our common stock is traded or, if our common stock is not
listed on a United States national or regional securities exchange, the closing
price as reported by the National Association of Securities Dealers Automated
Quotation system or by the National Quotation Bureau Incorporated. In the
absence of such a quotation, we will determine the closing sale price on the
basis we consider appropriate.
Conversion Upon Satisfaction of Trading Price Condition
You may surrender any of your Debentures for conversion during the five
business-day period after any five consecutive trading-day period (the
"measurement period") in which the trading price per Debenture for each day of
such measurement period was less than 98% of the product of the closing sale
price of our common stock on such day
24
and the conversion rate in effect on such day; provided, however, you may not
convert your Debentures in reliance on this provision after June 15, 2029 if on
any trading day during the measurement period the closing sale price of our
common stock is greater than or equal to the conversion price on such day but
less than or equal to 130% of the conversion price on such day.
The "trading price" of a Debenture on any date of determination means the
average of the secondary market bid quotations obtained by the trustee for
$2,000,000 principal amount of the Debentures at approximately 3:30 p.m., New
York City time, on such determination date from three independent nationally
recognized securities dealers we select; provided, that if three such bids
cannot reasonably be obtained by the trustee, but two such bids are obtained,
then the average of the two bids shall be used, and if only one such bid can
reasonably be obtained by the trustee, that one bid shall be used. If the
trustee cannot reasonably obtain at least one bid for $2,000,000 principal
amount of the Debentures from a nationally recognized securities dealer on such
date of determination, then the trading price per $1,000 principal amount of
Debentures for such date of determination will be deemed to be 97.9% of the
"closing sale price" per share of our common stock on such date multiplied by
the conversion rate on such date.
The trustee shall have no obligation to determine the trading price of the
Debentures unless we have requested such determination; and we shall have no
obligation to make such request unless a holder provides us with reasonable
evidence that the trading price per $1,000 principal amount of the Debentures
would be less than 98% of the product of the closing sale price of our common
stock and the conversion rate in effect; at which time, we shall instruct the
trustee to determine the trading price of the Debentures beginning on the next
trading day and on each successive trading day until the trading price is
greater than or equal to 98% of the product of the closing sale price of our
common stock and the conversion rate in effect.
Conversion Upon Notice of Redemption
You may surrender for conversion any of your Debentures that have been called
for redemption at any time prior to the close of business on the business day
prior to the redemption date, even if the Debentures are not otherwise
convertible at that time.
Conversion Upon Specified Corporate Transactions
(1) Certain Distributions
In the event:
[] we distribute to all or substantially all holders of our common stock
rights or warrants entitling them to purchase, for a period expiring
within 60 days, common stock at less than the closing sale price of the
common stock on the business day immediately preceding the announcement of
such distribution, or
[] we elect to distribute to all holders of our common stock, cash or other
assets, debt securities or certain rights or warrants to purchase our
securities, which distribution has a per share value exceeding 10% of the
closing sale price of our common stock on the business day preceding the
announcement date for the distribution, then
at least 20 days prior to the ex-dividend date for the distribution, we must
notify the holders of the Debentures and the trustee of the occurrence of such
event. Once we have given that notice, holders may surrender their Debentures
for conversion at any time until the earlier of the close of business on the
business day immediately prior to the ex-dividend date or the date of our
announcement that the distribution will not take place.
Under the terms of our current credit facility, we are prohibited from making
certain restricted payments, including the payment to any person of
indebtedness, cash or assets (other than common stock, warrants or rights to
purchase common stock). Any such restricted payment we make will be an event of
default under our credit facility and accordingly we will be prohibited from
paying any settlement amounts in connection with a conversion of Debentures
under the circumstances described in the bullet points above. See "Description
of Credit Facility."
(2) Certain Corporate Transactions
If:
25
[] a "change of control" occurs pursuant to clause (1) of the definition
thereof set forth under "--Repurchase of the Debentures at the Option of
Holders--Designated Event Put" below, or
[] a "change of control" occurs pursuant to clause (3) of the definition
thereof occurs pursuant to which our common stock would be converted
into cash, securities or other property (regardless of whether a holder
has the right to put the Debentures as described under "--Repurchase of
the Debentures at the Option of Holders--Designated Event Put"), then
a holder may surrender Debentures for conversion at any time from and after the
effective date of the transaction until the designated event repurchase date. We
will notify holders and the trustee at the same time we publicly announce such
transaction (but in no event less than 15 days prior to the effective date of
such transaction). The occurrence of a change of control constitutes an event of
default under our current credit facility. Accordingly, we will be prohibited
from making any settlement payments following the effective date of the
transaction unless we seek a waiver from our lenders or refinance the credit
facility in connection with such change of control.
If you elect to convert your Debentures in connection with the transactions
described above on or prior to June 15, 2009 and 10% or more of the
consideration for the common stock in the corporate transaction consists of
cash, securities or other property that is not traded or scheduled to be traded
immediately following such transaction on a U.S. national securities exchange or
the Nasdaq National Market, we will increase the conversion rate by the
additional shares as described above under "--Conversion Rights--General."
If we are a party to a consolidation, merger or binding share exchange
pursuant to which our common stock is converted into cash, securities or other
property, then at the effective time of the transaction, the right to convert a
Debenture into common stock will be changed into a right to convert the
Debenture into the kind and amount of cash, securities or other property which
the holder would have received if the holder had converted such Debentures
immediately prior to the transaction (assuming the Debentures are convertible
into shares of our common stock at the conversion rate in effect and not settled
in cash and common stock as set forth under "--Payments Upon Conversion" below).
If the transaction described in the bullet points above occurs, the holder
can, subject to certain conditions, require us to repurchase all or a portion of
its Debentures as described under "--Repurchase of Debentures at the Option of
Holders--Designated Event Put."
Conversion Procedures
By delivering to the holder cash and the number of shares issuable upon
conversion, if any, as set forth below under "--Payment Upon Conversion,"
together with a cash payment in lieu of any fractional shares, we will satisfy
our obligation with respect to the Debentures. That is, accrued interest, if
any, will be deemed to be paid in full rather than canceled, extinguished or
forfeited. You will receive, however, accrued and unpaid liquidated damages to,
but not including, the conversion date, provided that if you convert some or all
of your Debentures into common stock when there exists a registration default,
you will not be entitled to receive liquidated damages on such common stock, but
will receive additional shares upon conversion, as set forth under "Payments
Upon Conversion" below.
You will not be required to pay any taxes or duties relating to the issuance
or delivery of any of our common stock if you exercise your conversion rights,
but you will be required to pay any tax or duty which may be payable relating to
any transfer involved in the issuance or delivery of the common stock in a name
other than your own. Certificates representing shares of common stock will be
issued or delivered only after all applicable taxes and duties, if any, payable
by you have been paid.
To convert a definitive Debenture, you must:
[] complete the conversion notice on the back of the Debentures (or a
facsimile thereof);
[] deliver the completed conversion notice and the Debentures to be
converted to the specified office of the conversion agent;
[] pay all funds required, if any, relating to interest on the Debentures
to be converted to which you are not entitled, as described in
"--Interest;" and
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[] pay all taxes or duties payable by you, if any, as described above.
To convert interests in a global Debenture, you must comply with the last two
bullets above and deliver to DTC the appropriate instruction form for conversion
pursuant to DTC's conversion program.
The "conversion date" will be the date on which all of the foregoing
requirements have been satisfied. The Debentures will be deemed to have been
converted immediately prior to the close of business on the conversion date.
Payments of cash and, if shares of common stock are to be delivered, a
certificate will be delivered to you, or a book-entry transfer through DTC will
be made, for the number of shares of common stock as set forth below under
"--Payment Upon Conversion" (and cash in lieu of any fractional shares).
Payment Upon Conversion
In connection with any conversion we will deliver to holders in respect of
each $1,000 aggregate principal amount of Debentures being converted a
"Settlement Amount" consisting of (1) cash equal to the lesser of $1,000 and the
Conversion Value, and (2) to the extent the Conversion Value exceeds $1,000, a
number of shares equal to the sum of, for each day of the Cash Settlement
Period, (A) 10% (if, however, you convert your Debentures under "-Conversion
Upon Specified Corporate Transactions" and you are entitled to additional
shares, then 20%) of the difference between the Conversion Value and $1,000,
divided by (B) the closing sale price of our common stock for such day. We will
not issue fractional shares of common stock upon conversion of the Debentures.
Instead, we will pay the cash value of such fractional shares based upon the
closing sale price of our common stock on the trading day immediately preceding
the conversion date. We will deliver the settlement amount on the third business
day following the date the settlement amount is determined.
"Conversion Value" means the product of (1) the conversion rate in effect
(plus, any additional shares as described under "-Conversion Rights-General")
or, if the Debentures are converted during a registration default, 103% of such
conversion rate (and any such additional shares), and (2) the average of the
closing sale prices (as defined above under "--Conversion Upon Satisfaction of
Market Price Condition") of our common stock for the trading days during the
Cash Settlement Period.
The "Cash Settlement Period" with respect to any Debentures means the 10
consecutive trading days beginning on the second trading day after you deliver
your conversion notice to the conversion agent. If, however, you convert your
Debentures under "-Conversion Upon Specified Corporate Transactions" and you are
entitled to additional shares, the "Cash Settlement Period" shall be the five
consecutive trading days prior to but not including the effective date of the
corporate transaction.
"Trading day" means a day during which trading in our common stock generally
occurs and a closing sale price for our common stock is provided on the Nasdaq
National Market or, if our common stock is not listed on the Nasdaq National
Market, on the principal other United States national or regional securities
exchange on which our common stock is then listed or, if our common stock is not
listed on a United States national or regional securities exchange, on the
principal other market on which our common stock is then traded.
Conversion Rate Adjustments
We will adjust the conversion rate if any of the following events occur:
(1) We issue our common stock as a dividend or distribution on our common
stock, in which event the conversion rate will be adjusted by multiplying it by
a fraction,
[] the numerator of which will be the sum of (i) the number of shares of
our common stock outstanding on the record date fixed for the dividend
or distribution plus (ii) the total number of shares constituting the
dividend or distribution; and
[] the denominator of which is the number of shares of our common stock
outstanding on the record date fixed for the dividend or distribution.
(2) We issue rights or warrants to all holders of common stock entitling them
to subscribe for or purchase, for a period expiring within 60 days after the
date of the distribution, shares of our common stock at a price per share less
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than the closing sale price of a share of our common stock on the record date
for the distribution, in which event the conversion rate will be adjusted by
multiplying it by a fraction,
[] the numerator of which will be the sum of (i) the number of shares of
our common stock outstanding on the record date fixed for the
distribution plus (ii) the total number of additional shares of our
common stock offered for subscription or purchase (or into which such
convertible securities could be converted); and
[] the denominator of which is the sum of (i) the number of shares of our
common stock outstanding on the record date fixed for the distribution
plus (ii) the total number of shares of our common stock that the
aggregate offering price of the total number of shares offered for
subscription or purchase (or the aggregate conversion price of such
convertible securities) would purchase at the current market price of
our common stock.
(3) We subdivide or combine our common stock, in which event the conversion
rate in effect will be proportionately increased or reduced.
(4) We distribute to all or substantially all holders of our common stock,
shares of capital stock, evidences of indebtedness or other assets, including
securities (but excluding rights or warrants listed in (2) above, dividends or
distributions listed in (1) above and distributions consisting exclusively of
cash), in which event the conversion rate will be increased by multiplying it by
a fraction,
[] the numerator of which will be the current market price of our common
stock on the record date fixed for the distribution; and
[] the denominator of which will be the current market price of our common
stock on the record date fixed for the distribution minus the fair market
value, as determined by our board of directors, of the portion of those
assets, debt securities, shares of capital stock or rights or warrants so
distributed applicable to one share of common stock.
If we distribute capital stock of, or similar equity interests in, a
subsidiary or other business unit of ours, then the conversion rate will be
adjusted based on the market value of the securities so distributed relative to
the market value of our common stock, in each case based on the average closing
sales price of those securities (where such closing sale prices are available)
for the 10 trading days commencing on and including the fifth trading day after
the "ex-dividend date" for such distribution on the Nasdaq National Market or
such other national or regional exchange or market on which the securities are
then listed or quoted.
(5) We distribute cash to all or substantially all holders of our common
stock (excluding any dividend or distribution in connection with our
liquidation, dissolution or winding up), in which event the conversion rate will
be increased by multiplying it by a fraction,
[] the numerator of which will be the current market price of our common
stock on the record date fixed for the distribution; and
[] the denominator of which will be (i) the current market price of our
common stock on the record date fixed for the distribution minus (ii) the
amount per share of such dividend or distribution.
(6) We or one of our subsidiaries makes a payment in respect of a tender
offer or exchange offer for our common stock to the extent that the cash and
value of any other consideration included in the payment per share of our common
stock exceeds the closing sale price of our common stock on the first trading
day after the expiration of the tender or exchange offer, the conversion rate
will be increased by multiplying it by a fraction,
[] the numerator of which will be the sum of (i) the fair market value, as
determined by our board of directors, of the aggregate consideration
payable for all shares of our common stock we purchase in such tender or
exchange offer and (ii) the product of the number of shares of our common
stock outstanding less any such purchased shares and the closing sale
price of our common stock on the first trading day after the expiration of
the tender or exchange offer; and
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[] the denominator of which will be the product of the number of shares of
our common stock outstanding, including any such purchased shares, and the
closing sale price of our common stock on the first trading day after the
expiration of the tender or exchange offer.
(7) Someone other than us or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer in which, as of the closing date of
the offer, our board of directors is not recommending rejection of the offer, in
which event each conversion rate will be increased by multiplying such
conversion rate by a fraction,
[] the numerator of which will be the sum of (i) the fair market value, as
determined by our board of directors, of the aggregate consideration
payable to our stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the expiration of
the offer and (ii) the product of the number of shares of our common
stock outstanding less any such purchased shares and the closing sale
price of our common stock on the first trading day after the expiration
of the tender or exchange offer; and
[] the denominator of which will be the product of the number of shares of
our common stock outstanding, including any such purchased shares, and the
closing sale price of our common stock on the first trading day after the
expiration of the tender or exchange offer.
The adjustment referred to in this clause (7) will be made only if:
[] the tender offer or exchange offer is for an amount that increases the
offeror's ownership of common stock to more than 25% of the total shares
of common stock outstanding; and
[] the cash and value of any other consideration included in the payment per
share of common stock exceeds the current market price per share of common
stock on the first trading day after the expiration of the tender or
exchange offer.
