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SECURITIES PURCHASE AGREEMENT
Among
LABONE, INC.,
WELSH, CARSON, ANDERSON & STOWE IX, L.P.
and
THE OTHER PURCHASERS
NAMED ON SCHEDULE I HERETO
Dated as of August 31, 2001
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TABLE OF CONTENTS
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ARTICLE I.
PURCHASE AND SALE OF INITIAL SECURITIES
ON THE CLOSING DATE; PURCHASE PRICE......................................2
SECTION 1.01. Issuance, Sale and Delivery of the Initial Securities.....2
SECTION 1.02. Closing...................................................3
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY...........................................................4
SECTION 2.01. Organization and Qualification............................4
SECTION 2.02. Investments and Commitments; Subsidiaries.................5
SECTION 2.03. Capitalization............................................6
SECTION 2.04. Corporate Power and Authority; Authorization of
Agreements; Non-Contravention.......................................6
SECTION 2.05. Validity..................................................8
SECTION 2.06. Governmental Approvals....................................8
SECTION 2.07. SEC Filings...............................................9
SECTION 2.08. Financial Statements......................................9
SECTION 2.09. Absence of Certain Changes or Events.....................10
SECTION 2.10. Actions Pending..........................................10
SECTION 2.11. Compliance with Law; Material Permits....................10
SECTION 2.12. Title to and Condition of Properties.....................10
SECTION 2.13. Real Property............................................11
SECTION 2.14. Contracts................................................11
SECTION 2.15. Intellectual Property; Software..........................12
SECTION 2.16. Tax Matters..............................................12
SECTION 2.17. Employee Benefit Plans...................................14
SECTION 2.18. Customers................................................15
SECTION 2.19. Labor Matters............................................15
SECTION 2.20. Environmental Matters....................................15
SECTION 2.21. Insurance Coverage.......................................16
SECTION 2.22. Offering of the Securities...............................16
SECTION 2.23. Related-Party Transactions...............................16
SECTION 2.24. Proxy Statement..........................................16
SECTION 2.25. Anti-Takeover Statutes and Certain Charter Provisions;
Rights Plan........................................................17
SECTION 2.26. Osborn Acquisition Agreement.............................17
SECTION 2.27. Completeness of Disclosure...............................17
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SECTION 2.28. Brokers..................................................17
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS.......................................................18
SECTION 3.01. Organization and Authority...............................18
SECTION 3.02. Authorization............................................18
SECTION 3.03. Validity.................................................18
SECTION 3.04. Investment Representations...............................19
SECTION 3.05. Governmental Approvals...................................19
SECTION 3.06. Information Supplied.....................................19
SECTION 3.07. Ownership of Capital Stock of the Company................20
ARTICLE IV.
COVENANTS OF THE PARTIES
PENDING THE CLOSING.....................................................20
SECTION 4.01. Conduct of the Company's Business.........................20
SECTION 4.02. (a) Access to Information Concerning the Company and
its Subsidiaries...................................................22
SECTION 4.03. Authorizations, Consents, Waivers and Approvals...........22
SECTION 4.04. Further Assurances.......................................23
SECTION 4.05. Notification of Certain Matters..........................23
SECTION 4.06. Anti-Takeover Statutes; Rights Plan Amendment............23
SECTION 4.07. The Osborn Acquisition...................................23
SECTION 4.08. Nasdaq Quotation.........................................24
SECTION 4.09. SEC and Other Filings....................................24
SECTION 4.10. Certificates of Designation..............................24
ARTICLE V.
CONDITIONS PRECEDENT....................................................24
SECTION 5.01. Conditions Precedent to the Obligations of Each Party....24
SECTION 5.02. Conditions Precedent to the Obligations of the
Purchasers.........................................................25
SECTION 5.03. Conditions Precedent to the Obligations of the Company...27
ARTICLE VI.
POST-CLOSING COVENANTS AND AGREEMENTS...................................28
SECTION 6.01. Legends; Reservation of Shares...........................28
SECTION 6.02. Board Composition........................................28
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SECTION 6.03. Standstill Agreement.....................................31
SECTION 6.04. Right To Purchase Series C Preferred Shares..............32
SECTION 6.05. Issuance of Series B Notes In Connection With
Subsequent Acquisitions............................................35
SECTION 6.06. Company Shareholder Approval..............................39
SECTION 6.07. Tax Consistency..........................................40
SECTION 6.08 Certain Veto Rights Applying After Company Shareholder
Approval...........................................................40
SECTION 6.09 Certain Negative Covenants Relating to the Series B-2
Preferred Shares, Series C-2 Preferred Shares, Series A Notes and
Series B Notes.....................................................41
ARTICLE VII.
TERMINATION PRIOR TO CLOSING............................................48
SECTION 7.01. Termination of Agreement.................................48
SECTION 7.02. Effect of Termination....................................49
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS; INDEMNIFICATION...............................49
SECTION 8.01. Survival of Representations, Warranties, Covenants and
Agreements.........................................................49
SECTION 8.02. Indemnification..........................................50
SECTION 8.03. Conditions of Indemnification............................51
SECTION 8.04. Other Claims.............................................53
SECTION 8.05. Remedies Cumulative......................................53
ARTICLE IX.
