As filed with the Securities and Exchange Commission on September 10, 2004
Registration No. 333-_______
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
______________________
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 Street, 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.
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of each class Amount maximum maximum Amount of
of securities to be offering aggregate registration
to be registered registered price offering price fee
per unit
--------------------------------------------------------------------------------------------------------------------------
3.50% Convertible Senior Debentures $103,500,000(1) 100%(2) $103,500,000(2) $13,113.45
due 2034
--------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 2,633,692(4) (5) (5) (5)
per share (3)
--------------------------------------------------------------------------------------------------------------------------
(1) Represents the aggregate principal amount of 3.50% Convertible
Senior Debentures due 2034 that we issued on June 25, 2004 and July 7,
2004.
(2) Estimated solely for the purpose of determining the registration
fee in accordance with Rule 457 under the Securities Act of 1933,
exclusive of accrued interest, if any.
(3) Includes associated preferred stock purchase rights. Prior to the
occurrence of certain events, the preferred stock purchase rights will
not be evidenced separately from the common stock.
(4) Represents the maximum number of shares of our common stock that
are issuable upon conversion of the Debentures at an initial conversion
rate of 25.4463 shares per $1,000 principal amount of Debentures,
subject to adjustment in certain circumstances. Pursuant to Rule 416 of
the Securities Act of 1933, this registration statement also registers
such additional shares of common stock as may become issuable to prevent
dilution as a result of stock splits, stock dividends or similar
transactions or as a result of the anti-dilution provisions of the
Debentures.
(5) Pursuant to Rule 457(i) under the Securities Act of 1933, there
are no additional filing fees with respect to the shares of common stock
issuable upon conversion of the Debentures because no additional
consideration will be received by the registrant in connection with the
exercise of the conversion right.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. 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 SEPTEMBER 10, 2004
PROSPECTUS
LabOne, Inc.
LabOne, Inc.
$103,500,000
Principal Amount of 3.50% Convertible Senior Debentures Due 2034
____________________
Common Stock Issuable upon Conversion of the Debentures
____________________
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:
o 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
o 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
o if we have called the Debentures for redemption; or
o 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 September 8, 2004 was
$28.54 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 September 10, 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........................................................54
LEGAL MATTERS...............................................................56
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM...............................56
WHERE YOU CAN FIND MORE INFORMATION.........................................56
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:
o our ability to implement our growth strategy;
o our ability to integrate newly acquired companies;
o our ability to deliver high quality, timely test results; and
o 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:
o general economic, financial and market conditions and the duration and
extent of any future economic downturns;
o the cost of borrowing, availability of credit and terms of and
compliance with debt covenants;
o changes in economic conditions;
o renewal of sources of funding as they expire and the availability of
replacement funding;
o technological changes that could reduce the demand for the services we
provide;
o our ability to effectively compete for market share;
o our ability to generate growth;
ii
o retention of key executives and personnel;
o the collectibility of receivables and adequacy of our allowance for
credit losses;
o changes in laws and regulations to which we are subject;
o the outlook for markets we serve; and
o 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. At June 30, 2004, after
giving effect to the issuance of the
Debentures, our senior indebtedness
totaled approximately $114.4 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 June 30, 2004, after giving effect
to the issuance of the Debentures, we
had $160.5 million of total liabilities
comprised of $10.8 million of senior
secured indebtedness, $103.6 million of
senior unsecured indebtedness and $46.1
million of other unsecured liabilities.
This includes $17.2 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
o 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
o 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
o if we have called the Debentures for
redemption; or
o 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 default or 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, We may not redeem the Debentures prior
Inc.............................. 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 You may require us to repurchase all or
LabOne, Inc. a portion of your Debentures on June 15,
at the Option of the Holder...... 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 in-
clusion 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:
o the number of life insurance applications underwritten,
o the policy amount thresholds at which insurance companies order testing
and other services,
o the type and costs of tests and other services requested,
o testing and specimen collection innovations, and
o 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 June 30, 2004, we had $137.6 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:
o a fair price provision,
o a requirement that the board of directors be classified,
o the authorization of a "blank check" preferred stock to be issued at the
discretion of the board of directors, and
o 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.