However, the adjustment referred to in this clause (7) will generally not be
made if, as of the closing of the offer, the offering documents disclose a plan
or an intention to cause us to engage in a consolidation or merger or a sale of
all or substantially all of our assets or similar transaction in which holders
of common stock would be entitled to receive stock, other securities, other
property, assets or cash for their common stock.
With respect to certain adjustment events, no adjustment to the conversion
rate will be made if we provide that holders of Debentures will participate in
the distribution prior to conversion or upon conversion or in certain other
cases.
"Current market price" of our common stock on any day means the average of
the closing sale price of our common stock (as defined above under
"--Conversion--Conversion Upon Satisfaction of Market Price Condition") for each
of the 10 consecutive trading days ending on the earlier of the day in question
and the day before the "ex-dividend date" with respect to the issuance or
distribution requiring such computation, subject to adjustment by our board of
directors if the related transaction occurs during such 10 day period.
To the extent that we have a rights plan in effect upon any conversion of the
Debentures into common stock, you will receive, in addition to the common stock,
the rights under the rights plan, unless prior to any conversion, the rights
have separated from the common stock, in which case the conversion rate will be
adjusted at the time of separation as described in clause (4) above. A further
adjustment will occur as described in clause (4) above, if such rights become
exercisable to purchase different securities, evidences of indebtedness or
assets, subject to readjustment in the event of the expiration, termination or
redemption of such rights.
With respect to the adjustment events described above, if rights or warrants
for which an adjustment to the conversion rate has been made expire unexercised,
the conversion rate will be readjusted to take into account the actual number of
such rights or warrants which were exercised.
In the event of:
o any reclassification of our common stock;
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o a consolidation, merger, binding share exchange or combination involving
us; or
o a sale or conveyance to another person or entity of all or substantially
all of our property or assets;
in which holders of common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of your Debentures you will be entitled to receive the same type of
consideration that you would have been entitled to receive if you had converted
the Debentures into our common stock (assuming the Debentures are convertible
into shares of our common stock at the conversion rate in effect and not settled
in cash and common stock as set forth under "--Payments Upon Conversion" above)
immediately prior to any of these events.
The conversion rate will not be adjusted:
[] upon the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on our securities and the investment of additional
optional amounts in shares of our common stock under any plan;
[] upon the issuance of any shares of our common stock or options or rights
to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of or assumed by us or any
of our subsidiaries;
[] upon the issuance of any shares of our common stock pursuant to any
option, warrant, right or exercisable, exchangeable or convertible
security not described in the preceding bullet and outstanding as of the
date the Debentures were first issued;
[] for a change in the par value of the common stock; or
[] for accrued and unpaid interest, including liquidated damages, if any.
The holders of the Debentures may, in certain circumstances, be deemed to
have received a distribution subject to U.S. federal income tax as a dividend in
connection with an adjustment of the conversion rate. See "United States Federal
Income Tax Considerations--Adjustment of Conversion Rate."
To the extent permitted by law and the listing requirements of the Nasdaq
National Market (and any other exchange on which we are then listed), we may,
from time to time, increase the conversion rate for a period of at least 20 days
if our board of directors has made a determination that this increase would be
in our best interests. Any such determination by our board will be conclusive.
We would give holders and the trustee at least 15 days notice of any increase in
the conversion rate. In addition, we may increase the conversion rate if our
board of directors deems it advisable to avoid or diminish any income tax to
holders of common stock resulting from any stock distribution.
If we adjust the conversion rate or conversion price pursuant to the above
provisions, we will issue a press release through Dow Jones & Company, Inc. or
Bloomberg Business News containing the relevant information and make this
information available on our website or through another public medium as we may
use at that time.
Payment at Maturity
Each holder of $1,000 principal amount of the Debentures shall be entitled to
receive $1,000 at maturity, plus accrued and unpaid interest and liquidated
damages, if any. We will pay principal on:
[] global Debentures to DTC in immediately available funds; and
[] any definitive Debentures at our office or agency in New York, New York,
which initially will be the office or agency of the trustee in New York,
New York.
Optional Redemption by Us
Prior to June 20, 2009, the Debentures will not be redeemable at our option.
Beginning on June 20, 2009, we may redeem the Debentures for cash at any time as
a whole, or from time to time in part, at a redemption price equal to 100% of
the principal amount of the Debentures plus any accrued and unpaid interest and
liquidated damages, if any, on
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the Debentures to, but not including, the redemption date. If the redemption
date is on a date that is after a record date and on or prior to the
corresponding interest payment date, we will pay such interest (including
liquidated damages, if any) to the holder of record on the corresponding record
date, which may or may not be the same person to whom we will pay the redemption
price and the redemption price will be 100% of the principal amount of the
Debentures redeemed.
At least 30 days, but not more than 60 days, prior to redemption, we will
give notice of redemption to the trustee and mail notice of redemption to
holders of Debentures. Debentures or portions of Debentures called for
redemption will be convertible by the holder until the close of business on the
business day prior to the redemption date.
If we do not redeem all of the Debentures, the trustee will select the
Debentures to be redeemed in principal amounts of $1,000 or integral multiples
thereof, by lot, on a pro rata basis or by such other method that the trustee
considers fair and appropriate, so long as such method is not prohibited by the
rules of any stock exchange or quotation association on which the Debentures may
then be traded or quoted. If any Debentures are to be redeemed in part only, we
will issue a new Debenture or Debentures with a principal amount equal to the
unredeemed principal portion thereof. If a portion of your Debentures is
selected for partial redemption and you convert a portion of your Debentures,
the converted portion will be deemed to be taken from the portion selected for
redemption.
Repurchase of Debentures at the Option of Holders
Optional Put
On June 15, 2011, June 15, 2014 and June 15, 2024 (each, a "repurchase
date"), you may require us to repurchase any outstanding Debentures for which
you have properly delivered and not withdrawn a written repurchase notice.
Subject to certain additional conditions, the repurchase price will equal 100%
of the principal amount of the Debentures plus accrued and unpaid interest and
liquidated damages, if any, to, but not including, the repurchase date. If the
repurchase date is on a date that is after a record date and on or prior to the
corresponding interest payment date, we will pay such interest (including
liquidated damages, if any) to the holder of record on the corresponding record
date, which may or may not be the same person to whom we will pay the repurchase
price and the repurchase price will be 100% of the principal amount of the
Debentures repurchased.
You may submit a repurchase notice to the paying agent (which will initially
be the trustee) at any time from the opening of business on the date that is 20
business days prior to the repurchase date until the close of business on the
repurchase date.
Any repurchase notice given by you electing to require us to repurchase
Debentures shall be given so as to be received by the paying agent no later than
the close of business on the repurchase date and must state:
[] if definitive Debentures have been issued, the certificate numbers of the
holders' Debentures to be delivered for repurchase (or, if the Debentures
are not issued in definitive form, the notice of repurchase must comply
with appropriate DTC procedures);
[] the portion of the principal amount of Debentures to be repurchased,
which must be $1,000 or an integral multiple thereof; and
[] that the Debentures are to be repurchased by us pursuant to the
applicable provisions of the Debentures.
You may withdraw your repurchase notice by delivering a written notice of
withdrawal to the paying agent prior to the close of business on the repurchase
date. The notice of withdrawal shall state:
[] the principal amount of Debentures being withdrawn;
[] if definitive Debentures have been issued, the certificate numbers of the
Debentures being withdrawn (or, if the Debentures are not issued in
definitive form, the notice of withdrawal must comply with appropriate DTC
procedures); and
[] the principal amount of the Debentures, if any, that remain subject to the
repurchase notice.
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In connection with any repurchase, we will, to the extent applicable:
[] comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Securities Exchange Act of 1934, as amended
("Exchange Act"), which may then be applicable; and
[] file Schedule TO or any other required schedule under the Exchange Act.
Our obligation to pay the repurchase price for Debentures for which a
repurchase notice has been delivered and not validly withdrawn is conditioned
upon you effecting book entry transfer of the Debentures or delivering
definitive Debentures, together with necessary endorsements, to the paying agent
at any time after delivery of the repurchase notice. We will cause the
repurchase price for the Debentures to be paid promptly following the later of
the business day following the repurchase date and the time of book entry
transfer or delivery of definitive Debentures, together with such endorsements.
If the paying agent holds money sufficient to pay the repurchase price of the
Debentures for which a repurchase notice has been delivered and not validly
withdrawn in accordance with the terms of the indenture, then, immediately after
the repurchase date, the Debentures will cease to be outstanding and interest
and liquidated damages, if any, on the Debentures will cease to accrue, whether
or not the Debentures are transferred by book entry or delivered to the paying
agent. Thereafter, all of your other rights shall terminate, other than the
right to receive the repurchase price upon book entry transfer of the Debentures
or delivery of the Debentures. Our ability to repurchase Debentures for cash may
be limited by restrictions on the ability of LabOne, Inc. to obtain funds for
such repurchase through dividends from its subsidiaries and the terms of our
then existing borrowing agreements.
Our ability to repurchase Debentures for cash on a repurchase date is subject
to important limitations. Under the terms of our current credit facility, we are
prohibited from making certain restricted payments, including the payment to any
person of indebtedness, cash or assets (other than common stock, warrants or
rights to purchase common stock). Any such restricted payment we make will be an
event of default under our credit facility and accordingly we will be prohibited
from paying any settlement amounts in connection with a repurchase in cash for
all the Debentures that might be delivered by holders of Debentures seeking to
exercise their repurchase right on June 15, 2011, June 15, 2014 or June 15,
2024.
Designated Event Put
If a designated event, as defined below, occurs, you will have the right on
the designated event repurchase date (subject to certain exceptions set forth
below) to require us to repurchase all of your Debentures not previously called
for redemption, or any portion of those Debentures that is equal to $1,000 in
principal amount or integral multiples thereof, at a designated event repurchase
price equal to 100% of the principal amount of the Debentures plus any accrued
and unpaid interest, including liquidated damages, if any, on the Debentures to
but not including the designated event repurchase date. If the designated event
repurchase date is on a date that is after a record date and on or prior to the
corresponding interest payment date, we will pay such interest (including
liquidated damages, if any) to the holder of record on the corresponding record
date, which may or may not be the same person to whom we will pay the repurchase
price and the repurchase price will be 100% of the principal amount of the
Debentures repurchased.
Within 30 days after the occurrence of a designated event, we are required to
give notice to you and the trustee of such occurrence and of your resulting
repurchase right and the procedures that you must follow to require us to
repurchase your Debentures as described below. The designated event repurchase
date specified by us will be 30 days after the date on which we give this
notice.
The designated event repurchase notice given by you electing to require us to
repurchase your Debentures shall be given so as to be received by the paying
agent no later than the close of business on the designated event repurchase
date and must state:
[] if definitive Debentures have been issued, the certificate numbers of the
holders' Debentures to be delivered for repurchase (or, if the Debentures
are not issued in definitive form, the designated event repurchase notice
must comply with appropriate DTC procedures);
[] the portion of the principal amount of Debentures to be repurchased,
which must be $1,000 or an integral multiple thereof; and
32
[] that the Debentures are to be repurchased by us pursuant to the applicable
provisions of the Debentures.
You may withdraw your designated event repurchase notice by delivering a
written notice of withdrawal to the paying agent prior to the close of business
on the designated event repurchase date. The notice of withdrawal shall state:
[] the principal amount at maturity of Debentures being withdrawn;
[] if definitive Debentures have been issued, the certificate numbers of the
Debentures being withdrawn (or, if the Debentures are not issued in
definitive form, the notice of withdrawal must comply with appropriate DTC
procedures); and
[] the principal amount of the Debentures, if any, that remain subject to the
designated event repurchase notice.
A "designated event" will be deemed to have occurred upon a change of control
or a termination of trading.
A "change of control" will be deemed to have occurred at such time after the
original issuance of the Debentures when any of the following has occurred:
(1) a "person" or "group" within the meaning of Section 13(d)(3) of the
Exchange Act other than us, our subsidiaries or our or their employee benefit
plans, files a Schedule TO or any schedule, form or report under the Exchange
Act disclosing that such person or group has become the direct or indirect
"beneficial owner," as defined in Rule 13d-3 under the Exchange Act, of shares
of our common stock representing more than 50% of the voting power of our common
stock entitled to vote generally in the election of directors; or
(2) the first day on which a majority of the members of the board of
directors of LabOne, Inc. does not consist of continuing directors; or
(3) a consolidation, merger or binding share exchange, or any conveyance,
transfer, sale, lease or other disposition of all or substantially all of our
properties and assets to another person, other than:
o any transaction:
(i) that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of our capital stock; and
(ii) pursuant to which holders of our capital stock immediately prior to
the transaction have the entitlement to exercise, directly or indirectly,
50% or more of the total voting power of all shares of capital stock
entitled to vote generally in elections of directors of the continuing or
surviving person immediately after giving effect to such issuance; or
o any merger, share exchange, transfer of assets or similar transaction
solely for the purpose of changing our jurisdiction of incorporation and
resulting in a reclassification, conversion or exchange of outstanding
shares of common stock, if at all, solely into shares of common stock,
ordinary shares or American Depositary Shares of the surviving entity or a
direct or indirect parent of the surviving corporation; or
o any consolidation or merger with or into any of our subsidiaries, so long
as such merger or consolidation is not part of a plan or a series of
transactions designed to or having the effect of merging or consolidating
with any other person.
A "continuing director" means a director who either was a member of our board
of directors on June 25, 2004 or who becomes a member of our board of directors
subsequent to that date and whose appointment, election or nomination for
election by our shareholders is duly approved by a majority of the continuing
directors on our board of directors at the time of such approval, either by a
specific vote or by approval of the proxy statement issued by us on behalf of
the board of directors in which such individual is named as nominee for
director.
Beneficial ownership shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act. The term "person" includes
any syndicate or group that would be deemed to be a "person" under Section
13(d)(3) of the Exchange Act.
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The definition of change of control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, your ability to require
us to repurchase your Debentures as a result of a conveyance, transfer, sale,
lease or other disposition of less than all our assets may be uncertain.
However, notwithstanding the foregoing, you will not have the right to
require us to repurchase your Debentures upon a change of control if (a) 90% or
more of the consideration in the transaction or transactions (other than cash
payments for fractional shares and cash payments made in respect of dissenters'
appraisal rights) constituting a change of control described in clause (3) above
consists of shares of common stock traded or to be traded immediately following
a change of control on a national securities exchange or the Nasdaq National
Market, and, as a result of the transaction or transactions, the Debentures
become convertible into that common stock (and any rights attached thereto) or
(b) a default or event of default under our existing credit facility has
occurred or is continuing.