MISCELLANEOUS...........................................................53
SECTION 9.01. Specific Performance.....................................53
SECTION 9.02. Expenses, Etc............................................53
SECTION 9.03. Execution in Counterparts................................54
SECTION 9.04. Notices..................................................54
SECTION 9.05. Amendments and Waivers...................................56
SECTION 9.06. Amendments, Supplements, Etc.............................56
SECTION 9.07. Entire Agreement.........................................56
SECTION 9.08. Benefit of Agreement; Assignment.........................56
SECTION 9.09. Governing Law............................................57
SECTION 9.10. Jurisdiction and Venue...................................57
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SECTION 9.11. Severability.............................................58
SECTION 9.12. Publicity................................................58
SECTION 9.13. Appointment of the Purchaser Representative..............58
SECTION 9.14. Interpretation...........................................58
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INDEX TO EXHIBITS AND SCHEDULES
Exhibit Description
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A Form of Series B-1 Preferred Certificate of Designation
B Form of Warrant Agreement
C Form of Series B-2 Preferred Certificate of Designation
D Form of Senior Subordinated Note
E Form of Series C-1 Preferred Certificate of Designation
F Form of Series C-2 Preferred Certificate of Designation
G Form of Rights Plan Amendment
H Form of Opinion of Morrison & Hecker LLP
I Form of Registration Rights Agreement
J Form of Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol
K Form of Charter Amendment
Schedule Description
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I Purchasers/Initial Securities
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INDEX TO DEFINED TERMS
THIS INDEX IS INCLUDED FOR CONVENIENCE ONLY AND
DOES NOT CONSTITUTE A PART OF THE AGREEMENT
Term ss. Reference
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"Additional Indebtedness" 6.09(A)(1)(L)
"Additional Securities" Recitals
"Additional Warrants" Recitals
"Affiliate" 6.02(a)
"Ancillary Agreements" 2.04(a)
"Annual Report" 2.02(b)
"Approval Date" 6.06(a)
"Balance Sheet Date" 2.08
"Board Meeting" 2.04(b)
"Capitalized Lease Obligations" 6.09(a)
"Charter Amendment" 6.06(a)
"ChoicePoint" Recitals
"Closing" 1.02(a)
"Closing Date" 1.02(a)
"COBRA" 2.17(c)
"Code" 2.17(c)
"Co-Investors" 6.04(a)
"Company" Recitals
"Company Common Stock" 2.03(a)
"Company Directors" 6.02(a)(iv)
"Company Group" 8.02(b)
"Company Preferred Stock" 2.03(a)
"Company SEC Filings" 2.07
"Company Shareholder Approval" 6.06(a)
"Company Shareholder Meeting" 6.06(a)
"Company Stock Options" 2.03(b)
"Confidentiality Agreement" 4.02(b)
"Conversion Shares" 2.04(b)
"Damages" 8.02
"Definitive Note Purchase Agreement" 6.05(d)
"Disclosure Schedule" Article II
"Disqualified Stock" 6.09(a)(ii)
"Employee Plan" 2.17(a)
"Environmental Event" 2.20
"Equity Offering" 6.04(b)
"ERISA" 2.17(a)
"Exchange Act" 2.06
"Existing Indebtedness" 6.09(a)(i)(E)
"GAAP" 2.08
"Governmental Body" 2.10
"HIPAA" 2.17(c)
"Indebtedness" 6.09(a)
"Industrial Revenue Bonds" 6.09(a)(i)(D)
"Initial Securities" Recitals
"Initial Warrants" Recitals
"In-the-Money Options" 6.04(d)
"In-the-Money Preferred Stock" 6.04(d)
"IRB Indebtedness" 6.09(a)(i)(D)
"Jointly-Selected Director" 6.02(a)(iv)
"Law" 2.04(c)
"Leased Properties" 2.13
"Liens" 2.02(b)
"Market Price" 6.04(d)
"Material Adverse Effect" 2.01
"Material Customers" 2.18
"Material Contracts" 2.14
"Material Permits" 2.11
"Missouri Code" 2.25
"Mutual Approval" 6.05(d)
"Non-WCAS Directors" 6.02(a)(iv)
"Notes" 6.09
"Order" 2.04(c)
"Original Transaction" 6.04(e)
"Osborn" Recitals
"Osborn Acquisition" Recitals
"Osborn Acquisition Agreement" Recitals
"Osborn Acquisition Documents" 4.07(c)
"Other Financing" 6.05(e)
"Parent" Recitals
"Permitted Liens" 2.12
"Potential Acquisition" 6.05(a)
"Potential Acquisition Notice" 6.05(a)
"Potential Acquisition Target" 6.05(a)
"Prohibited Related Party Transactions" 6.09(f)
"Proxy Statement" 6.06(b)
"Publicly-Available Contracts" 2.14
"Purchaser Group" 8.02
"Purchaser Representative" 9.13
"Purchaser" Recitals
"Reference Date" 6.04(d)
"Registration Rights Agreement" 5.02
"Related Party" 2.23
"Restricted Payments" 6.09(b)
"Restricted Period" 6.04(a)
"Returns" 2.16(a)
"Rights Plan Amendment" 5.02
"Rights Plan" 2.25
"SEC" 2.07
"Securities Act" 2.03(b)
"Senior Credit Agreement Indebtedness" 6.09(a)(i)(C)
"Senior Indebtedness" 6.09(a)(i)(D)
"Series A Notes" Recitals
"Series B Notes" Recitals
"Series B-1 Preferred Certificate of Designation" Recitals
"Series B-2 Preferred Certificate of Designation" Recitals
"Series B-1 Preferred Shares" Recitals
"Series B-2 Preferred Shares" Recitals
"Series B Note Transaction" 6.05(b)
"Series C-1 Preferred Certificate of Designation" Recitals
"Series C-2 Preferred Certificate of Designation" Recitals
"Series C-1 Preferred Shares" Recitals
"Series C-2 Preferred Shares" Recitals
"Series C Preferred Transaction" 6.04(a)
"Subsidiary" 2.02(a)
"Taxes" 2.16(b)
"Taxing Authorities" 2.16(b)
"Third Party Claim" 8.03
"Transaction Expenses" 9.02
"Voting Agreement" 5.02
"Voting Securities" 6.03
"Warrant Agreement" Recitals
"Warrant Certificate" 1.02(b)
"WCAS Cessation of Interest Notice" 6.05(b)
"WCAS Directors" 6.02(a)(iv)
"WCAS" Recitals
SECURITIES PURCHASE AGREEMENT dated as of August 31, 2001 among
LABONE, INC., a Missouri corporation (the "Company"), WELSH, CARSON, ANDERSON &
STOWE IX, L.P., a Delaware limited partnership ("WCAS"), and the other persons
named on Schedule I hereto under the heading "Purchasers" (together with WCAS,
each individually a "Purchaser" and collectively the "Purchasers").