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:
o pricing differences between our fee schedules and the reimbursement
rates of the payers;
o disputes with payers as to which party is responsible for payment; and
o 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, and have
plans for remediation. 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:
o cease developing, performing or selling products or services that
incorporate the challenged intellectual property;
o obtain and pay for licenses from the holder of the infringed
intellectual property right;
o redesign or reengineer our tests;
o change our business processes; or
o 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 June 30, 2004, our subsidiaries had total liabilities of approximately
$17.3 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 June 30, 2004, we, including our subsidiaries, had total indebtedness
of approximately $114.4 million, after giving effect to the issuance of the
Debentures. Our level of indebtedness could have important consequences to
the holders of the Debentures. For example, it:
o may limit our ability to obtain additional financing for working
capital, capital expenditures or general corporate purposes;
o 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
o 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.
The conversion rate of the Debentures may not be adjusted for all dilutive
events.
16
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.
Six Months Ended
Year Ended December 31, June 30,
----------------------------------------------- -------------------
1999 2000 2001 2002 2003 2003 2004
-------- ------- ------ ------ ------ -------- -------
5.22 1.48 1.12 2.87 4.20 3.73 6.45
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 August 27, 2004,
approximately $0.7 million was outstanding under the credit facility
and, based upon the covenant for leverage capacity, approximately $60 million
of the remaining $174.3 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:
o provision of financial and other information;
o restrictions on the incurrence of additional debt;
o restrictions on the granting of liens;
o restrictions on certain fundamental corporate changes, including mergers
and consolidations, liquidations and dissolutions;
o restrictions on the disposition of our assets;
o restrictions on making investments, loans and extending guarantees;
o restrictions on transactions with affiliates that are not on an arms
length basis; and
o 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. See "Description of
Debentures--Conversion Rights--Conversion Upon Specified Corporate
Transactions--Certain Distributions".
19
Events of default under the credit facility are typical for a credit
agreement of this type and include, without limitation:
o the non-payment of amounts owed under the credit facility;
o material breaches of representations and warranties;
o failure to comply with the provisions of the credit agreement;
o cross default with other indebtedness of more than $3 million;
o certain events of bankruptcy and insolvency; and
o 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:
o global Debentures to DTC in immediately available funds;
o any definitive Debentures having an aggregate principal amount of
$5,000,000 or less by check mailed to the holders of those Debentures;
and
o 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:
o 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.
o 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.
o 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:
o 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
o 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
o 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
o 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:
o complete the conversion notice on the back of the Debentures (or a
facsimile thereof);
o deliver the completed conversion notice and the Debentures to be
converted to the specified office of the conversion agent;
o 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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o 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,
o 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
o 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,
o 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
o 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,
o the numerator of which will be the current market price of our common
stock on the record date fixed for the distribution; and
o 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,
o the numerator of which will be the current market price of our common
stock on the record date fixed for the distribution; and
o 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,
o 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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o 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,
o 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
o 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:
o 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
o 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:
o 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;
o 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;
o 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;
o for a change in the par value of the common stock; or
o 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:
o global Debentures to DTC in immediately available funds; and
o 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:
o 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);
o the portion of the principal amount of Debentures to be repurchased,
which must be $1,000 or an integral multiple thereof; and
o 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:
o the principal amount of Debentures being withdrawn;
o 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
o 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:
o 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
o 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:
o 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);
o the portion of the principal amount of Debentures to be repurchased,
which must be $1,000 or an integral multiple thereof; and
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o 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:
o the principal amount at maturity of Debentures being withdrawn;
o 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
o 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:
o to accumulate shares of our common stock;
o to obtain control of us by means of a merger, tender offer solicitation
or otherwise; or
o 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.