A "termination of trading" will be deemed to have occurred if our common
stock (or other common stock into which the Debentures are then convertible) is
neither listed for trading on a United States national securities exchange nor
approved for trading on the Nasdaq National Market.
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders if an issuer tender offer occurs and may apply
if the repurchase option becomes available to holders of the Debentures. We will
comply with this rule and file Schedule TO (or any similar schedule) to the
extent applicable at that time.
If the paying agent holds money sufficient to pay the designated event
repurchase price of the Debentures which holders have elected to require us to
repurchase on the business day following the designated event repurchase date in
accordance with the terms of the indenture, then, immediately after the
designated event repurchase date, those Debentures will cease to be outstanding
and interest and liquidated damages, if any, on the Debentures will cease to
accrue, whether or not the Debentures are transferred by book entry or delivered
to the paying agent. Thereafter, all other rights of the holder shall terminate,
other than the right to receive the designated event repurchase price upon book
entry transfer of the Debentures or delivery of the Debentures.
The term "designated event" is limited to specified transactions and may not
include other events that might adversely affect our financial condition or
business operations. The foregoing provisions would not necessarily protect
holders of the Debentures if highly leveraged or other transactions involving us
occur that may affect holders adversely. We could, in the future, enter into
certain transactions, including certain recapitalizations, that would not
constitute a designated event with respect to the designated event repurchase
feature of the Debentures but that would increase the amount of our (or our
subsidiaries') outstanding indebtedness.
Our ability to repurchase Debentures for cash upon the occurrence of a
designated event is subject to important limitations. Our ability to repurchase
the Debentures for cash may be limited by restrictions on the ability of LabOne,
Inc. to obtain funds for such repurchase through dividends from its subsidiaries
and the terms of our then existing borrowing agreements. In addition, the
occurrence of a designated event that constitutes a change of control is an
event of default under our current credit facility and could cause an event of
default under, or be prohibited or limited by the terms of, our then existing
borrowing arrangements. Under the terms of our current credit facility, we are
prohibited from repurchasing any Debentures that might be delivered by holders
of Debentures seeking to exercise their designated put right if a default or
event of default exists and is continuing under the facility. We cannot assure
you that we would have the financial resources, or would be able to arrange
financing, to pay the designated event repurchase price in cash for all the
Debentures that might be delivered by holders of Debentures seeking to exercise
the repurchase right.
The designated event purchase feature of the Debentures may in certain
circumstances make more difficult or discourage a takeover of our company. The
designated event purchase feature, however, is not the result of our knowledge
of any specific effort:
[] to accumulate shares of our common stock;
[] to obtain control of us by means of a merger, tender offer solicitation
or otherwise; or
[] by management to adopt a series of anti-takeover provisions.
Instead, the designated event repurchase feature is a standard term contained
in securities similar to the Debentures.
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Merger and Sales of Assets
The indenture provides that LabOne, Inc. may not consolidate with or merge
into any other person or convey, transfer, sell, lease or otherwise dispose of
all or substantially all of its properties and assets to another person unless,
among other things:
[] the resulting, surviving or transferee person is organized and existing
under the laws of the United States, any state thereof or the District
of Columbia;
[] such person assumes all obligations of LabOne, Inc. under the Debentures
and the indenture; and
[] immediately after giving effect to such transaction, no event of default
and no event that, after notice or lapse of time, or both, would become an
event of default, shall have occurred and be continuing.
The occurrence of certain of the foregoing transactions could constitute a
change of control.
This covenant includes a phrase relating to the conveyance, transfer, sale,
lease or disposition of "all or substantially all" of our assets. There is no
precise, established definition of the phrase "substantially all" under
applicable law. Accordingly, there may be uncertainty as to whether a
conveyance, transfer, sale, lease or other disposition of less than all our
assets is subject to this covenant.
Events of Default
Each of the following constitutes an event of default under the indenture:
[] default in our obligation to deliver the settlement amount upon conversion
of the Debentures, together with cash in lieu thereof in respect of any
fractional shares, upon conversion of any Debentures;
[] default in our obligation to provide timely notice of a designated event
to the holders of the Debentures under the indenture;
[] default in our obligation to repurchase Debentures at the option of
holders or following a designated event;
[] default in our obligation to redeem Debentures after we have exercised
our redemption option;
[] default in our obligation to pay the principal amount, or premium, if
any, on the Debentures at maturity, when due and payable;
[] default in our obligation to pay any interest or liquidated damages on
the Debentures when due and payable, and continuance of such default for
a period of 30 days;
[] our failure to perform or observe any other term, covenant or agreement
contained in the Debentures or the indenture for a period of 60 days after
written notice of such failure, provided that such notice requiring us to
remedy the same shall have been given to us by the trustee or to us and
the trustee by the holders of at least 25% in aggregate principal amount
of the Debentures then outstanding;
[] a failure to pay when due at maturity or a default that results in the
acceleration of maturity of any indebtedness for borrowed money of LabOne,
Inc. or our designated subsidiaries in an aggregate amount of $10,000,000
or more, unless the acceleration is rescinded, stayed or annulled within
30 days after written notice of default is given to us by the trustee or
holders of not less than 25% in aggregate principal amount of the
Debentures then outstanding; and
[] certain events of bankruptcy, insolvency, receivership or reorganization
with respect to us or any substantial part of our property, including
without limitation any of our subsidiaries that is a designated subsidiary
or any group of two or more subsidiaries that, taken as a whole, would
constitute a designated subsidiary.
A "designated subsidiary" shall mean any existing or future, direct or
indirect, subsidiary of LabOne, Inc. whose assets constitute 15% or more of the
total assets of LabOne, Inc. on a consolidated basis.
35
The indenture provides that, within 90 days of the occurrence of a default
or, if later within 15 days after the default is known to it, the trustee shall
give to the registered holders of the Debentures notice of all uncured defaults
known to it, but the trustee shall be protected in withholding such notice if
it, in good faith, determines that the withholding of such notice is in the best
interest of such registered holders, except in the case of a default under any
of the first six bullets above.
If certain events of default specified in the last bullet point above shall
occur and be continuing, then automatically the principal amount of the
Debentures plus any accrued and unpaid interest and liquidated damages, if any,
through such date shall become immediately due and payable. If any other event
of default shall occur and be continuing (the default not having been cured or
waived as provided under "--Modification and Waiver" below), the trustee or the
holders of at least 25% in aggregate principal amount of the Debentures then
outstanding may declare the Debentures due and payable at the principal amount
of the Debentures plus any accrued and unpaid interest and liquidated damages,
if any, through such date and thereupon the trustee may, at its discretion,
proceed to protect and enforce the rights of the holders of Debentures by
appropriate judicial proceedings. Such declaration may be rescinded or annulled
with the written consent of the holders of a majority in aggregate principal
amount of the Debentures then outstanding upon the conditions provided in the
indenture.
The indenture contains a provision entitling the trustee, subject to the duty
of the trustee during default to act with the required standard of care, to be
indemnified by the holders of Debentures before proceeding to exercise any right
or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
Debentures then outstanding, through their written consent, may direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred upon the trustee.
We will be required to furnish annually to the trustee a statement as to the
fulfillment of our obligations under the indenture.
Modification and Waiver
Changes Requiring Approval of Each Affected Holder
The indenture (including the terms and conditions of the Debentures) cannot
be modified or amended without the written consent or the affirmative vote of
the holder of each Debenture affected by such change to:
[] change the maturity of any Debenture or the payment date of any
installment of interest or liquidated damages payable on any Debentures;
[] reduce the principal amount of, or any interest, liquidated damages,
redemption price, repurchase price or designated event repurchase price
on, any Debenture;
[] impair or adversely affect the conversion rights of any holder of
Debentures;
[] change the currency of payment of such Debentures or interest or
liquidated damages thereon;
[] alter the manner of calculation or rate of interest or liquidated
damages on any Debenture or extend the time for payment of any such
amount;
[] impair the right of any holder to institute suit for the enforcement of
any payment on or with respect to, or conversion of, any Debenture;
[] except as otherwise permitted or contemplated by provisions concerning
corporate reorganizations, adversely affect the repurchase option of
holders (including after a designated event);
[] modify the redemption provisions of the indenture in a manner adverse to
the holders of Debentures;
[] reduce the percentage in aggregate principal amount of Debentures
outstanding necessary to modify or amend the indenture or to waive any
past default; or
36
[] reduce the percentage in aggregate principal amount of Debentures
outstanding required for any other waiver under the indenture.
Changes Requiring Majority Approval
The indenture (including the terms and conditions of the Debentures) may be
modified or amended, subject to the provisions described above, with the written
consent of the holders of at least a majority in aggregate principal amount of
the Debentures at the time outstanding.
Changes Requiring No Approval
The indenture (including the terms and conditions of the Debentures) may be
modified or amended by us and the trustee, without the consent of the holder of
any Debenture, for the purposes of, among other things:
[] adding to our covenants for the benefit of the holders of Debentures;
[] surrendering any right or power conferred upon us;
[] providing for conversion rights of holders of Debentures if any
reclassification or change of our common stock or any consolidation,
merger or sale of all or substantially all of our assets occurs;
[] providing for the assumption of our obligations to the holders of
Debentures in the case of a merger, consolidation, conveyance, transfer
or lease;
[] increasing the conversion rate, provided that the increase will not
adversely affect the interests of the holders of Debentures;
[] complying with the requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture
Act of 1939, as amended, or in connection with the registration of the
Debentures as contemplated by the registration rights agreement;
provided, that such modification or amendment does not, in the good
faith opinion of our board of directors and the trustee, adversely
affect the interests of the holders of the Debentures in any material
respect;
[] curing any ambiguity or correcting or supplementing any inconsistent or
defective provision contained in the indenture; provided, that such
modification or amendment does not, in the good faith opinion of our board
of directors and the trustee, adversely affect the interests of the
holders of the Debentures in any material respect; or
[] adding or modifying any other provisions with respect to matters or
questions arising under the indenture which we and the trustee may deem
necessary or desirable and which, in the good faith opinion of our board
of directors and the trustee, will not adversely affect the interests of
the holders of Debentures in any material respect; provided, that any
addition or modification made solely to conform the provisions of the
indenture to the description of the Debentures in the offering
memorandum utilized in connection with the original issuance of the
Debentures will not be deemed to adversely affect the interests of the
holders of the Debentures.
Registration Rights
We entered into a registration rights agreement with the initial purchasers
for the benefit of the holders of the Debentures. Pursuant to the agreement, we
have agreed, at our expense, to:
[] file with the Commission not later than the date 90 days after the
earliest date of original issuance of any of the Debentures, a
registration statement on such form as we deem appropriate covering
resales by holders of all Debentures and the common stock issuable upon
conversion of the Debentures;
[] use our reasonable best efforts to cause such registration statement to
become effective within 180 days after the earliest date of original
issuance of the Debentures; and
[] use our reasonable best efforts to keep the registration statement
effective until the earliest of:
37
(1) two years after the last date of original issuance of any of the
Debentures;
(2) the date when all of the Debentures and the common stock issuable upon
conversion of the Debentures have ceased to be outstanding (whether as a
result of redemption, repurchase and cancellation, conversion or
otherwise);
(3) the date when the holders of the Debentures and the common stock
issuable upon conversion of the Debentures are able to sell all such
securities immediately without restriction pursuant to the volume
limitation provisions of Rule 144 under the Securities Act of 1933, as
amended ("Securities Act"), or any successor provision; and
(4) the date when all of the Debentures and the common stock issuable upon
conversion of the Debentures are sold pursuant to the registration
statement or pursuant to Rule 144 under the Securities Act or any successor
provision.
We have filed the registration statement of which this prospectus is a part
to meet our obligations under the regisration rights agreement. To be named as a
selling security holder in the related prospectus at the time of effectiveness
of this registration statement, a holder must complete and deliver a
questionnaire to us on or prior to the fifth business day before the
effectiveness of the registration statement. Upon receipt of a completed
questionnaire after effectiveness of the registration statement, we will, within
15 business days, file any amendments to the registration statement or
supplements to the related prospectus as are necessary to permit the relevant
selling security holder to deliver a prospectus to purchasers of Debentures or
common stock sold pursuant to the registration statement; provided, that if such
notice is delivered during a suspension period referred to below such amendments
or supplements need not be filed until the 15th business day following the
expiration of such suspension period; and provided, further, that to the extent
a prospectus supplement may not be utilized under applicable law to make changes
to the information in the prospectus regarding the selling holders or the plan
of distribution, we will file a post-effective amendment to the registration
statement once per calendar quarter and may coordinate such filings with the
filings of our annual reports on Form 10-K and quarterly reports on Form 10-Q.
In connection with the filing of this registration statement, we have agreed
to:
[] provide to each selling security holder for whom this registration
statement was filed copies of the prospectus that is a part of this
registration statement;
[] notify each such selling security holder when this registration statement
has become effective;
[] notify each such selling security holder of the commencement of any
suspension period (as described below); and
[] take certain other actions as are required to permit unrestricted resales
of the Debentures and the common stock issuable upon conversion of the
Debentures.
Each selling security holder who sells securities pursuant to this
registration statement generally will be:
[] required to be named as a selling holder in the related prospectus;
[] required to deliver a prospectus to the purchaser;
[] subject to certain of the civil liability provisions under the
Securities Act in connection with the holder's sales; and
[] bound by the provisions of the registration rights agreement which are
applicable to the holder (including certain indemnification rights and
obligations).
We may suspend a holder's use of the prospectus for a period not to exceed 45
consecutive days, and not to exceed an aggregate of 120 days in any 360-day
period, if:
38
[] the prospectus would, in our judgment, contain a material misstatement or
omission as a result of an event that has occurred and is continuing; and
[] we determine in good faith that the disclosure of this material non-public
information would be detrimental to us and our subsidiaries.
However, if the disclosure relates to a previously undisclosed proposed or
pending material business transaction, the disclosure of which we determine in
good faith would be reasonably likely to impede our ability to consummate such
transaction, we may extend the suspension period from 45 consecutive days to 60
consecutive days. We will not specify the nature of the event giving rise to a
suspension in any notice to selling security holders of the Debentures of the
existence of such a suspension. By acceptance of a Debenture, each selling
security holder agrees to hold any communications by us in response to a notice
of a proposed business transaction in confidence.