W I T N E S S E T H:
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WHEREAS, the Company is a party to a Stock Purchase Agreement, dated
as of August 31, 2001, by and among ChoicePoint Inc., a Georgia corporation
("Parent"), ChoicePoint Services Inc., a Georgia corporation and wholly-owned
subsidiary of Parent ("ChoicePoint"), and the Company (the "Osborn Acquisition
Agreement"), pursuant to which the Company has agreed to acquire from
ChoicePoint (the "Osborn Acquisition") all of the issued and outstanding shares
of capital stock of Osborn Group, Inc., a Delaware corporation and wholly-owned
subsidiary of ChoicePoint ("Osborn");
WHEREAS, in order to finance the Osborn Acquisition, the Company
desires to issue and sell to the Purchasers on the Closing Date (as hereinafter
defined), and the Purchasers desire to purchase from the Company on the Closing
Date, for an aggregate purchase price of $50,000,000, (A) (1) an aggregate
14,000 shares of Series B-1 Cumulative Convertible Preferred Stock of the
Company (the "Series B-1 Preferred Shares") having a stated value of $1,000 per
share and a par value of $0.01 per share and the designation, powers,
preferences and rights, and qualifications, limitations and restrictions, set
forth in the form of certificate of designation attached as Exhibit A hereto
(the "Series B-1 Preferred Certificate of Designation"), together with an
aggregate 350,000 nominally-priced detachable common stock purchase warrants
(the "Initial Warrants") issued pursuant to the terms hereof and governed by the
Warrant Agreement, dated as of the date hereof, in the form attached as Exhibit
B hereto (the "Warrant Agreement") and (2) an aggregate 21,000 shares of Series
B-2 Cumulative Convertible Preferred Stock of the Company (the "Series B-2
Preferred Shares") having a stated value of $1,000 per share and a par value of
$0.01 per share and the designation, powers, preferences and rights, and
qualifications, limitations and restrictions, set forth in the form of
certificate of designation attached as Exhibit C hereto (the "Series B-2
Preferred Certificate of Designation") and (B) $15,000,000 in aggregate
principal amount of Series A Senior Subordinated Notes of the Company in the
form attached as Exhibit D hereto (the "Series A Notes" and, together with the
Series B-1 Preferred Shares, the Series B-2 Preferred Shares and the Initial
Warrants, the "Initial Securities"), all on the terms and subject to the
conditions set forth herein, including, without limitation, the consummation of
the Osborn Acquisition on the terms and conditions set forth in the Osborn
Acquisition Agreement;
WHEREAS, as a condition to the Purchasers' willingness to enter into
this Agreement and consummate the transactions contemplated hereby, the Company
will agree herein not to issue certain additional equity or equity-linked
securities for a period of three years following the Closing Date unless it
first grants to WCAS the right to purchase, together with its Co-Investors (as
hereinafter defined), up to an aggregate 15,000 shares of (A) if Company
Shareholder Approval (as hereinafter defined) has at the time of issuance been
obtained, Series C-1 Cumulative Convertible Preferred Stock of the Company
("Series C-1 Preferred Shares") having a stated value of $1,000 per share and a
par value of $0.01 per share and the designation, powers, preferences and
rights, and qualifications, limitations and restrictions, set forth in the form
of certificate of designation attached as Exhibit E hereto (the "Series C-1
Preferred Certificate of Designation") or (B) if Company Shareholder Approval
has not been obtained at the time of issuance, Series C-2 Cumulative Convertible
Preferred Stock of the Company ("Series C-2 Preferred Shares") having a stated
value of $1,000 per share and a par value of $0.01 per share and the
designation, powers, preferences and rights, and qualifications, limitations and
restrictions, set forth in the form of certificate of designation attached as
Exhibit F hereto ("Series C-2 Preferred Certificate of Designation"), all on the
terms and subject to the conditions, limitations and exceptions set forth
herein; and
WHEREAS, the Company and WCAS desire to set forth in this Agreement
the terms and conditions upon which the Company may agree to sell and WCAS may
agree to purchase, together with its Co-Investors, up to $15,000,000 in
aggregate principal amount of Series B Senior Subordinated Notes of the Company
in the form attached as Exhibit D hereto (the "Series B Notes") together with
certain additional nominally-priced detachable common stock purchase warrants
(the "Additional Warrants" and together with the Series C-1 Preferred Shares,
the Series C-2 Preferred Shares and the Series B Notes, the "Additional
Securities") in order to finance future acquisitions by the Company that are
approved by both the Board of Directors of the Company and WCAS;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF INITIAL SECURITIES
ON THE CLOSING DATE; PURCHASE PRICE
SECTION 1.01. Issuance, Sale and Delivery of the Initial Securities.
Subject to the terms and conditions set forth herein, and in reliance on the
mutual representations and warranties being made herein, on the Closing Date,
the Company shall issue, sell and deliver to each Purchaser, and each Purchaser
shall purchase from the Company, (1) the number of Series B-1 Preferred Shares,
the number of Series B-2 Preferred Shares and the number of Initial Warrants set
forth opposite the name of such Purchaser on Schedule I hereto and (2) a Series
A Note in the aggregate principal amount set forth opposite the name of such
Purchaser on Schedule I hereto. The Initial Securities shall be issued, sold and
delivered as provided in Section 1.02(b). Notwithstanding anything to the
contrary contained above, the respective obligations of the Purchasers to
purchase the Initial Securities hereunder shall be several and not
2
joint obligations except that WCAS shall be jointly and severally obligated,
subject to the terms and conditions set forth herein, with each of the other
Purchasers named on Schedule I hereto with respect to such other Purchaser's
obligation to make full and prompt payment of the purchase price payable with
respect to the Initial Securities being purchased by such Purchaser hereunder.