34
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:
o 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;
o such person assumes all obligations of LabOne, Inc. under the Debentures
and the indenture; and
o 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:
o 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;
o default in our obligation to provide timely notice of a designated event
to the holders of the Debentures under the indenture;
o default in our obligation to repurchase Debentures at the option of
holders or following a designated event;
o default in our obligation to redeem Debentures after we have exercised
our redemption option;
o default in our obligation to pay the principal amount, or premium, if
any, on the Debentures at maturity, when due and payable;
o 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;
o 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;
o 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
o 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:
o change the maturity of any Debenture or the payment date of any
installment of interest or liquidated damages payable on any Debentures;
o reduce the principal amount of, or any interest, liquidated damages,
redemption price, repurchase price or designated event repurchase price
on, any Debenture;
o impair or adversely affect the conversion rights of any holder of
Debentures;
o change the currency of payment of such Debentures or interest or
liquidated damages thereon;
o 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;
o 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;
o except as otherwise permitted or contemplated by provisions concerning
corporate reorganizations, adversely affect the repurchase option of
holders (including after a designated event);
o modify the redemption provisions of the indenture in a manner adverse to
the holders of Debentures;
o 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
o 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:
o adding to our covenants for the benefit of the holders of Debentures;
o surrendering any right or power conferred upon us;
o 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;
o providing for the assumption of our obligations to the holders of
Debentures in the case of a merger, consolidation, conveyance, transfer
or lease;
o increasing the conversion rate, provided that the increase will not
adversely affect the interests of the holders of Debentures;
o 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;
o 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
o 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:
o 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;
o 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
o 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:
o 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;
o notify each such selling security holder when this registration
statement has become effective;
o notify each such selling security holder of the commencement of any
suspension period (as described below); and
o 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:
o required to be named as a selling holder in the related prospectus;
o required to deliver a prospectus to the purchaser;
o subject to certain of the civil liability provisions under the
Securities Act in connection with the holder's sales; and
o 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
o 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
o 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:
o 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
o 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
o 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:
o 0.25% of the principal amount of a Debenture to and including the 90th
day following such registration default; and
o 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:
o will not be entitled to have certificates registered in their names;
o will not receive or be entitled to receive physical delivery of
certificates in definitive form; and
o 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.
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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:
o the number of directors,
o management of the registrant,
o amendments to the bylaws,
o the right of the registrant to amend the articles of incorporation
generally and
o the fair price provisions relating to business combinations.
These provisions include those sections of our bylaws relating to:
o meetings of stockholders,
o the number and classification of directors,
o powers of the board of directors,
o indemnification of directors and
o 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:
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of the
United States or of any political subdivision thereof; or
o an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source.
Interest 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:
o an individual who is classified as a nonresident alien for U.S. federal
income tax purposes;
o a foreign corporation; or
o 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:
o 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,
o the certification requirement described below has been fulfilled with
respect to the Non-U.S. Holder,
o 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
o 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.
50
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:
o the gain is effectively connected with the conduct by such Non-U.S.
Holder of a trade or business in the United States,
o 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
o 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 following selling security holders, and we have not
independently verified the information.
Except as indicated below, none of the selling security holders 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)
--------------------------------------------------------------------------------
Acuity Master Fund, Ltd. 1,420,000 1,420,000 36,133.74 36,133.74
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
American Investors Life 250,000 250,000 6,361.58 6,361.58
Insurance Co.
--------------------------------------------------------------------------------
BNP Paribas Equity 3,064,000 3,064,000 80,226.46(4) 77,967.46
Strategies, SNC
--------------------------------------------------------------------------------
Boilermakers Blacksmith 515,000 515,000 13,104.84 13,104.84
Pension Fund
--------------------------------------------------------------------------------
CALAMOS Market Neutral 4,200,000 4,200,000 106,874.46 106,874.46
Fund- CALAMOS
Investment Trust
--------------------------------------------------------------------------------
CNH CA Master Account 250,000 250,000 6,361.58 6,361.58
L.P.
--------------------------------------------------------------------------------
Consulting Group 800,000 800,000 20,357.04 20,357.04
Capital Markets Funds
--------------------------------------------------------------------------------
Cooperneff Convertible 3,008,000 3,008,000 76,542.47 76,542.47
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
--------------------------------------------------------------------------------
Delaware PERS 230,000 230,000 5,852.65 5,852.65
--------------------------------------------------------------------------------
Delta Airlines Master 130,000 130,000 3,308.02 3,308.02
Fund
--------------------------------------------------------------------------------
DIACO Investments, LP 470,000 470,000 11,959.76 11,959.76
--------------------------------------------------------------------------------
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 Master 1,839,000 1,839,000 46,795.75 46,795.75
Fund, Ltd.