We refer to each of the following as a registration default:
[] the registration statement has not been filed prior to or on the 90th
day following the earliest date of original issuance of any of the
Debentures; or
[] the registration statement has not been declared effective prior to or on
the 180th day following the earliest date of original issuance of any of
the Debentures, which we call the effectiveness target date; or
[] at any time after the effectiveness target date, the registration
statement ceases to be effective or fails to be usable and (1) we do not
cure the lapse of effectiveness or usability of the registration
statement within ten business days (or, if the suspension period is then
in effect, the fifth business day following the expiration of such
suspension period) by a post-effective amendment, prospectus supplement
or report filed pursuant to the Exchange Act or (2) if applicable, we do
not terminate the suspension period, described in the preceding
paragraph, by the 45th or 60th consecutive day, as the case may be, or
(3) if suspension periods exceed an aggregate of 120 days in any 360-day
period, provided that it shall not be a registration default if we
suspend sales under the registration statement from time to time until
the date on which a required post-effective amendment to the
registration statement relating to changes in selling security holder
information is declared effective.
If a registration default occurs (other than a registration default relating
to a failure to file or have an effective registration statement with respect to
the shares of common stock), cash liquidated damages will accrue on the
Debentures that are transfer restricted securities, from and including the day
following the registration default to but excluding the earlier of (1) the day
on which the registration default has been cured and (2) the date the
registration statement is no longer required to be kept effective. Liquidated
damages will be paid semiannually in arrears, with the first semiannual payment
due on each June 15 and December 15, commencing the first interest payment date
following the registration default, and will accrue at a rate per year equal to:
[] 0.25% of the principal amount of a Debenture to and including the 90th
day following such registration default; and
[] 0.50% of the principal amount of a Debenture from and after the 91st day
following such registration default.
In no event will liquidated damages accrue at a rate per year exceeding
0.50%. If a holder converts some or all of its Debentures into common stock when
there exists a registration default, the holder will not be entitled to receive
liquidated damages on such common stock, but will receive additional shares upon
conversion, as set forth under "Payments Upon Conversion" above.
Form, Denomination and Registration
Denomination and Registration
The Debentures will be issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
39
Global Debentures
The Debentures are evidenced by one or more global Debentures deposited with
the trustee as custodian for DTC, and registered in the name of Cede & Co. as
DTC's nominee.
Record ownership of the global Debentures may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee,
except as set forth below. You may hold your interests in the global Debentures
directly through DTC if you are a participant in DTC, or indirectly through
organizations which are direct DTC participants if you are not a participant in
DTC. Transfers between direct DTC participants will be effected in the ordinary
way in accordance with DTC's rules and will be settled in same-day funds. You
may also beneficially own interests in the global Debentures held by DTC through
certain banks, brokers, dealers, trust companies and other parties that clear
through or maintain a custodial relationship with a direct DTC participant,
either directly or indirectly.
So long as Cede & Co., as nominee of DTC, is the registered owner of the
global Debentures, Cede & Co. for all purposes will be considered the sole
holder of the global Debentures. Except as provided below, owners of beneficial
interests in the global Debentures:
[] will not be entitled to have certificates registered in their names;
[] will not receive or be entitled to receive physical delivery of
certificates in definitive form; and
[] will not be considered holders of the global Debentures.
The laws of some states require that certain persons take physical delivery
of securities in definitive form. Consequently, the ability of an owner of a
beneficial interest in a global security to transfer the beneficial interest in
the global security to such persons may be limited.
We will wire, through the facilities of the trustee, payments of principal,
interest and liquidated damages, if any, on the global Debentures to Cede & Co.,
the nominee of DTC, as the registered owner of the global Debentures. None of
LabOne, Inc., the trustee and any paying agent will have any responsibility or
be liable for paying amounts due on the global Debentures to owners of
beneficial interests in the global Debentures.
It is DTC's current practice, upon receipt of any payment of principal,
interest or liquidated damages, if any, on the global Debentures, to credit
participants' accounts on the payment date in amounts proportionate to their
respective beneficial interests in the Debentures represented by the global
Debentures, as shown on the records of DTC. Payments by DTC participants to
owners of beneficial interests in Debentures represented by the global
Debentures held through DTC participants will be the responsibility of DTC
participants, as is now the case with securities held for the accounts of
customers registered in "street name."
Holders wishing to convert Debentures pursuant to the terms of the Debentures
should contact their broker or other direct or indirect DTC participant to
obtain information on the procedures, including proper forms and cut-off times,
for submitting those requests and effecting delivery of such Debentures on DTC's
records.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and other banks, the ability of a holder to
pledge its interest in the Debentures represented by global Debentures to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate.
Neither LabOne, Inc. nor the trustee (nor any registrar, paying agent or
conversion agent under the indenture) will have any responsibility for the
performance by DTC or direct or indirect DTC participants of their obligations
under the rules and procedures governing their operations. DTC has advised us
that it will take any action permitted to be taken by a holder of Debentures,
including, without limitation, the presentation of Debentures for conversion as
described below, only at the direction of one or more direct DTC participants to
whose account with DTC interests in the global Debentures are credited and only
for the principal amount of the Debentures for which directions have been given.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code, and a
"clearing agency"
40
registered pursuant to the provisions of Section 17A of the Exchange Act, as
amended. DTC holds securities for DTC participants and facilitates the clearance
and settlement of securities transactions between DTC participants through
electronic computerized book-entry transfers and pledges between the accounts of
its participants. This eliminates the need for physical movement of securities
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations, and may
include one or more of the initial purchasers of the Debentures. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").
DTCC, in turn, is owned by a number of DTC's participants or their
representatives, together with other entities. Indirect access to the DTC system
is available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with, a participant, either
directly or indirectly. The DTC rules applicable to its participants are on file
with the Commission.
Although the description of the foregoing procedures is based upon
information obtained from DTC, it is under no obligation to perform or continue
to perform such procedures, and such procedures may be discontinued at any time.
If (i) DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by us within 90 days, (ii) at any time an
event of default has occurred and is continuing, and a holder of a beneficial
interest in a global Debenture requests to exchange such beneficial interest for
certificated Debentures or (iii) at any time we, in our sole discretion,
determine not to have the Debentures represented by global Debentures we will
cause Debentures to be issued in definitive form in exchange for the global
Debentures. In such case, beneficial interests in a global Debenture may be
exchanged for definitive certificated Debentures in accordance with DTC's
customary procedures. None of LabOne, Inc., the trustee or any of their
respective agents will have any responsibility for the performance by DTC or
direct or indirect DTC participants of their obligations under the rules and
procedures governing their operations, including maintaining, supervising or
reviewing the records relating to, or payments made on account of beneficial
ownership interests in global Debentures.
According to DTC, the foregoing information with respect to DTC has been
provided to its participants and other members of the financial community for
information purposes only and is not intended to serve as a representation,
warranty or contract modification of any kind.
Governing Law
The indenture and the Debentures will be governed by, and construed in
accordance with, the laws of the State of New York.
Information Concerning the Trustee and the Transfer Agent
Wells Fargo Bank, National Association, a national banking association duly
organized under the laws of the United States of America, as trustee under the
indenture, has been appointed by us as paying agent, conversion agent, registrar
and custodian with regard to the Debentures. American Stock Transfer and Trust
Company is the transfer agent and registrar for our common stock. The trustee,
transfer agent and their respective affiliates may from time to time in the
future provide banking and other services to us in exchange for a fee.
Rule 144A Information Request
We will furnish to the holders or beneficial holders of the Debentures or the
underlying common stock and prospective purchasers, upon their request, the
information required under Rule 144A(d)(4) under the Securities Act until such
time as such securities are no longer "restricted securities" within the meaning
of Rule 144 under the Securities Act, assuming these securities have not been
owned by an affiliate of ours.
Calculations in Respect of Debentures
The trustee, as calculation agent, will be responsible for making all
calculations called for under the Debentures. These calculations include, but
are not limited to, determination of the trading prices of the Debentures and of
our common stock. The calculation agent will make all these calculations in good
faith and, absent manifest error, their calculations will be final and binding
on holders of Debentures.
41
DESCRIPTION OF CAPITAL STOCK
General
Authorized Shares. Our articles of incorporation authorize the issuance of up
to 43,000,000 shares of stock, consisting of 40,000,000 shares of common stock,
$.01 par value per share, and 3,000,000 shares of preferred stock, $.01 par
value per share. Our board of directors is authorized to provide for the
issuance of shares of preferred stock, in one or more series, to establish the
number of shares in each series and to fix the voting powers of the series and
the designations, powers, preferences, and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions of each
series. No shares of preferred stock are presently outstanding.
Common Stock
Dividends and Other Distributions; Preemptive Rights. Subject to any superior
rights which may be created in any series of preferred stock which may be issued
from time to time in the future, the holders of common stock are entitled to
receive dividends as declared from time to time by our board of directors from
funds legally available therefor, and upon liquidation of the company will be
entitled to share ratably in all of our assets available for distribution to
such holders. Shares of common stock are not redeemable or convertible, have no
preemptive rights and are fully paid and non-assessable.
Voting Rights. Shares of common stock have one vote per share on each matter
submitted to a vote of stockholders, other than the election of directors.
Holders of common stock have cumulative voting rights in the election of
directors. Cumulative voting permits each stockholder to cast as many votes as
shall equal the number of shares held by such stockholder multiplied by the
number of directors to be elected, and such votes may all be cast for a single
director or may be distributed among the directors to be elected as the
stockholder wishes. Depending upon the number of directors elected, cumulative
voting may permit a holder of fewer than 50% of outstanding shares of common
stock to cumulate such holder's votes and obtain representation on our board of
directors. Our articles of incorporation contain provisions requiring a
super-majority vote for certain stockholder actions. See "Certain Possible
Anti-Takeover Effects of Articles of Incorporation and Bylaws" below.
Classified Board. Our articles of incorporation provide that the board of
directors shall be divided into three classes, as nearly equal in number as
possible. One class of directors will be elected each year to hold office for a
three-year term and until the successors of such class are duly elected and have
qualified. The impact of this classification of the board of directors on
cumulative voting is that a greater percentage of the voting shares are
necessary in any election to obtain representation on the board of directors,
because only one-third of the directors are elected each year. The
classification of the board of directors together with cumulative voting may
also have the effect of delaying, deferring or preventing a change of control of
LabOne, Inc.
Listing. Registrant's common stock currently is listed for trading on the
Nasdaq National Market.
Certain Possible Anti-Takeover Effects of Articles of Incorporation and Bylaws
General. Certain provisions of our articles of incorporation and bylaws might
have the effect of discouraging a potential acquirer from attempting a takeover
of us on terms which some stockholders might favor, and might reduce the
opportunity for stockholders to sell shares at a premium over then-prevailing
market prices. These provisions are described below.
Classified Board. We have a classified board of directors, as noted above.
The purpose of the classification of the board of directors is to help assure
continuity and stability in the management of our business and affairs. However,
the classification of directors has the effect of making it more difficult for
stockholders to change the composition of our board of directors. At least two
annual meetings of stockholders, instead of one meeting, will be required to
effect a change in a majority of our board of directors. The existence of
cumulative voting may further delay a change in a majority of our board of
directors, if the stockholders attempting to change the composition of our board
of directors do not own a sufficient number of shares to elect a full slate of
directors each year.
Authorized But Unissued Common Stock. The availability of authorized but
unissued shares of common stock could enable our board of directors to render
more difficult or discourage a hostile transaction to take control of us. In the
course of exercising our fiduciary responsibilities to stockholders, our board
of directors could issue additional
42
shares without stockholder approval in order to increase the voting power of
parties friendly to the board of directors or to dilute the voting and other
rights of the proposed acquiror. The 3,000,000 authorized but unissued shares of
preferred stock may be also issued by the board of directors for the same
purposes.
"Blank-Check" Preferred Stock. Our articles of incorporation authorize our
board of directors to issue 3,000,000 shares of preferred stock, in one or more
series, to establish the number of shares in each series and to fix the voting
powers of the series and the designations, powers, preferences, and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of each series. The ability to issue preferred stock provides
the board of directors with flexibility in structuring possible future
financings and acquisitions, and in meeting other corporate needs. However, the
board of directors could issue one or more series of preferred stock that might
impede the completion of a future merger, tender offer or other takeover
attempt.
Fair Price Provisions. Our articles of incorporation have a "fair price"
provision. This provision requires stockholder approval, by affirmative vote of
80% of all shares entitled to vote thereon voting as a single class, of certain
business combinations with related persons beneficially owning 10% or more of
our common stock, unless the business combination is approved by two-thirds or
more of our continuing directors and certain minimum fair price and procedural
provisions are satisfied. This provision makes certain business combinations
with related persons more difficult when the requisite board approval has not
been obtained and may therefore have an anti-takeover effect.
Amendment of Certain Charter or Bylaw Provisions. Certain provisions of our
articles of incorporation and bylaws may be amended only by the affirmative vote
of at least 80% of the outstanding shares of stock entitled to vote thereon,
unless the amendments are favorably recommended by the affirmative vote of a
majority of the entire board of directors.
These provisions include those sections of our articles of incorporation
relating to:
[] the number of directors,
[] management of the registrant,
[] amendments to the bylaws,
[] the right of the registrant to amend the articles of
incorporation generally and
[] the fair price provisions relating to business combinations.
These provisions include those sections of our bylaws relating to:
[] meetings of stockholders,
[] the number and classification of directors,
[] powers of the board of directors,
[] indemnification of directors and
[] advance notice of shareholder proposals and nominations.
The purpose of these provisions generally is to prevent holders of less than
a substantial percentage of outstanding shares from amending provisions of our
articles of incorporation and bylaws that are designed to promote, or to empower
the board of directors to promote, the interests of all stockholders. The
super-majority vote requirements may have the effect of making more difficult
any amendment by stockholders of any of such provisions of our articles of
incorporation or bylaws that have not been approved by a majority of our board
of directors, even if the holders of a majority of our outstanding shares
believe that such amendment would be in their best interests.
Number of Directors; Removing Directors and Filling Vacancies. Our bylaws
permit the board of directors to change the number of directors, except that
unless the articles of incorporation are amended there may not be fewer than
three nor more than 15 directors. Our bylaws provide that directors may be
removed by stockholders only for cause by a majority vote of the stockholders
entitled to vote on the election of directors. The Missouri General and Business
Corporation Law provides that a director may not be removed by a stockholder
vote if the votes cast against removal would be sufficient to elect the director
if then cumulatively voted at an election of the entire class of which he is a
part, unless the entire board is being removed. Our bylaws provide that any
vacancies will be filled by an affirmative vote of a majority of the remaining
directors, or, if they are unable to do so, by a vote of a majority of the
stockholders at an annual or special meeting. These provisions of our articles
of incorporation and bylaws may be amended only by the affirmative vote of at
least 80% of the outstanding shares of stock entitled to vote thereon, unless
the amendments are approved or favorably recommended by the affirmative vote of
a majority of the entire board of directors. These
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provisions could have an anti-takeover effect by preventing or delaying a
stockholder from enlarging the board of directors or removing directors without
cause and filling the resulting vacancies or new directorships with the
stockholder's nominees.