SECTION 1.02. Closing. (a) Subject to the terms and conditions set
forth herein, the issuance, sale and delivery of the Initial Securities
contemplated by Section 1.01 (the "Closing") shall take place at the location of
and concurrently with the closing of the Obsorn Acquisition, or at such other
location and time and on such other date as the parties mutually agree (such
date and time of Closing being herein called the "Closing Date"). Subject to the
provisions of Article VII, failure to consummate the purchase and sale of the
Initial Securities on the date and at the location and time determined pursuant
to this Section 1.02(a) will not result in the termination of this Agreement.
(b) Subject to the terms and conditions set forth in this Agreement,
and concurrently with the consummation of the Osborn Acquisition, at the
Closing:
(i) The Company shall issue and deliver to each Purchaser,
against payment of the purchase price therefor as set forth herein, (1) a
stock certificate in definitive form, registered in the name of such
Purchaser and evidencing the Series B-1 Preferred Shares being purchased
by such Purchaser hereunder, (2) a stock certificate in definitive form,
registered in the name of such Purchaser and evidencing the Series B-2
Preferred Shares being purchased by such Purchaser hereunder, (3) a
definitive warrant certificate in the form attached as Exhibit A to the
Warrant Agreement (each a "Warrant Certificate"), registered in the name
of such Purchaser and evidencing the Initial Warrants being purchased by
such Purchaser hereunder, and (4) a Series A Note, registered in the name
of such Purchaser and evidencing the indebtedness of the Company to such
Purchaser in connection with the purchase thereof;
(ii) As payment in full for the Initial Securities being
purchased by such Purchaser hereunder, and against delivery of the
certificates and promissory notes therefor as aforesaid, each Purchaser
shall pay, by wire transfer of immediately available funds to an account
of the Company designated in writing to the Purchaser Representative (as
hereinafter defined) not less than two business days prior to the Closing
Date, the sum set forth opposite the name of such Purchaser on Schedule I
hereto under the heading "Total Purchase Price";
(iii) The Company shall pay to WCA Management Corporation, by
wire transfer of immediately available funds to an account designated in
writing to the Company not less than two business days prior to the
Closing Date, a $500,000 advisory fee for services rendered in connection
with the Osborn Acquisition;
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(iv) The Company shall pay, by wire transfer of immediately
available funds to an account or accounts designed in writing to the
Company not less than two business days prior to the Closing Date, the
Transaction Expenses (as hereinafter defined) incurred by the Purchasers,
as contemplated by and in accordance with Section 9.02; and
(v) The parties hereto shall execute and/or deliver or cause to
be executed and/or delivered each of the other documents, instruments,
certificates, agreements and opinions contemplated by Sections 5.02 and
5.03 hereof.
(c) All amounts received by the Company in respect of the issuance
and sale of the Initial Securities pursuant to this Agreement shall be used
solely to pay the purchase price for the Osborn Acquisition and/or to pay fees
and expenses incurred in connection with the Osborn Acquisition and the
transactions contemplated by this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to the Purchaser Representative prior to the execution and delivery of
this Agreement (the "Disclosure Schedule"), and, in each case, making specific
reference to the particular section of this Article II to which such exception
is being taken, the Company represents and warrants to each Purchaser as
follows:
SECTION 2.01. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
(as hereinafter defined) of the State of Missouri. The Company has all requisite
corporate power and corporate authority to own or lease and operate its
properties and assets and to carry on its business as it is now being conducted.
The Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction in which the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not have a Material
Adverse Effect (as hereinafter defined). "Material Adverse Effect" means any
change, event, condition, circumstance or effect (or aggregation of changes,
events, conditions, circumstances and effects) that is or could reasonably be
expected to be materially adverse to the business, assets, financial condition,
prospects or results of operations of the Company and its Subsidiaries taken as
a whole, other than any change, event, condition, circumstance or effect (i)
relating to the economy or securities markets generally, (ii) relating to the
industries in which the Company and its Subsidiaries operate and not
specifically relating to or disproportionately affecting (relative to other
industry participants) the Company and its Subsidiaries or (iii) resulting from
the execution of, the announcement of, or the performance of this Agreement, or
any change in the value of the Series B-1 Preferred Shares, Series B-2
4
Preferred Shares, Series A Notes or Company Common Stock (as hereinafter
defined) resulting from such execution, announcement, or performance (but not
including effects which were known to the Company on the date hereof and not
disclosed to the Purchasers in violation of the representations and warranties
contained in this Agreement). The Company has previously made available to the
Purchaser Representative or the Purchasers' counsel complete and accurate copies
of the minute books and the Articles of Incorporation and By-Laws of the
Company, each as in effect on the date hereof. The Company is not in default in
the performance, observance or fulfillment of any provision of its
organizational documents.
SECTION 2.02. Investments and Commitments; Subsidiaries. (a) Except
for the outstanding capital stock of its Subsidiaries, the Company does not own,
directly or indirectly, (i) any shares of outstanding capital stock or
securities convertible into or exchangeable for capital stock of any other
corporation or (ii) any participating interest in the revenues or profits of any
corporation, partnership, limited liability company, joint venture or other
business enterprise. Except in connection with the Osborn Acquisition, the
Company is not subject to any obligation to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity or other business enterprise that is not a wholly-owned Subsidiary of the
Company. For purposes of this Agreement, with respect to the Company, the term
"Subsidiary" shall mean any corporation, partnership, limited liability company,
joint venture or other business enterprise of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
owned by the Company and/or one or more other Subsidiaries of the Company.