--------------------------------------------------------------------------------
Fore Plan Asset Fund, 175,000 175,000 4,453.10 4,453.10
Ltd.
--------------------------------------------------------------------------------
Froley Revy Investment 30,000 30,000 763.39 763.39
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
--------------------------------------------------------------------------------
Highbridge 7,500,000 7,500,000 190,847.25 190,847.25
International LLC
--------------------------------------------------------------------------------
ICI American Holdings 90,000 90,000 2,290.17 2,290.17
Trust
--------------------------------------------------------------------------------
Institutional Benchmark 160,000 160,000 4,071.41 4,071.41
Management Fund
--------------------------------------------------------------------------------
Lord Abbett Investment 2,000,000 2,000,000 50,892.60 50,892.60
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
Arbitrage Fund Limited
--------------------------------------------------------------------------------
53
--------------------------------------------------------------------------------
Man Mac I Limited 681,000 681,000 17,328.93 17,328.93
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Polaris Vega Fund L.P. 2,650,000 2,650,000 67,432.70 67,432.70
--------------------------------------------------------------------------------
Prudential Insurance Co 25,000 25,000 636.16 636.16
of America
--------------------------------------------------------------------------------
Quatrro Fund Ltd 3,600,000 3,600,000 91,606.68 91,606.68
--------------------------------------------------------------------------------
Quattro Multistratgy 240,000 240,000 6,107.11 6,107.11
Master Fund LP
--------------------------------------------------------------------------------
Singlehedge US 744,000 744,000 18,932.05 18,932.05
Convertible Arbitrage
Fund
--------------------------------------------------------------------------------
State of Oregon / Equity 1,225,000 1,225,000 31,171.72 31,171.72
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Syngenta AG 70,000 70,000 1,781.24 1,781.24
--------------------------------------------------------------------------------
Tribeca Investments LTD 5,000,000 5,000,000 127,231.50 127,231.50
--------------------------------------------------------------------------------
Other Holders of
Debentures or common 43,810,000 43,810,000 1,114,802.4 1,114,802.4
stock issuable upon
conversion of the
Debentures or any
future transferee,
pledgee, donee or
successor of any such
holder (5)
--------------------------------------------------------------------------------
(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) Includes shares of common stock beneficially owned other than common stock
issuable upon conversion of the Debentures.
(5) Information about other selling security holders will be set forth in
amendments to the registration statement of which this prospectus is a part or
supplements to this prospectus as required by the registration rights
agreement and by applicable law. 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.
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 amendments to the
registration statement or supplements to this prospectus to the extent
necessary.
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.
54
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 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
55
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.
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 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, incorporated by reference herein, 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.
56
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:
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 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:
57
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 registration fee $ 13,113.45
Accounting fees and expenses 10,000.00
Legal fees and expenses 30,000.00
Miscellaneous expenses (including printing expenses 3,000.00
---------------
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
II-3
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 3rd
day of September, 2004.
LABONE, INC.
By: /s/ W. Thomas Grant II
----------------------------------
Name: W. Thomas Grant II
Title: Chairman of the Board, President
and Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints John W. McCarty and Joseph C. Benage,
and each of them, the undersigned's true and lawful attorneys-in-fact and
agents with full power of substitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as
amended, and all post-effective amendments thereto, and to file the same, with
all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
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, September 3, 2004
----------------------
W. Thomas Grant II President and Chief Executive
Officer (Principal Executive
Officer)
/s/ John W. McCarty Executive Vice President and September 3, 2004
----------------------
John W. McCarty Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ W. Roger Drury Director September 3, 2004
----------------------
W. Roger Drury
/s/ Jill L. Force Director September 3, 2004
----------------------
Jill L. Force
/s/ John P. Mascotte Director September 3, 2004
----------------------
John P. Mascotte
/s/ James R. Seward Director September 3, 2004
----------------------
James R. Seward
/s/ John E. Walker Director September 3, 2004
----------------------
John E. Walker
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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
8.1 Tax Opinion of Stinson Morrison Hecker LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG LLP
23.2 Consent of Stinson Morrison Hecker LLP (included in Exhibits 5.1 and
8.1)
24 Power of Attorney (included on signature page)
25.1 Statement of eligibility of trustee