Advance Notice of Stockholder Nominations and Proposals. Our bylaws include
an advance notice procedure for stockholders wishing to nominate candidates for
election as directors or to bring other business before an annual meeting of
stockholders. By requiring advance notice of nominations and stockholder
proposals, our bylaw provision provides an orderly procedure for conducting
annual meetings of stockholders and provides our board of directors with the
opportunity to inform stockholders prior to such meetings, to the extent deemed
necessary or desirable by our board of directors, of the qualifications of such
nominees and of any business to be conducted at such meetings. Although the
advance notice provisions do not give our board of directors any power to
approve or disapprove stockholder nominations or proposals, they may have the
effect of precluding or delaying a contest for the election of directors or the
consideration of stockholder proposals if the designated procedures are not
followed. Such provisions may have the effect of discouraging or deterring a
third party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to us
or our stockholders.
Special Stockholders' Meetings. Our bylaws provide that special meetings may
be called only by a majority of the entire board of directors. The purpose of
this provision is to avoid the time, expense and disruption resulting from
holding special meetings of stockholders in addition to annual meetings, unless
the special meetings are approved by our board of directors. However, this
by-law provision may have the effect of delaying a change in control of us or
delaying the presentation to the stockholders of a stockholder proposal favored
by stockholders.
Preferred Stock Purchase Rights
General. Each outstanding share of common stock has associated with it one
preferred stock purchase right ("Right"). Each Right entitles the registered
holder thereof to purchase from us at any time following the Distribution Date
(as defined below) a unit consisting of one one-hundredth of a share of Series A
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), at a
purchase price of $50.00 per unit, subject to adjustment as described below. The
Rights are not exercisable until the Distribution Date. The description and
terms of the Rights are set forth in a Rights Agreement dated February 11, 2000,
as amended on August 31, 2001 (the "Rights Agreement") between us American Stock
Transfer & Trust Company, as Rights Agent. Rights will also be issued with
respect to shares of common stock issued by us or transferred from our treasury
prior to the Distribution Date, and, under certain circumstances, Rights will be
issued with respect to shares of common stock issued or transferred by us after
the Distribution Date. The following summary of certain terms of the Rights is
qualified in its entirety by reference to the current Rights Agreement, which is
on file with the Commisssion.
Rights Initially Attached to and Trade with Common Stock. Until the earlier
of the Distribution Date or the date the Rights are redeemed or expire: (1) the
Rights will be evidenced by common stock certificates and no separate Rights
certificates will be distributed, (2) the Rights will be transferable only in
connection with the transfer of the underlying shares of common stock, (3) the
surrender for transfer of any common stock certificate will also constitute the
transfer of the Rights associated with the shares of common stock represented by
such certificate and (4) new common stock certificates will contain a notation
incorporating the Rights Agreement by reference.
When Rights Separate from Common Stock and Become Exercisable. The Rights
will separate from the common stock and become exercisable on the Distribution
Date, which will occur upon the earlier of (1) ten business days after the Stock
Acquisition Date (as defined below) or (2) ten business days (or such later date
as the Board shall determine prior to such time as there is an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
or exchange offer, the consummation of which would result in a Person becoming
an "Acquiring Person." The "Stock Acquisition Date" means the earlier of (i) the
date of the first public announcement by us or an Acquiring Person that an
Acquiring Person has become such or (ii) the date on which we have actual
notice, direct or indirect, or otherwise determine that a person or entity has
become an Acquiring Person. As soon as practicable after the Distribution Date,
Rights certificates will be mailed to holders of record of the common stock as
of the close of business on the Distribution Date, and thereafter the separate
Rights certificates will represent the Rights.
Under the Rights Agreement, an Acquiring Person is a person or entity who,
together with all affiliates and associates of such person or entity, and
without the prior written approval of the Company, is the beneficial owner (as
defined in the
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Rights Agreement) of 15% or more of the outstanding shares of our common stock,
subject to a number of exceptions set forth in the Rights Agreement. The Rights
Agreement exempts certain persons from the definition of "Acquiring Person,"
including (1) Grant Family Members (as defined in the Rights Agreement), unless
such family members become (other than with the prior written approval of the
Board of Directors or pursuant to a Qualifying Offer) the beneficial owners of
20% or more of the shares of common stock then outstanding, excluding shares of
common stock and other securities acquired on or after February 11, 2000
pursuant to certain employee or director benefit plans, (2) us or any subsidiary
of ours and (3) any employee benefit plan of ours or any subsidiary and certain
persons appointed pursuant to the terms of any such plan. Under the Rights
Agreement, a person or entity shall not be an Acquiring Person if such Person
acquires beneficial ownership of 15% or more of the outstanding shares of common
stock pursuant to a qualifying offer, which is a cash tender offer for all of
the outstanding shares of common stock which meets certain conditions specified
in the Rights Agreement. The Rights Agreement contains exceptions for persons or
entities who inadvertently become Acquiring Persons or who exceed the ownership
limits as a result of repurchases of our stock by us, if certain conditions are
satisfied.
Adjustment of Rights upon Occurrence of a Triggering Event. In the event that
a person or entity becomes an Acquiring Person, each holder of a Right (except
the Acquiring Person and certain other persons as described below) will no
longer have the right to purchase units of Series A Preferred Stock, but instead
will thereafter have the right to receive, upon exercise of the Right, shares of
common stock (or, in certain circumstances, cash, property or other securities
of ours) having a current market price (as defined in the Rights Agreement)
equal to two times the then current exercise price of the Right. For example, at
a purchase price of $50 per Right, each Right not owned by an Acquiring Person
would entitle its holder to purchase $100 worth of common stock (or other
consideration, as noted above) for $50. Assuming that the common stock has a per
share value of $10 at such time, the holder of each valid Right would be
entitled to purchase ten shares of common stock for $50. Once a person or entity
becomes an Acquiring Person, all Rights that are, or under certain circumstances
were, beneficially owned by such Acquiring Person (or certain related parties)
will be null and void.
In the event that, at any time after the Stock Acquisition Date, (1) we are
acquired in a merger or other business combination transaction in which we are
not the surviving corporation (other than a merger which follows a qualifying
offer and satisfies certain other requirements), or (2) 50% or more of our
assets or earning power is sold or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a current market price equal to two times the then current purchase price
of the Right. The events set forth in this paragraph and in the preceding
paragraph which allow Rights to be exercised are referred to individually as a
"Triggering Event" and collectively as "Triggering Events."
Exchange of Rights. At any time after any person or entity becomes an
Acquiring Person, our board of directors may, at its option, exchange the Rights
(except Rights which previously have been voided as set forth above), in whole
or in part, at an exchange ratio of one-hundredth of a share of Series A
Preferred Stock or one share of common stock for each Right, subject to
adjustment for any stock split, stock dividend or similar transaction. Our Board
of Directors may not cause the exchange of Rights at any time after any Person,
together with such person's affiliates and associates, becomes the beneficial
owner of 50% or more of the shares of common stock then outstanding, with
certain exceptions.
Redemption of Rights. At any time prior to the close of business on the tenth
business day after the Stock Acquisition Date, we may order that all Rights be
redeemed at a price of $.01 per Right (payable in cash, common stock or other
consideration deemed appropriate by our Board of Directors), subject to
adjustment for any stock split, stock dividend or similar transaction.
Immediately upon the effectiveness of the action of our Board of Directors
ordering redemption of the Rights, the right to exercise the Rights will
terminate and the holders of the Rights will only be entitled to receive the
redemption price for each Right so held.
Amendment of Rights. At any time and from time to time prior to the close of
business on the tenth business day after the Stock Acquisition Date, we may
amend the Rights in any manner without the approval of any holders of Rights. At
any time and from time to time after the close of business on the tenth business
day after the Stock Acquisition Date, we may supplement or amend the Rights
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).
Terms of Series A Preferred Stock. Each unit of Series A Preferred Stock
(consisting of one one-hundredth of a share of Series A Preferred Stock) that is
issuable upon exercise of the Rights after the Distribution Date and prior to
the occurrence of a Triggering Event is intended to have approximately the same
economic rights and voting power as a
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share of common stock, and the value of a unit of Series A Preferred Stock
should approximate the value of one share of common stock. Each share of Series
A Preferred Stock will be entitled to dividend payments equal to 100 times the
aggregate per share amount of all dividends (other than a dividend payable in
common stock) declared per share of common stock. In the event of liquidation,
the holders of shares of Series A Preferred Stock will be entitled to the
greater of (a) a minimum preferential liquidation payment of $100 per share, or
(b) 100 times the aggregate amount to be distributed per share of common stock.
Each share of Series A Preferred Stock will have 100 votes, voting together
with, and on the same matters as, the common stock. In the event of any merger,
consolidation or other transaction in which shares of common stock are exchanged
for or changed into other stock, securities, cash and/or other property, each
share of Series A Preferred Stock will be entitled to receive 100 times the
amount received per share of common stock. These rights are protected by
customary anti-dilution provisions. Shares of Series A Preferred Stock are not
redeemable. Pursuant to the Rights Agreement, we reserve the right to require,
prior to the occurrence of a Triggering Event, that upon any exercise of Rights
a number of Rights be exercised so that only whole shares of Series A Preferred
Stock will be issued.
Adjustment of Rights and Securities Upon Certain Events. The purchase price
payable, and the number of units of Series A Preferred Stock or other securities
or property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (1) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Series A Preferred Stock,
or (2) upon the distribution to holders of the Series A Preferred Stock of
certain rights, options, warrants, evidences of indebtedness or assets
(excluding regular quarterly cash dividends). No adjustment in the purchase
price will be required until cumulative adjustments amount to at least 1% of the
purchase price.
The number of outstanding Rights attached to each share of common stock and
the number of units of Series A Preferred Stock purchasable upon exercise of a
Right are also subject to adjustment in the event of a stock split of the common
stock or a stock dividend on the common stock payable in shares of common stock
or a subdivision or combination of the shares of common stock, occurring prior
to the Distribution Date.
We are not required to issue fractional units of Series A Preferred Stock; in
lieu thereof, we may pay cash for such fractional units based on the market
price of the Series A Preferred Stock on the last trading date prior to the date
of issuance.
Rights Holder Not a Shareholder. Until a Right is exercised, the holder
thereof, as such, will have no rights as a shareholder, including, without
limitation, the right to vote or to receive dividends. The holders of Rights
will be able to vote and receive dividends on the common stock that they hold.
Expiration of Rights. The Rights will expire at the close of business on
February 25, 2010, unless we redeem or exchange the Rights prior to such date,
in each case as described above.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
considerations to U.S. holders relating to the purchase, ownership and
disposition of the Debentures or shares of our common stock. This discussion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed Treasury Regulations, and judicial decisions and administrative
interpretations thereunder, as of the date hereof, all of which are subject to
change or different interpretations, possibly with retroactive effect. We cannot
assure you that the Internal Revenue Service (the "IRS") will not challenge one
or more of the tax results described herein, and we have not obtained, nor do we
intend to obtain, a ruling from the IRS with respect to the federal tax
consequences of acquiring, holding or disposing of the Debentures or shares of
our common stock.
This discussion is limited to holders of Debentures who purchase the
Debentures in connection with their original issue from the initial purchases at
the "issue price" of the Debentures (as described below) and who hold the
Debentures and any shares of our common stock into which the Debentures are
converted as capital assets within the meaning of the Code.
This discussion does not contain a complete analysis of all the potential
tax considerations relating to the purchase, ownership and disposition of the
Debentures or shares of our common stock. In particular, this discussion does
not address all tax considerations that may be important to you in light of your
particular circumstances (such as the alternative minimum tax provisions) or
under certain special rules. Special rules may apply, for instance, to certain
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financial institutions, insurance companies, tax-exempt organizations, regulated
investment companies, security dealers and other persons that mark-to-market,
holders whose functional currency for federal income tax purposes is not the
United States dollar, persons who hold Debentures or shares of our common stock
as part of a hedge, conversion or constructive sale transaction, or straddle or
other integrated or risk reduction transaction, or persons who have ceased to be
United States citizens or are to be taxed as resident aliens. In addition, the
discussion does not apply to holders of Debentures or shares of our common stock
that are partnerships. If a partnership (including for this purpose any entity
treated as a partnership for federal income tax purposes) is a beneficial owner
of the Debentures or shares of our common stock into which the Debentures are
converted, the treatment of a partner in the partnership will generally depend
upon the status of the partner and upon the activities of the partnership. A
holder of Debentures that is a partnership and partners in such partnership
should consult their own tax advisors about the federal income tax consequences
of holding and disposing of the Debentures or shares of our common stock into
which the Debentures are converted. This discussion also does not address the
tax consequences arising under the laws of any foreign, state or local
jurisdiction.
PLEASE CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES
TO YOU OF ACQUIRING, HOLDING, CONVERTING OR OTHERWISE DISPOSING OF THE
DEBENTURES AND SHARES OF OUR COMMON STOCK, INCLUDING THE EFFECT AND
APPLICABILITY OF STATE, LOCAL OR FOREIGN TAX LAWS.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Debenture that is, for U.S. federal income tax purposes:
[] a citizen or resident of the United States;
[] a corporation, or other entity taxable as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of the
United States or of any political subdivision thereof; or
[] an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source.
Interest Income
Interest paid on a Debenture will generally be taxable to a U.S. Holder as
ordinary interest income at the time it accrues or is received in accordance
with the Holder's method of accounting for federal income tax purposes. It is
expected that the Debentures will be issued without original issue discount for
federal income tax purposes. If, however, the Debentures' stated redemption
price at maturity exceeds the issue price by more than a de minimis amount, a
U.S. Holder will be required to include such excess in income as original issue
discount, as it accrues, in accordance with a constant yield method based on a
compounding of interest before the receipt of cash payments attributable to this
income.
Additional amounts paid pursuant to the obligations described under
"Description of Debentures - Registration Rights" would be treated as ordinary
interest income.
Contingent Payment Debt Instrument Regulations
Treasury Regulations issued in 1996 provide for special tax treatment of
"contingent payment debt instruments" (the "contingent debt regulations").