(b) A complete and accurate list of each Subsidiary of the Company is
set forth on Exhibit 21 to the Annual Report of the Company on Form 10-K for the
year ended December 31, 2000 (as amended by Amendment No. 1 thereto, the "Annual
Report"). Each Subsidiary of the Company is a corporation duly incorporated,
validly existing and in good standing under the Laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as it is now being
conducted. Each Subsidiary of the Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect. The Company has previously
made available to the Purchaser Representative or the Purchasers' counsel
complete and accurate copies of the minute books, stock ledgers, charter
documents and By-Laws of each of its Subsidiaries, each as in effect on the date
hereof. No such Subsidiary is in default in the performance, observance or
fulfillment of any provision of such organizational documents. All of the
outstanding shares of capital stock of each Subsidiary of the Company are
validly issued, fully paid and nonassessable and are owned by the Company or by
a wholly-owned Subsidiary of the Company, free and clear of any liens, charges,
pledges, security interests, mortgages, encumbrances or adverse claims
("Liens"), and there are no proxies outstanding or restrictions on voting with
respect to any such shares.
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SECTION 2.03. Capitalization. (a) The authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock, par value $0.01 per share
("Company Common Stock"), and 3,000,000 shares of Preferred Stock, par value
$.01 per share ("Company Preferred Stock"), of which, as of the Closing Date
(after the filing of the Series B-1 Preferred Certificate of Designation and the
Series B-2 Preferred Certificate of Designation), 300,000, 45,000, and 30,000
shares will have been designated as Series A Preferred Stock, Series B-1
Cumulative Convertible Preferred Stock and Series B-2 Cumulative Convertible
Preferred Stock, respectively. As of the date hereof, 10,788,310 shares of
Company Common Stock are issued and outstanding, all of which were duly
authorized, validly issued, fully paid and nonassessable. There are 2,271,710
shares of Company Common Stock held in the Company's treasury. As of the date
hereof and as of the Closing Date (prior to the issuance, sale and delivery of
the Initial Securities), there are and will be no shares of Company Preferred
Stock issued or outstanding or held in the Company's treasury.
(b) Except for (i) rights issued pursuant to and in accordance with
the Rights Plan (as hereinafter defined), (ii) rights under this Agreement and
the Ancillary Agreements (as hereinafter defined), (iii) warrants that have been
included as exhibits to the Annual Report and (iv) options (the "Company Stock
Options") to purchase shares of Company Common Stock granted pursuant to the
Company's 1987 Long-Term Incentive Plan, 1997 Long-Term Incentive Plan, or 2001
Long-Term Incentive Plan, no subscription, warrant, option or other right
(contingent or other) to purchase or acquire, or any securities convertible into
or exchangeable for, any shares of any class of capital stock of the Company or
any Subsidiary of the Company, or any stock appreciation or phantom stock right
or similar arrangement, is authorized or outstanding and there is not any
commitment of the Company or any Subsidiary of the Company to issue, or register
under the Securities Act of 1933 (the "Securities Act"), any shares, warrants,
options or other such rights or any securities convertible into or exchangeable
for capital stock or to distribute to holders of any class of capital stock any
evidences of indebtedness or assets. Neither the Company nor any Subsidiary of
the Company has any obligation (contingent or other) to purchase, redeem or
otherwise acquire any shares of capital stock or any interest therein or to pay
any dividend or make any other distribution in respect thereof.
SECTION 2.04. Corporate Power and Authority; Authorization of
Agreements; Non-Contravention. (a) The Company has all requisite corporate power
and corporate authority to execute and deliver this Agreement, the Warrant
Agreement, the Registration Rights Agreement (as hereinafter defined), the
Rights Plan Amendment (as hereinafter defined), each Series A Note, each Warrant
Certificate, and each other instrument, certificate, agreement and document to
be executed and delivered by the Company at the Closing (such other instruments,
certificates, agreements and documents, together with the Warrant Agreement, the
Registration Rights Agreement, the Rights Plan Amendment, the Series A Notes,
and the Warrant Certificates, collectively, the "Ancillary Agreements") and to
perform its respective obligations hereunder and thereunder.
6
(b) The execution and delivery of this Agreement and each Ancillary
Agreement by the Company and the performance by the Company of its obligations
hereunder and thereunder, including, the issuance, sale and delivery by the
Company of the Initial Securities and the issuance and delivery by the Company
of the shares of Company Common Stock or Series B-1 Preferred Shares, as
applicable, issuable upon conversion or exercise of the Series B-1 Preferred
Shares (including the shares underlying the Series B-2 Preferred Shares that
would be issued if Company Shareholder Approval is obtained), the Series B-2
Preferred Shares and the Initial Warrants (the "Conversion Shares"), were
approved by the Board of Directors of the Company at a meeting duly called and
held on August 24, 2001 (the "Board Meeting"), and no other corporate
proceedings on the part of the Company (including approval of its shareholders)
are necessary to authorize this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby (except to the extent that such
transactions are expressly made subject to Company Shareholder Approval in this
Agreement or in the Ancillary Agreements).
(c) The execution and delivery of this Agreement and each Ancillary
Agreement by the Company do not, and the consummation by the Company of the
transactions contemplated hereby and thereby, including, the issuance, sale and
delivery of the Initial Securities and the issuance and delivery of the
Conversion Shares (including the shares that would be issued upon obtaining
Company Shareholder Approval, subject, in the case of those transactions that
have been expressly made subject to Company Shareholder Approval in this
Agreement or in the Ancillary Agreements, to the Company obtaining such Company
Shareholder Approval), will not, (i) violate or conflict with any provision of
the Articles of Incorporation or By-Laws of the Company; (ii) violate or
conflict with any foreign or domestic statute, law, doctrine, directive or
guideline (whether or not having the force of law), ordinance, rule or
regulation (each a "Law") or order, writ, judgment, decree, consent decree,
injunction, award, settlement agreement, stipulation, ruling or subpoena (each
an "Order") of any Governmental Body (as hereinafter defined) applicable to the
Company or any Subsidiary of the Company or any of their respective properties
or assets; or (iii) result (with or without the giving of notice or the lapse of
time or both) in any violation of or default under or loss of, or decrease (to
the Company or to any Subsidiary of the Company) or increase (to any third
party) in, any benefit under, or permit the acceleration, other modification or
termination of any obligation under, any Material Permit (as hereinafter
defined) or Material Contract (as hereinafter defined); or (iv) result in the
creation or imposition of any Lien (other than a Permitted Lien (as hereinafter
defined) upon any of the material properties or assets of the Company or any
Subsidiary of the Company, other than, in the cases of clauses (iii) and (iv)
above, as set forth in Item 2.04(c) of the Disclosure Schedule.