Subject to certain exceptions, these regulations apply to debt instruments that
provide for one or more contingent payments. By their terms, however, the
contingent debt regulations do not apply where the contingency is remote or
incidental or because the holder of the debt instrument has an option to convert
the instrument into stock of the issuer. In addition, the contingent debt
regulations do not apply to a debt instrument that provides for alternate
payment schedules, each of which can be determined (as to timing and amount) as
of the issue date, if one payment schedule is significantly more likely than not
to occur. In general, if a debt instrument is subject to the contingent debt
regulations, a U.S. Holder must accrue contingent interest income as "original
issue discount" over the term of the debt instrument and in advance of the cash
payments attributable thereto based upon a projected payment schedule (subject
to later adjustments) provided by the issuer. Further, any gain and (subject to
certain limitations) loss recognized by a holder with respect to the sale or
other disposition of such an instrument will be ordinary, rather than capital,
in nature.
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The application of the contingent debt regulations to instruments such as
the Debentures is uncertain. In particular, if the Debentures are not registered
with the Commission within prescribed time periods or in certain other
circumstances described above in "Description of the Debentures-Registration
Rights," holders will be entitled to the payment of additional interest.
Notwithstanding the possibility of such contingent payments, under applicable
Treasury Regulations, payments on a Debenture that are subject to either a
remote or incidental contingency may be ignored. We believe that the prospect of
the foregoing payments being made should be considered as a remote and/or
incidental contingency so that the payments should be ignored.
Moreover, the Debentures provide for an increase in the conversion rate in
the event of certain corporate transactions unless 90% or more of the
consideration received is securities or other property that is traded or to be
traded immediately following such transaction on a national securities exchange
or the NASDAQ National Market. See "Description of Debentures - Conversion
Rights - General."
We are taking the position that the contingent debt regulations should not
apply to the Debentures because we believe that all the possible payment
schedules under the Debentures are known and there is a single payment schedule
which is significantly more likely than not to occur.
Therefore, for purposes of filing tax or information returns with the IRS,
we will not treat the Debentures as contingent payment debt instruments. Our
determination that the Debentures are not contingent payment debt instruments is
binding on each holder unless the holder explicitly discloses in the manner
required by applicable Treasury Regulations that its determination is different
from ours. Our determination is not, however, binding on the IRS. However, since
the scope of the contingent debt regulations is not clear, it is possible that
the IRS will take the position that the Debentures are subject to the contingent
debt regulations. If the Debentures are ultimately found to be subject to the
contingent debt regulations, U.S. Holders, including U.S. Holders using the cash
method of tax accounting, would be required to accrue interest income as
"original issue discount" over the term of the debt instrument based upon a
projected payment schedule (subject to later adjustments) that could include
projected values for the conversion price adjustments, and any gain and (subject
to certain limitations) loss recognized by a holder on a sale or other taxable
disposition with respect to such instrument would be ordinary, rather than
capital, in nature. In addition, all or a portion of the gain or loss recognized
on sale or other taxable disposition of shares of common stock received in
exchange for Debentures might be ordinary, rather than capital, in nature.
It should be noted that in 2002, the IRS sought comments in Notice 2002-36
regarding the tax classification and treatment of convertible instruments under
the contingent debt regulations. In this Notice, the IRS acknowledged that
subtle changes to the terms of an instrument could effectively make use of the
non-contingent bond method under the contingent debt regulations elective.
Moreover, the IRS acknowledged that there is considerable uncertainty about the
tax consequences of convertible debt instruments that are widely used and
broadly traded in the capital markets. The IRS invited comments on several
issues including whether the exclusion from the non-contingent bond method for
straight convertible debt instruments should be eliminated, expanded or modified
and whether the rule that remote and incidental contingencies are disregarded in
determining whether a debt instrument is a contingent debt instrument should be
modified. The IRS has not issued any guidance pursuant to the request for
comments set forth in Notice 2002-36. The Notice clearly sets forth, however,
the scope of uncertainty with respect to instruments such as the Debentures.
Accordingly, any potential holder of the Debentures is encouraged to consult
their tax counsel regarding the tax treatment of the Debentures in their hands.
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Sale, Exchange, Retirement or Conversion of Debentures Solely for Cash
Upon the sale, exchange, retirement or conversion of a Debenture solely
for cash, a U.S. Holder will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange, retirement or
conversion and the U.S. Holder's adjusted tax basis in the Debenture. For these
purposes, the amount realized does not include any amount attributable to
accrued interest. Amounts attributable to accrued interest are treated as
interest as described under "Payments of Interest" above. Gain or loss realized
on the sale, exchange, retirement or conversion of a Debenture solely for cash
will generally be capital gain or loss and will be long-term capital gain or
loss if at the time of sale, exchange, retirement or conversion the Debenture
has been held for more than one year.
Conversion of Debentures for Cash and Shares of Common Stock
If a holder converts Debentures and we are required to deliver a
combination of cash and shares of our common stock in satisfaction of our
conversion obligation, assuming that the Debentures are securities for federal
income tax purposes, which is likely, a U.S. Holder generally will not recognize
loss, but will recognize capital gain, if any, with respect to the Debentures so
converted in an amount equal to the lesser of (i) gain "realized" (i.e., the
excess, if any, of the fair market value of the common stock received upon
conversion plus cash received over the adjusted tax basis in the Debentures
converted) and (ii) the amount of cash received. For these purposes, the amount
realized does not include any amount attributable to accrued interest, which
will be treated as interest, as described under "Payments of Interest" above.
Any such capital gain will be long-term if the holder's holding period in
respect of the Debentures converted is more than one year.
A U.S. Holder's tax basis in the common stock received would generally
equal the adjusted tax basis in the Debentures converted decreased by the cash
received, and increased by the amount of gain, if any, recognized. A U.S.
Holder's holding period in the common stock received upon conversion will
include the holding period of the Debentures so converted.
Adjustment of Conversion Rate
If at any time we make a distribution of property to shareholders that
would be taxable to such shareholders as a dividend for federal income tax
purposes (for example, distributions of cash, evidences of indebtedness or
assets of ours, but generally not stock dividends or rights to subscribe for our
common stock) and, pursuant to the anti-dilution provisions of the indenture,
the conversion rate of the Debentures is increased, such increase may be deemed
to be the payment of a taxable stock dividend to you. If the conversion rate is
increased at our discretion or in certain other circumstances, such increase
also may be deemed to be the payment of a taxable dividend to you,
notwithstanding the fact that you do not receive a cash payment. In certain
circumstances, the failure to make an adjustment of the conversion rate under
the indenture may result in a taxable distribution to holders of our common
stock. Any deemed distribution will be taxable as a dividend, return of capital
or capital gain in accordance with the tax rules applicable to corporate
distributions, but may not be eligible for the reduced rates of tax applicable
to certain dividends paid to individual holders nor to the dividends-received
deduction applicable to certain dividends paid to corporate holders.
Ownership and Disposition of Shares of Our Common Stock
Distributions, if any, paid on shares of our common stock generally will
be includable in your income as ordinary income to the extent made from our
current or accumulated earnings and profits. Such distributions will be eligible
for the dividends-received deduction in the case of a corporate holder that
meets certain holding period and other applicable requirements, and will qualify
for taxation at reduced rates in the case of an individual holder (effective for
tax years beginning before January 1, 2009) if the holder meets certain holding
period and other requirements. Upon the sale, exchange or other disposition of
shares of our common stock, you generally will recognize capital gain or capital
loss equal to the difference between the amount realized on such sale or
exchange and your adjusted tax basis in such shares. You should consult your tax
advisors regarding the treatment of capital gains (which may be taxed at lower
rates than ordinary income for taxpayers who are individuals) and losses (the
deductibility of which is subject to limitations).
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Backup Withholding and Information Reporting
Payments of interest or dividends made by us on, or the proceeds of the
sale or other disposition of, the Debentures or shares of our common stock may
be subject to information reporting and federal backup withholding tax
(currently, at the rate of 28%) if the recipient of such payment fails to supply
an accurate taxpayer identification number or otherwise fails to comply with
applicable United States information reporting or certification requirements.
Any amount withheld from a payment to a holder under the backup withholding
rules is allowable as a credit against the holder's U.S. federal income tax,
provided that the required information is furnished to the IRS.
Tax Consequences to Non-U.S. Holders
As used herein, the term "Non-U.S. Holder" means a beneficial owner of a
Debenture or our common stock that is, for U.S. federal income tax purposes:
[] an individual who is classified as a nonresident alien for U.S. federal
income tax purposes;
[] a foreign corporation; or
[] a nonresident alien fiduciary of a foreign estate or trust.
Debentures
Except as described below with respect to constructive dividends, all
payments on the Debentures made to a Non-U.S. Holder, including a payment in our
common stock or cash pursuant to a conversion, exchange or retirement and any
gain realized on a sale of the Debentures, will be exempt from U.S. federal
income and withholding tax, provided that:
[] the Non-U.S. Holder does not own, actually or constructively, 10% or more
of the total combined voting power of all classes of our stock entitled to
vote, is not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership and is not a bank receiving
certain types of interest,
[] the certification requirement described below has been fulfilled with
respect to the Non-U.S. Holder,
[] such payments are not effectively connected with the conduct by such
Non-U.S. Holder of a trade or business in the United States, and
[] in the case of gain realized on the sale, conversion, exchange or
retirement of the Debentures or disposition of our common stock following
conversion we are not, and have not been within the shorter of the
five-year period preceding such sale, conversion, exchange or retirement
and the period the Non-U.S. Holder held the Debentures, a U.S. real
property holding corporation.
Generally, a corporation is a U.S. real property holding corporation under
the "FIRPTA" rules if the fair market value of its U.S. real property interests,
as defined in the Internal Revenue Code and applicable regulations, equals or
exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. We
currently are not a U.S. real property holding corporation and do not intend to
become one in the future. However, no assurance can be given that we will not
become a U.S. real property holding corporation in the future. If we are
determined to be a U.S. real property holding corporation, then an exemption
would generally apply to a Non-U.S. Holder who at no time actually or
constructively owned more than 5% of the outstanding Debentures or more than 5%
of our outstanding common stock, assuming our common stock continues to be
regularly traded on an established securities market, as prescribed by Treasury
regulations.
The certification requirement referred to above will be fulfilled if
either (a) the beneficial owner of a Debenture certifies on IRS Form W-8BEN,
under penalties of perjury, that it is not a U.S. person and provides its name
and address; or (b) a securities clearing organization, bank or other financial
institution, that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Debenture, certifies
under penalties of perjury that such a Form W-8BEN (or a suitable substitute
form) has been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes the payor with a
copy thereof.
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If a Non-U.S. Holder of a Debenture is engaged in a trade or business in
the United States, and if payments on the Debenture are effectively connected
with the conduct of this trade or business, the Non-U.S. Holder, although exempt
from U.S. withholding tax, will generally be taxed in the same manner as a U.S.
Holder (see general discussion of federal income tax considerations to U.S.
Holders above), except that the Non-U.S. Holder will be required to provide a
properly executed IRS Form W-8ECI in order to claim an exemption from
withholding tax. These Non-U.S. Holders should consult their own tax advisers
with respect to other tax consequences of the ownership of the Debentures,
including the possible imposition of a 30% branch profits tax or, if applicable,
a lower treaty rate.
If a Non-U.S. Holder were deemed to have received a constructive dividend
(see general discussion of federal income tax considerations to U.S. Holders
above), the Non-U.S. Holder generally would be subject to United States
withholding tax at a 30% rate, subject to reduction by an applicable treaty, on
the taxable amount of the dividend. It is possible that U.S. federal tax on the
constructive dividend would be withheld from subsequent interest or principal
payments made to the Non-U.S. Holder of the Debentures. A Non-U.S. Holder who is
subject to withholding tax under such circumstances should consult his own tax
adviser as to whether he can obtain a refund of all or a portion of the
withholding tax.
Distributions on Common Stock
Dividends, if any, paid to a Non-U.S. Holder of our common stock generally
will be subject to U.S. withholding tax at a 30% rate, subject to reduction
under an applicable treaty. In order to obtain a reduced rate of withholding, a
Non-U.S. Holder will be required to provide a properly executed IRS Form W-8BEN
certifying its entitlement to benefits under a treaty. A Non-U.S. Holder who is
subject to withholding tax under such circumstances should consult his own tax
adviser as to whether he can obtain a refund of all or a portion of the
withholding tax. Except to the extent otherwise provided under an applicable tax
treaty, you generally will be taxed in the same manner as a U.S. Holder on
dividends that are effectively connected with your conduct of a trade or
business in the United States. If you are a foreign corporation, you may also be
subject to a U.S. branch profits tax on such effectively connected income at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty, subject to certain adjustments.
A Non-U.S. Holder generally will not be subject to U.S. federal income or
withholding tax on gain realized on a sale or other disposition of the common
stock received upon a conversion of a Debenture, unless:
[] the gain is effectively connected with the conduct by such Non-U.S.
Holder of a trade or business in the United States,
[] in the case of a Non-U.S. Holder who is a nonresident alien individual,
the individual is present in the United States for 183 or more days in the
taxable year of the disposition and either (A) such Non-U.S. Holder has a
"tax home" in the United States and certain other requirements are met, or
(B) the gain from the disposition is attributable to an office or other
fixed place of business in the United States; or
[] we are or have been a U.S. real property holding corporation at any time
within the shorter of the five year period preceding such sale, exchange
or disposition and the period the Non-U.S. Holder held the common stock.
As discussed above, we believe that we are not, and do not anticipate
becoming, a U.S. real property holding corporation for United States federal
income tax purposes.
If a Non-U.S. Holder of our common stock is engaged in a trade or business
in the United States, and if the gain on the common stock is effectively
connected with the conduct of this trade or business, the Non-U.S. Holder will
generally be taxed in the same manner as a U.S. Holder (see general discussion
of federal income tax considerations to U.S. Holders above). These Non-U.S.
Holders should consult their own tax advisers with respect to other tax
consequences of the disposition of the common stock, including the possible
imposition of a 30% branch profits tax.
51
Backup Withholding and Information Reporting
Information returns may be filed with the IRS in connection with payments
on the Debentures, the common stock and the proceeds from a sale or other
disposition of the Debentures or the common stock. A Non-U.S. Holder may be
subject to United States backup withholding tax on these payments unless the
Non-U.S. Holder complies with certification procedures to establish that it is
not a U.S. person. The certification procedures required of Non-U.S. Holders to
claim the exemption from withholding tax on certain payments on the Debentures,
described above, will satisfy the certification requirements necessary to avoid
the backup withholding tax as well. The amount of any backup withholding from a
payment will be allowed as a credit against the holder's U. S. federal income
tax liability and may entitle the holder to a refund, provided that the required
information is timely furnished to the IRS. In addition, we must report annually
to the IRS and to each Non-U.S. Holder the amount of any dividends paid to, and
the tax withheld with respect to, such holder, regardless of whether any
withholding was actually required. Copies of these information returns may also
be made available under the provisions of a specific treaty or agreement to the
tax authorities of the country in which the Non-U.S. Holder resides.
SELLING SECURITY HOLDERS
We issued the Debentures in a private offering in June and July 2004. The
initial purchasers have advised us that they resold the Debentures to qualified
institutional buyers under Rule 144A under the Securities Act. The Debentures
and the common stock that are offered for resale by this prospectus are offered
for the accounts of the selling security holders. These subsequent purchasers,
or their transferees, pledgees, donees or successors, may from time to time
offer and sell any or all of the Debentures and/or the common stock issuable
upon conversion of the Debentures pursuant to this prospectus.
The following table sets forth certain information with respect to the
selling security holders and the principal amount of Debentures and the number
of shares of our common stock that are beneficially owned by each selling
security holder and that may be offered and sold from time to time pursuant to
this prospectus. The information is based solely on information provided by or
on behalf of the selling security holders set forth below, and we have not
independently verified the information.
Except as indicated below, none of the selling security holders set forth
below has had any position, office or other material relationship with us or our
affiliates within the past three years.
52
--------------------------------------------------------------------------------
Name Principal Principal Number of Number of
Amount of Amount of Shares of Shares of
Debentures Debentures Common Common
Beneficially That Stock Stock That
Owned ($) May Be Beneficially May Be Sold
Sold ($)(1) Owned (1)(3)
(2)(3)
--------------------------------------------------------------------------------
Arkansas PERS 400,000 400,000 10,178.52 10,178.52
--------------------------------------------------------------------------------
Astrazencea Holdings 120,000 120,000 3,053.56 3,053.56
Pension
--------------------------------------------------------------------------------
BNP Paribas Equity 3,064,000 3,064,000 80,226.46(5) 77,967.46
Strategies, SNC(4)
--------------------------------------------------------------------------------
Boilermakers 515,000 515,000 13,104.84 13,104.84
Blacksmith Pension
Fund
--------------------------------------------------------------------------------
CALAMOS Market 4,200,000 4,200,000 106,874.46 106,874.46
Neutral Fund-
CALAMOS Investment
Trust
--------------------------------------------------------------------------------
CNH CA Master 250,000 250,000 6,361.58 6,361.58
Account L.P.
--------------------------------------------------------------------------------
Commission of the 600,000 600,000 15,267.78 15,267.78
Land Office
--------------------------------------------------------------------------------
Consulting Group 800,000 800,000 20,357.04 20,357.04
Capital Markets Funds
--------------------------------------------------------------------------------
Cooperneff 3,008,000 3,008,000 76,542.47 76,542.47
Convertible
Strategies (Cayman)
Master Fund LP
--------------------------------------------------------------------------------
CQS Convertible and 1,000,000 1,000,000 25,446.30 25,446.30
Quantitative
Strategies Master
Fund Limited
--------------------------------------------------------------------------------
Credit Suisse First
Boston Europe LTD (4) 7,500,000 7,500,000 190,847.25 190,847.25
--------------------------------------------------------------------------------
DBAG London (4) 17,000,000 17,000,000 432,587.1 432,587.1
--------------------------------------------------------------------------------
Delaware PERS 230,000 230,000 5,852.65 5,852.65
--------------------------------------------------------------------------------
Delta Airlines 130,000 130,000 3,308.02 3,308.02
Master Fund
--------------------------------------------------------------------------------
DKR Sound Shore 200,000 200,000 5,089.26 5,089.26
Opportunity Fund Ltd.
--------------------------------------------------------------------------------
Duke Endorsement 110,000 110,000 2,799.09 2,799.09
--------------------------------------------------------------------------------
Fore Convertible 1,839,000 1,839,000 46,795.75 46,795.75
Master Fund, Ltd.
--------------------------------------------------------------------------------
Fore Plan Asset 175,000 175,000 4,453.10 4,453.10
Fund, Ltd.
--------------------------------------------------------------------------------
Froley Revy 30,000 30,000 763.39 763.39
Investment
Convertible Security
Fund
--------------------------------------------------------------------------------
Grace Convertible 4,600,000 4,600,000 117,052.98 117,052.98
Arbitrage Fund, LTD
--------------------------------------------------------------------------------
Guggenheim Portfolio 305,000 305,000 7,761.12 7,761.12
Company VIII
(Cayman), Ltd (4)
--------------------------------------------------------------------------------
Highbridge 7,500,000 7,500,000 190,847.25 190,847.25
International LLC (4)
--------------------------------------------------------------------------------
ICI American 90,000 90,000 2,290.17 2,290.17
Holdings Trust
--------------------------------------------------------------------------------
Institutional 160,000 160,000 4,071.41 4,071.41
Benchmark Management
Fund
--------------------------------------------------------------------------------
Lighthouse 125,000 125,000 3,180.79 3,180.79
Multi-Strategy
Master Fund LP
--------------------------------------------------------------------------------
Lord Abbett 2,000,000 2,000,000 50,892.60 50,892.60
Investment Trust -
LA Convertible Fund
--------------------------------------------------------------------------------
Louisiana CCRF 45,000 45,000 1,145.08 1,145.08
--------------------------------------------------------------------------------
Lyxor/Convertible 560,000 560,000 14,249.93 14,249.93
--------------------------------------------------------------------------------
53
--------------------------------------------------------------------------------
Arbitrage Fund
Limited
--------------------------------------------------------------------------------
Lyxor/Quest Fund Ltd. 825,000 825,000 20,993.20 20,993.20
--------------------------------------------------------------------------------
Man Mac I Limited 681,000 681,000 17,328.93 17,328.93
--------------------------------------------------------------------------------
Northwestern Mutual 1,000,000 1,000,000 25,446.30 25,446.30
Life Insurance
Company (4)
--------------------------------------------------------------------------------
OCLC Online Computer 10,000 10,000 254.46 254.46
Library Center Inc
--------------------------------------------------------------------------------
Piper Jaffray & Co. 4,000,000 4,000,000 101,785.20 101,785.20
(6)
--------------------------------------------------------------------------------
Polaris Vega Fund 2,650,000 2,650,000 67,432.70 67,432.70
L.P.
--------------------------------------------------------------------------------
Prudential Insurance 25,000 25,000 636.16 636.16
Co of America (4)
--------------------------------------------------------------------------------
Quatrro Fund Ltd 3,600,000 3,600,000 91,606.68 91,606.68
--------------------------------------------------------------------------------
Quattro 240,000 240,000 6,107.11 6,107.11
Multistrategy Master
Fund LP
--------------------------------------------------------------------------------
Quest Global 300,000 300,000 7,633.89 7,633.89
Convertible Master
Fund Ltd.
--------------------------------------------------------------------------------
Singlehedge US 744,000 744,000 18,932.05 18,932.05
Convertible
Arbitrage Fund
--------------------------------------------------------------------------------
State of Oregon / 1,225,000 1,225,000 31,171.72 31,171.72
Equity
--------------------------------------------------------------------------------
Sturgeon Limited 624,000 624,000 15,878.49 15,878.49
--------------------------------------------------------------------------------
Sunrise Partners 7,350,000 7,350,000 187,030.30 187,030.30
Limited Partnership
(4)
--------------------------------------------------------------------------------
Syngenta AG 70,000 70,000 1,781.24 1,781.24
--------------------------------------------------------------------------------
Tribeca Investments 5,000,000 5,000,000 127,231.50 127,231.50
LTD
--------------------------------------------------------------------------------
Other Holders of
Debentures or common 18,600,000 18,600,000 473,301.18 473,301.18
stock issuable upon
conversion of the
Debentures or any
future transferee,
pledgee, donee or
successor of any
such holder (7)(8)
--------------------------------------------------------------------------------
(1) Because a selling security holder may sell all or a portion of the
Debentures and common stock issuable upon conversion of the Debentures pursuant
to this prospectus, no estimate can be given as to the number or percentage of
Debentures and common stock that the selling security holder will hold upon
termination of any sales.
(2) Includes shares of common stock issuable upon conversion of the Debentures.
(3) The number of shares of our common stock issuable upon conversion of the
Debentures assumes a holder would receive the maximum number of shares of common
stock issuable in connection with the conversion of the full amount of
Debentures held by such holder at the initial conversion rate of 25.4463 shares
per $1,000 principal amount of Debentures. This conversion rate is subject to
adjustment as described under "Description of the Debentures - Conversion
Rights." Accordingly, the maximum number of shares of common stock issuable upon
conversion of the Debentures may increase or decrease from time to time. Under
the terms of the indenture, fractional shares will not be issued upon conversion
of the Debentures; cash will be paid in lieu of fractional shares, if any.
(4) Affiliate of a broker-dealer, based upon information provided to us by the
selling security holder.
(5) Includes shares of common stock beneficially owned other than common stock
issuable upon conversion of the Debentures.
(6) Piper Jaffray & Co. was an initial purchaser in our private offering of
Debentures in June and July, 2004. Piper Jaffray & Co. is a broker-dealer, based
upon information provided to us by Piper Jaffray & Co.
(7) The number of shares shown assumes that any other holders of Debentures or
common stock issued upon conversion of Debentures, or any future transferee,
pledgee, donee or successor of any such holders, do not beneficially own any
common stock other than common stock issuable upon conversion of the Debentures
based upon the initial conversion rate.
(8) Information about other selling security holders, other than any direct or
indirect transferee of a selling security holder named above, will be set forth
in post-effective amendments to the registration statement of which this
prospectus is a part. Under the registration rights agreement that we entered
into with respect to the Debentures, we are not required to file more than one
post-effective amendment per calendar quarter to name new selling security
holders
54
and may coordinate such filing with the filing of our annual report on Form 10-K
or quarterly report on Form 10-Q during such calendar quarter.
The selling security holders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Debentures or common stock since
the date on which the information in the preceding table is presented.
Information concerning the selling security holders may change from time to time
and any such changed information will be set forth in prospectus supplements or,
to the extent required, post-effective amendments to the registration statement.
Each selling security holder who is an affiliate of a broker-dealer has
informed us that such selling security holder purchased the securities in the
ordinary course of business and, at the time of the purchase of the securities,
did not have any agreements or understandings, directly or indirectly, with any
person to distribute the securities.
PLAN OF DISTRIBUTION
The securities to be offered and sold using this prospectus are being
registered to permit public secondary trading of these securities by the selling
security holders from time to time after the date of this prospectus. We will
not receive any of the proceeds from the sale by the selling security holders of
the securities offered by this prospectus. Selling security holders will act
independently of us in making decisions with respect to the timing, manner and
size of each sale.
The Debentures and the common stock issuable upon conversion of the
Debentures may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at prices relating to such
prevailing market prices, at varying prices determined at the time of sale, or
at negotiated prices. Sales of Debentures and common stock issuable upon
conversion of the Debentures may be effected in transactions (which may involve
crosses or block transactions) (i) on any national securities exchange or
quotation service on which the Debentures or common stock issuable upon
conversion of the Debentures may be listed or quoted at the time of sale, (ii)
in the over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market or (iv) through the
writing of options. The selling security holders may effect such transactions by
selling the Debentures or common stock issuable upon conversion of the
Debentures directly to purchasers, through broker-dealers acting as agents for
the selling security holders, or to broker-dealers who may purchase Debentures
or common stock issuable upon conversion of the Debentures as principals and
thereafter sell the Debentures or common stock issuable upon conversion of the
Debentures from time to time in transactions. In effecting sales, broker-dealers
engaged by selling security holders may arrange for other broker-dealers to
participate. Such broker-dealers, if any, may receive compensation in the form
of discounts, concessions or commissions from the selling security holders
and/or the purchasers of the Debentures or common stock issuable upon conversion
of the Debentures for whom such broker-dealers may act as agents or to whom they
may sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
In connection with the sale of Debentures or common stock issuable upon
conversion of the Debentures, the selling security holders may, subject to the
terms of their agreements with us and applicable law, (i) enter into
transactions with brokers-dealers or others, who in turn may engage in short
sales of the securities in the course of hedging the positions they assume, (ii)
sell short or deliver securities to close out positions or (iii) loan securities
to brokers, dealers or others that may in turn sell such securities. The selling
security holders may enter into option or other transactions with broker-dealers
or other financial institutions that require the delivery to the broker-dealer
of the Debentures or common stock issuable upon conversion of the Debentures.
The broker-dealer or other financial institution may then resell or transfer
these securities through this prospectus. The selling security holders may also
loan or pledge their Debentures or common stock issuable upon conversion of the
Debentures to a broker-dealer or other financial institution. The broker-dealer
or other financial institution may sell the securities which are loaned or, upon
a default, the broker-dealer or other financial institution may sell the pledged
securities by use of this prospectus.
The selling security holders and any broker-dealers, agents or underwriters
that participate with the selling security holders in the distribution of the
Debentures or common stock issuable upon conversion of the Debentures may be
deemed to be underwriters within the meaning of the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such persons,
and any profits received on the resale of the Debentures or common stock
issuable upon conversion of the Debentures and purchased by them may be deemed
to be underwriting commissions or
55
discounts under the Securities Act. Because the selling security holders may be
deemed to be "underwriters" within the meaning of the Securities Act, the
selling security holders will be subject to the prospectus delivery requirements
of the Securities Act. Neither the delivery of any prospectus, or any prospectus
supplement, nor any other action taken by the selling security holders or any
purchaser relating to the purchase or sale of Debentures or common stock
issuable upon conversion of the Debentures under this prospectus shall be
treated as an admission that any of them is an underwriter within the meaning of
the Securities Act, relating to the sale of any Debentures or common stock
issuable upon conversion of the Debentures.
To the extent required by the Securities Act, a prospectus supplement or
amendment will be filed and disclose the specific number of shares of common
stock to be sold, the name of the selling security holder, the purchase price,
the public offering price, the names of any agent, dealer or underwriter, and
any applicable commissions paid or discounts or concessions allowed with respect
to a particular offering and other facts material to the transaction.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling security holders and any underwriter,
broker-dealer or agent regarding the sale of the Debentures and shares of our
common stock issuable upon conversion of the Debentures by the selling security
holders.
Pursuant to our registration rights agreement, we have agreed to pay all of
our expenses incident to the offer and sale of the Debentures and common stock
issuable upon conversion of the Debentures offered by the selling security
holders. The selling security holders will pay all underwriting discounts and
selling commissions, stock transfer taxes and fees and expenses of the selling
security holders. We have agreed to indemnify the selling security holders
against certain liabilities, including certain liabilities under the Securities
Act, and to contribute to payments the selling security holders may be required
to make in respect thereof.