(d) The issuance, sale and delivery of the Initial Securities is not
subject to any preemptive rights of shareholders of the Company or to any right
of first refusal or other similar right in favor of any person. Upon the filing
of the Series B-1 Preferred Certificate of Designation and the Series B-2
Preferred Certificate of Designation, the Series B-1 Preferred Shares (including
those which are Conversion Shares) and the Series B-2 Preferred Shares will have
been duly authorized by the Company, and, the Series B-1 Preferred Shares
(including those which are Conversion Shares) and the Series B-2 Preferred
Shares, when issued in accordance
7
with the provisions of this Agreement or the Series B-2 Preferred Certificate of
Designation, as applicable, will be validly issued, fully paid and
nonassessable.
(e) The Conversion Shares have been duly authorized by the Company
and, when issued in accordance with the provisions of the Series B-1 Preferred
Certificate of Designation, the Series B-2 Preferred Certificate of Designation
or the Initial Warrants, as the case may be, the Conversion Shares will be
validly issued, fully paid and nonassessable shares of Company Common Stock or
Series B-1 Preferred Shares, as the case may be. The issuance and delivery of
the Conversion Shares is not now, and upon conversion or exercise of the Series
B-1 Preferred Shares (including those which are Conversion Shares), the Series
B-2 Preferred Shares and/or the Initial Warrants will not be, subject to any
preemptive rights of shareholders of the Company or to any right of first
refusal or other similar right in favor of any person.
(f) None of (A) the issuance, sale and delivery of the Series C-1
Preferred Shares and/or Series C-2 Preferred Shares pursuant to Section 6.04,
(B) the issuance, sale and delivery of the Series B Notes and the Additional
Warrants pursuant to Section 6.05 or (C) the issuance and delivery of Series C-1
Preferred Shares upon conversion of any Series C-2 Preferred Shares issued
pursuant to Section 6.04, are, or will be, subject to any preemptive rights of
shareholders of the Company or to any right of first refusal or other similar
right in favor of any person.
SECTION 2.05. Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except that (a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other Laws, now or hereafter
in effect, relating to or limiting creditors rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. Each of the Ancillary Agreements, when
executed and delivered by the Company as provided in this Agreement, will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that (a) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other Laws, now or hereafter in effect,
relating to or limiting creditors rights generally, (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought and (c) the indemnification provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.
SECTION 2.06. Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III
hereof, no consent, approval, Order or authorization of, or registration,
declaration or filing with, or other action by, any Governmental Body is
required to be made or obtained by the Company in connection with the execution
and delivery by the Company of this Agreement and the Ancillary Agreements and
the performance by the Company of its obligations hereunder and thereunder,
including, the
8
issuance, sale and delivery of the Initial Securities and the issuance and
delivery of the Conversion Shares, except (i) for the filing of the Series B-1
Preferred Certificate of Designation and the Series B-2 Preferred Certificate of
Designation with the Secretary of State of the State of Missouri, (ii) filings
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), and (iii)
filings of notices of sale under applicable federal and state securities laws.
SECTION 2.07. SEC Filings. The Company has timely filed all forms,
reports, schedules, statements and other documents required to be filed with the
Securities and Exchange Commission (the "SEC") since January 1, 1998, including
(i) the Annual Report, (ii) the Quarterly Reports of the Company on Form 10-Q
for the three months ended March 31, 2001 and the three months ended June 30,
2001 and (iii) the Proxy Statement on Schedule 14A relating to the Company's
2001 annual meeting of stockholders (collectively, the "Company SEC Filings").
The Company SEC Filings, including, all financial statements and schedules
included therein, (i) were prepared in compliance with the requirements of the
Securities Act and/or the Exchange Act, as the case may be, and (ii) did not at
the time of filing (or if amended, supplemented or superseded by a subsequent
filing, on the date of that subsequent filing) and, in the case of any
registration statement, at the time of effectiveness, and in the case of any
proxy statement, at the time of mailing, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the Subsidiaries of the
Company is required to file any forms, reports, schedules, statements or other
documents with the SEC.
SECTION 2.08. Financial Statements. The consolidated financial
statements of the Company included in the Company SEC Filings have been prepared
in accordance with United States generally accepted accounting principles
consistently applied and consistent with prior periods ("GAAP") and the
published rules and regulations of the SEC applicable thereto, except, in the
case of unaudited interim consolidated financial statements, as permitted by
Form 10-Q adopted under the Exchange Act. The consolidated balance sheets of the
Company included in the Company SEC Filings fairly present the financial
position of the Company and its Subsidiaries as of their respective dates, and
the related consolidated statements of operations, stockholders' equity and cash
flows included in the Company SEC Filings fairly present the results of
operations of the Company and its Subsidiaries for the respective periods then
ended, subject, in the case of unaudited interim financial statements, to
year-end adjustments (which consist of normal recurring accruals) and the
absence of certain footnote disclosures. Except for (A) liabilities or
obligations that are accrued or reserved against in the Company's balance sheet
as of June 30, 2001 (the "Balance Sheet Date") included in its Quarterly Report
on Form 10-Q for the three months then ended, (B) contingent liabilities to the
extent identified in the notes to the Company's financial statements contained
in the Annual Report (as qualified by any subsequent inclusion of a liability,
reserve or expense in the balance sheet as of June 30, 2001 included in its
Quarterly Report on Form 10-Q for the three months then ended), (C) liabilities
and obligations incurred subsequent to the Balance Sheet Date in the ordinary
course of business and consistent with past practice and (D) obligations
otherwise incurred in the ordinary course of
9
business and consistent with past practice which are not required to be
disclosed in accordance with GAAP, none of the Company or any of its
Subsidiaries has any material liabilities or obligations (whether fixed,
absolute, accrued, contingent, secured or unsecured, known or unknown or
otherwise).
SECTION 2.09. Absence of Certain Changes or Events. Except for the
Osborn Acquisition and except as set forth in Item 2.09 of the Disclosure
Schedule, since the Balance Sheet Date (i) the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary course of business
and consistent with past practice, (ii) neither the Company nor any Subsidiary
of the Company has taken any of the actions described in Section 4.01, assuming
that Section 4.01 had applied to the period since the Balance Sheet Date, or
(iii) no event has occurred which could reasonably be expected to have a
Material Adverse Effect.
SECTION 2.10. Actions Pending. Except (i) as set forth in Item 2.10
of the Disclosure Schedule or (ii) as disclosed in the Company SEC Filings made
prior to the date hereof, there is no action, suit, hearing, investigation,
proceeding or claim pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries or their respective
properties or assets, by or before any court, arbitrator, arbitration board,
tribunal or other judicial body or authority or administrative, governmental,
quasi-governmental or regulatory body, authority or agency or securities
exchange or association, including, the Nasdaq Stock Market ("Governmental
Body"). None of the actions, suits, investigations, proceedings or claims set
forth in Item 2.10 of the Disclosure Schedule, when taken together with all
other similar actions, whether or not any or all of such actions are adversely
determined, could reasonably be expected to have a Material Adverse Effect.
SECTION 2.11. Compliance with Law; Material Permits. Neither the
Company nor any Subsidiary thereof is in default under or in violation of any
Order to which the Company or any such Subsidiary or any of their respective
properties or assets is or was subject or in violation, in any material respect,
of any Laws to which the Company or any such Subsidiary is or was subject. The
Company and its Subsidiaries possess all permits, authorizations, approvals,
registrations, variances and licenses that are necessary for the Company and its
Subsidiaries to own, use and maintain their material properties and assets used
in or required for the conduct of the business of the Company and its
Subsidiaries ("Material Permits"). Each Material Permit is in full force and
effect, and no proceeding is pending or, to the knowledge of the Company,
threatened, to suspend, revoke, limit or otherwise materially modify any
Material Permit, and no actions have been taken or, to the knowledge of the
Company, threatened, by any Governmental Body, in connection with the expiration
or renewal of any Material Permit.
SECTION 2.12. Title to and Condition of Properties. (a) The Company
and its Subsidiaries have good and valid title to all their material assets and
properties, in each case free and clear of all Liens other than Liens permitted
by Section 6.09(c)(A)-(F) hereof and (i) liens for taxes not yet due and
payable, (ii) landlords' liens on fixtures and movable property located on
premises leased by the Company or a Subsidiary in the ordinary course of
business, (iii) purchase
10
money security interests in real property or equipment hereafter acquired by the
Company in the ordinary course of business, (iv) workman's, materialman's,
warehouseman's and similar Liens arising by Law for obligations not yet
delinquent, (v) zoning and planning restrictions, easements, permits and other
restrictions or limitations affecting the use of such properties that do not
materially detract from the value or materially impair the use of such
properties, and (vi) minor imperfections of title, if any, not material in
amount and not materially detracting from the value or materially impairing the
use of the property subject thereto or materially impairing the operations or
proposed operations of the Company and its Subsidiaries (the Liens described in
clauses (i) and (vi) above being referred to herein as "Permitted Liens").
(b) The assets, properties, contracts and rights of the Company and
its Subsidiaries include all of the assets, properties, contracts and rights
reasonably necessary for the conduct of the businesses of the Company and its
Subsidiaries as now conducted. The Company and each of its Subsidiaries have
maintained all of their material tangible assets in good and normal operating
condition, ordinary wear and tear excepted, and all such material tangible
assets are, in all material respects, adequate and suitable for the purposes for
which they are presently used.
SECTION 2.13. Real Property. Except as disclosed in the Company SEC
Filings made prior to the date hereof, neither the Company nor any of its
Subsidiaries owns any real property. The Company and its Subsidiaries (i) have
good and marketable title to all real property owned by them and (ii) a valid
and enforceable leasehold interest in all of the material real property leased
by them (the "Leased Properties"), in each case, free and clear of all Liens
except for Permitted Liens. Each lease or other agreement relating to the Leased
Properties is a valid and subsisting agreement, without any material default of
the Company or any Subsidiary of the Company thereunder and, to the knowledge of
the Company, without any material default thereunder of the other party or
parties thereto.