To comply with the securities laws of certain jurisdictions, if applicable,
the Debentures and common stock issuable upon conversion of the Debentures will
be offered or sold in such jurisdictions only through registered or licensed
brokers or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Debentures or the common stock issuable upon
conversion of the Debentures may be limited in its ability to engage in market
activities with respect to such Debentures or common stock issuable upon
conversion of the Debentures. In addition and without limiting the foregoing,
each selling security holder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchase and
sales of any of the Debentures and common stock issuable upon conversion of the
Debentures by the selling security holders. Furthermore, Regulation M of the
Exchange Act may restrict the ability of any person engaged in the distribution
of the Debentures and common stock issuable upon conversion of the Debentures to
engage in market-making activities with respect to the particular Debentures and
common stock issuable upon conversion of the Debentures being distributed for a
period of five business days prior to the commencement of the distribution.
Any selling security holder who is a broker-dealer is deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act. To our
knowledge, Piper Jaffray & Co. is the only selling security holder who is a
registered broker-dealer and, as such, it is deemed to be an underwriter of the
Debentures and the underlying common stock within the meaning of the Securities
Act. Other than the performance of investment banking, advisory and other
commercial services for us in the ordinary course of business, we do not have a
material relationship with Piper Jaffray & Co., and Piper Jaffray & Co. does not
have the right to designate or nominate a member or members of our board
directors. Piper Jaffray & Co. purchased their Debentures in the open market,
not directly from us, and we are not aware of any underwriting plan or
agreement, underwriters' or dealers' compensation, or passive market-making or
stabilizing transactions involving the purchase or distribution of these
securities by Piper Jaffray & Co. To our knowledge, none of the selling security
holders who are affiliates of broker-dealers purchased the Debentures outside of
the ordinary course of business or, at the time of the purchase of the
Debentures, had any agreement or understanding, directly or indirectly, with any
person to distribute the securities.
We may suspend the use of this prospectus and any supplements hereto upon any
event or circumstance which necessitates the making of any changes in the
registration statement or prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that the registration statement, the
prospectus and any amendment or
56
supplement thereto will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
Any securities covered by this prospectus that qualify for sale pursuant to
Rule 144 or Rule 144A under the Securities Act, may be sold under Rule 144 or
Rule 144A rather than pursuant to this prospectus.
We cannot assure you that the selling security holders will sell any or all
of the securities offered hereunder.
LEGAL MATTERS
The validity of the Debentures and the common stock issuable upon conversion
of the Debentures and certain other legal matters will be passed upon for us by
Stinson Morrison Hecker LLP, Kansas City, Missouri.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The consolidated financial statements and schedule of LabOne, Inc. as of
December 31, 2003 and 2002, and for each of the years in the three-year period
ended December 31, 2003, have been incorporated by reference herein in reliance
upon the report of KPMG LLP, independent registered public accounting firm, and
upon the authority of said firm as experts in accounting and auditing. The audit
report covering the December 31, 2003 and 2002 consolidated financial statements
refers to the adoption of Statement of Financial Accounting Standards No. 141,
"Business Combinations" and No. 142, "Goodwill and Other Intangible Assets."
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and in accordance therewith file reports, proxy
statements and information statements and other information with the Commission.
These reports, proxy statements and information statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Reports, proxy statements and information statements and other
information filed electronically by us with the Commission are available at the
Commission's web site at http://www.sec.gov. You may also obtain copies of this
information by mail from the Public Reference Section of the Commission at rates
prescribed by the Commission. You may obtain information on the operation of the
public reference room by calling the Commission at (800) 732-0330.
We are incorporating by reference certain information into this prospectus.
This means that we are disclosing important information to you by referring you
to other documents filed separately with the Commission. The information
incorporated by reference is considered to be a part of this prospectus, except
for any information that is superseded by information that is included directly
in this document.
This prospectus incorporates by reference the following documents or portions
of documents listed below that we have previously filed with the Commission:
57
o Our annual report on Form 10-K for the fiscal year ended December 31, 2003
(including information specifically incorporated by reference into our
Form 10-K from our definitive Proxy Statement for our annual meeting of
shareholders held on May 24, 2004);
o Our quarterly reports on Form 10-Q for the fiscal quarters ended September
30, 2004, June 30, 2004 and March 31, 2004;
o Our current reports on Form 8-K dated September 3, 2004 and January 20,
2004;
o The description of our common stock contained in the Form 8-A/A filed
September 7, 1999 to our registration statement on Form 8-A under the
Exchange Act, including any amendment or report updating this description;
and
o The description of our preferred stock purchase rights contained our
registration statement on Form 8-A under the Exchange Act filed February
14, 2000, including any amendment or report updating this description.
All documents which we file with the Commission pursuant to section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the
date of this prospectus and before the termination of this offering of
securities (other than current reports on Form 8-K containing only information
furnished under and exhibits relating to Item 7.01 or Item 2.02 of Form 8-K,
unless such report specifically provides for such incorporation) shall be deemed
to be incorporated by reference in this prospectus and to be a part of it from
the filing dates of such documents. Also, all such documents filed by us with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, after the date of the registration statement
of which this prospectus forms a part and prior to effectiveness of the
registration statement (other than current reports on Form 8-K containing only
information furnished under and exhibits relating to Item 7.01 or Item 2.02 of
Form 8-K, unless such report specifically provides for such incorporation) shall
be deemed to be incorporated by reference in this prospectus and to be a part of
it from the filing dates of such documents. Any statement incorporated or deemed
to be incorporated herein shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
The following information contained in documents described above is not
incorporated herein by reference: (i) information furnished under and exhibits
relating to Items 9 and 12 of our Current Reports on Form 8-K filed prior to
August 23, 2004 and information furnished under and exhibits relating to Items
7.01 and 2.02 of our Current Reports on Form 8-K filed on or after August 23,
2004, (ii) certifications accompanying or furnished in any such documents
pursuant to Title 18, Section 1350 of the United States Code and (iii) any other
information in such documents which is not deemed to be filed with the SEC under
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section (except the information in Part I of
our Quarterly Reports on Form 10-Q).
Documents incorporated by reference are available from us without charge,
excluding any exhibit to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this prospectus. You can obtain
documents incorporated by reference in this prospectus by requesting them in
writing or by telephone from us at the following address:
Attention: Investor Relations
LabOne, Inc.
10101 Renner Blvd.
Lenexa, Kansas 66219
Telephone: (800) 873-8845
www.labone.com
58
--------------------------------------------------------------------------------
You should rely only on the information contained in or incorporated by
reference into this prospectus. We have not authorized anyone to provide you
with different information, and you should not rely on any such information. The
securities covered by this prospectus are not offered in any jurisdiction where
offers to sell, or solicitations of offers to purchase, such securities are
unlawful. You should not assume that the information in this prospectus, and the
documents incorporated by reference herein, is accurate as of any date other
than their respective dates. Our business, financial condition, results of
operations and prospects may have changed since such dates.
------------------------
LabOne, Inc.
$103,500,000
Principal Amount of 3.50% Convertible Senior Debentures Due 2034
--------------------
Common Stock Issuable upon Conversion of the Debentures
PROSPECTUS
--------------------
-----------, 2004
II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses to be borne by the Registrant in connection with
the offering are as follows:
Amount to be Paid
-----------------
Securities and Exchange Commission $ 13,113.45
registration fee
Accounting fees and expenses 10,000.00
Legal fees and expenses 30,000.00
Miscellaneous expenses (including printing 3,000.00
expenses)
----------------
Total $ 56,113.45
================
Item 15. Indemnification of Directors and Officers
We are incorporated under the laws of the state of Missouri. Under Section
351.355 of the General and Business Corporation Law of Missouri, we may, under
specified circumstances, indemnify any of our directors, officers, employees or
agents who is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that such person is or was a director, officer, employee or agent of the
company, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by such person in
connection with such action, suit or proceeding. Section 351.355 provides that
the indemnification provided by the section shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under our
articles of incorporation or by-laws or any agreement, vote of shareholders,
disinterested directors or otherwise. Under Section 351.355, we may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the company against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not we would have the power to indemnify
such person against such liability under the provisions of Section 351.355.
Article IV of our bylaws provides that each person who is or was a
director, officer or employee of the company shall be indemnified by us as of
right to the full extent permitted or authorized by the laws of the state of
Missouri, as now in effect and as hereafter amended, against any liability,
judgment, fine, amount paid in settlement, cost and expense (including
attorneys' fees) asserted or threatened against and incurred by such person in
his or her capacity as or arising out of his or her status as a director,
officer or employee of the company. Article IV of our bylaws also provides that
no person shall be liable to the company for any loss, damage, liability or
expense suffered by the company on account of any action taken or omitted to be
taken by him or her as a director, officer or employee of the company if such
person (i) exercised the same degree of care and skill as a prudent man would
have exercised under the circumstances in the conduct of his own affairs or (ii)
took or omitted to take such action in reliance upon the advice of counsel or
upon statements made or information furnished by directors, officers, employees
or agents of the company which such person had no reasonable grounds to
disbelieve.
We have entered into indemnification agreements with our directors and
officers under which we have agreed to indemnify such persons against expenses,
judgments and fines incurred in connection with the defense or settlement of
actions, suits or proceedings, provided such persons' conduct is not finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct.
An Agreement and Plan of Merger between the former LabOne, Inc. and us
provides for certain indemnification of officers and directors as well as former
officers and directors of the company, as described under "The Merger Agreement-
Indemnification" in the Joint Proxy Statement/Prospectus contained in Amendment
No. 4 to the registrant's Registration Statement on Form S-4, registration no.
333-76131, filed with the Commission on July 2, 1999.
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Article IV of our bylaws authorizes us to purchase and maintain insurance
on behalf of any director, officer or employee, trustee or agent of the company
against any liability asserted against such person or incurred by such person in
any such capacity or status, whether or not we would have power to indemnify
such person against such liability. We currently maintain directors' and
officers' liability insurance to insure our directors and officers against
certain liabilities incurred in their capacities as such.
Item 16. Exhibits
The index to exhibits appears immediately following the signature pages to
this Registration Statement.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of the securities offered would not exceed that
which was registered) and any deviation from the low or high end of
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the change in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions of the Delaware General
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Corporation Law, the certificate of incorporation or bylaws of the registrant or
resolutions of the registrant's board of directors adopted pursuant thereto, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lenexa, State of Kansas, on this 10th day of
November, 2004.
LABONE, INC.
By: /s/ W. Thomas Grant II
------------------------------
Name: W. Thomas Grant II
Title: Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ W. Thomas Grant II Chairman of the Board, November 10, 2004
------------------------ President and Chief
W. Thomas Grant II Executive Officer
(Principal Executive
Officer)
/s/ John W. McCarty Executive Vice President November 10, 2004
------------------------ and Chief Financial
John W. McCarty Officer (Principal
Financial and Accounting
Officer)
*/s/ W. Roger Drury Director November 10, 2004
-------------------------
W. Roger Drury
*/s/ Jill L. Force Director November 10, 2004
--------------------------
Jill L. Force
*/s/ John P. Mascotte Director November 10, 2004
--------------------------
John P. Mascotte
*/s/ James R. Seward Director November 10, 2004
--------------------------
James R. Seward
*/s/ John E. Walker Director November 10, 2004
--------------------------
John E. Walker
*By: /s/ John W. McCarty
----------------------
John W. McCarty
Attorney-in-Fact
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Indenture, dated as of June 25, 2004, between the Registrant and Wells
Fargo Bank, National Association - attached as Exhibit 4.1 to the
Registrant's Form 8-K Current Report, filed June 28, 2004 and
incorporated herein by reference.
4.2 Purchase Agreement, dated as of June 25, 2004, among the Registrant, J.P
Morgan Securities, Inc. and Banc of America Securities LLC - attached as
Exhibit 4.2 to the Registrant's Form 8-K Current Report, filed June 28,
2004 and incorporated herein by reference.
4.3 Registration Rights Agreement, dated as of June 25, 2004, among the
Registrant, J.P Morgan Securities, Inc. and Banc of America Securities
LLC - attached as Exhibit 4.3 to the Registrant's Form 8-K Current
Report, filed June 28, 2004 and incorporated herein by reference.
4.4 Specimen 3.50% Convertible Senior Debenture due 2034 (Global Security) -
attached as Exhibit A to the Indenture, dated as of June 25, 2004,
between the Registrant and Wells Fargo Bank, National Association
(attached as Exhibit 4.1 to the Registrant's Form 8-K Current Report,
filed June 28, 2004) and incorporated herein by reference.
4.5 Specimen 3.50% Convertible Senior Debenture due 2034 (Certificated
Security) - attached as Exhibit B to the Indenture, dated as of June 25,
2004, between the Registrant and Wells Fargo Bank, National Association
(attached as Exhibit 4.1 to the Registrant's Form 8-K Current Report,
filed June 28, 2004) and incorporated herein by reference.
4.6 Amended Articles of Incorporation - attached as Exhibit B to Appendix A
to the Joint Proxy Statement/Prospectus filed as a part of the
Registrant's Registration Statement on Form S-4, filed July 2, 1999
(File No. 333-76131) and incorporated herein by reference.
4.7 Amended and Restated Bylaws - attached as Exhibit C to Appendix A to the
Joint Proxy Statement/Prospectus filed as a part of the Registrant's
Registration Statement on Form S-4, filed July 2, 1999 (File No.
333-76131) and incorporated herein by reference.
4.8 Specimen certificate for shares of the registrant's common stock
(incorporated by reference from Exhibit (4) of the Form 8-A/A amendment
filed September 7, 1999 to registrant's registration statement on Form
8-A under the Securities Exchange Act of 1934).
4.9 Rights Agreement and attached exhibits A, B and C, dated as of February
11, 2000, between the Registrant and American Stock Transfer & Trust
Company-- attached as Exhibit 4.1 to the Registrant's Form 8-K Current
Report, filed February 14, 2000 and incorporated herein by reference.
4.10 Amendment No. 1 to Rights Agreement dated August 31, 2001 between
LabOne, Inc. and American Stock Transfer & Trust Company-- attached as
exhibit 4.6 to the Current Report on Form 8-K filed October 5, 2001 and
incorporated herein by reference.
5.1 Opinion of Stinson Morrison Hecker LLP with respect to the validity of
the Debentures and the common stock (1)
8.1 Tax Opinion of Stinson Morrison Hecker LLP (1)
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG LLP
23.2 Consent of Stinson Morrison Hecker LLP (1)
24 Power of Attorney (1)
25.1 Statement of eligibility of trustee (1)
(1) Previously filed with the registrant's Registration Statement on Form S-3
filed September 10, 2004.