SECTION 2.14. Contracts. Except for the contracts, licenses, leases,
instruments and other commitments and agreements included as exhibits to or
incorporated by reference as exhibits to the Annual Report or any other Company
SEC Filing made subsequent to the filing of the Annual Report and prior to the
date hereof ("Publicly-Available Contracts"), Item 2.14 of the Disclosure
Schedule sets forth a complete and accurate listing of the following contracts,
licenses, leases, instruments and other commitments and agreements (together
with the Publicly-Available Contracts, the "Material Contracts"): (i) all
contracts, instruments and other commitments and agreements relating to the
borrowing of money, the granting of Liens or the extension of credit by or to
the Company and/or its Subsidiaries, (ii) all employment, severance and other
agreements with the officers and directors of the Company and its Subsidiaries,
(iii) all agreements between the Company and/or any Subsidiary of the Company,
on the one hand, and any Material Customer, on the other hand, (iv) all joint
venture agreements or other agreements providing for the sharing of revenues or
payment of royalties by or to the Company and/or its Subsidiaries, (v) all
agreements prohibiting, partially restricting, or otherwise limiting the ability
of the Company and/or its Subsidiaries to conduct any business anywhere in the
world, (vi) all
11
agreements (other than the Osborn Acquisition Documents (as hereinafter
defined)) relating to the acquisition or sale by the Company or any Subsidiary
thereof of any company, business, division or other enterprise, whether in the
form of stock purchase, asset acquisition, or otherwise and whether or not such
acquisition or disposition was completed, (vii) all customer contracts involving
the receipt by the Company and/or any of its Subsidiaries of more than
$1,000,000 in any single year and all other contracts, licenses, leases,
instruments and other commitments and agreements involving the payment or
receipt by the Company and/or any of its Subsidiaries of more than $500,000 in
any single year or $2,500,000 or more in the aggregate and (viii) all agreements
to which the Company or any of its Subsidiaries is a party requiring the consent
of any third party thereto to the consummation of the transactions contemplated
hereby or by the Osborn Acquisition Agreement or having provisions which will be
accelerated or otherwise affected by the consummation of such transactions. Each
Material Contract is a valid and subsisting agreement, without any material
default thereunder (with or without notice or the passage of time or both) of
the Company or any Subsidiary thereof and, to the knowledge of the Company,
without any material default (with or without notice or the passage of time or
both) thereunder of the other party or parties thereto. The Company has not
received notice of any cancellation or termination of, or of any threat to
cancel or terminate, any Material Contract.
SECTION 2.15. Intellectual Property; Software. (a) The Company and
its Subsidiaries own or have adequate right to use all of the patents,
trademarks and trade names, trademark and trade name registrations,
servicemarks, servicemark registrations and copyrights that are reasonably
necessary to the conduct of their business. To the knowledge of the Company, (i)
the Company and its Subsidiaries conduct their businesses without infringement
or violation of any intellectual property rights of third parties, (ii) no third
party is claiming that the conduct of the business of the Company or any of its
Subsidiaries infringes, misappropriates or otherwise violates the intellectual
property rights of such third party and (iii) no person is challenging,
infringing, misappropriating or otherwise violating any intellectual property
rights of the Company or any of its Subsidiaries.
(b) To the knowledge of the Company, (i) the Company or a Subsidiary
thereof either owns or has a valid license covering each copy of software used
by the Company and its Subsidiaries, (ii) the use by the Company and its
Subsidiaries of the software licensed by them from third parties complies in all
material respects with the terms and conditions of such software licenses and
(iii) no use of any software by the Company or any of its Subsidiaries infringes
upon or violates any intellectual property or contract right of any third party.
SECTION 2.16. Tax Matters. (a) Except as disclosed in Item 2.16 of
the Disclosure Schedule or in the Company SEC Filings made prior to the date
hereof, the Company and its Subsidiaries have (i) timely filed all federal,
state, local and foreign returns, declarations, reports, estimates, information
returns and statements ("Returns") required to be filed by them in respect of
any Taxes (as hereinafter defined), all of which Returns were correct as filed
(or as subsequently amended) and correctly reflect the facts regarding the
income, business, assets, operations, activities and status of the Company and
its Subsidiaries as well as any Taxes
12
required to be paid or collected by the Company and its Subsidiaries, (ii)
timely paid or withheld all Taxes that are due and payable with respect to the
Returns referred to in clause (i) (other than Taxes that are being contested in
good faith by appropriate proceedings and are adequately reserved for in the
Company's most recent consolidated financial statements included in the Company
SEC Filings made prior to the date hereof), (iii) established reserves that are
adequate for the payment of all Taxes not yet due and payable with respect to
the results of operations of the Company and its Subsidiaries and (iv) complied
with all applicable Laws relating to the payment and withholding of Taxes and
has timely withheld from employee wages and paid over to the proper Taxing
Authorities (as hereinafter defined) when due all amounts required to be so
withheld and paid over.
(b) For purposes of this Agreement, "Taxes" shall mean (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, withholding
on amounts paid or received, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit taxes, custom
duties or other taxes, governmental fees or other like assessments or charges of
any kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any governmental authority responsible for the
imposition of any such taxes (domestic or foreign) ("Taxing Authorities"), (ii)
liability for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby liability for
payments of such amounts was determined or taken into account with reference to
the liability of any other person for any period and (iii) liability with
respect to the payment of any amounts described in (i) as a result of any
express or implied obligation to indemnify any other person.
(c) Except as disclosed in Item 2.16 of the Disclosure Schedule or in
the Company SEC Filings made prior to the date hereof, no Returns of the Company
or any of its Subsidiaries have been examined by any Taxing Authority.
(d) Except as disclosed in Item 2.16 of the Disclosure Schedule or in
the Company SEC Filings made prior to the date hereof, (i) no extensions of time
have been granted to the Company or any of its Subsidiaries to file any Return,
(ii) no deficiency or adjustment for any Taxes has been proposed, asserted or
assessed against the Company or any of its Subsidiaries, and there have never
been any, and no Federal, state, local or foreign audits or other administrative
proceedings or court proceedings are currently in progress or pending against
the Company or any of its Subsidiaries with respect to any Taxes owed by the
Company or any of its Subsidiaries, and (iii) no waiver or consent extending any
statute of limitations for the assessment or collection of any Taxes owed by the
Company or any of its Subsidiaries, has been executed by the Company or any of
its Subsidiaries or on behalf of the Company or any of its Subsidiaries, nor are
any requests for such waivers or consents pending.
13
SECTION 2.17. Employee Benefit Plans. (a) As used herein, "Employee
Plan" means any "employee benefit plan" (as that term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974 ("ERISA")), as well as
any other plan, program or arrangement involving direct and indirect
compensation, under which the Company or any Subsidiary of the Company has any
present or future obligations or liability on behalf of its employees or former
employees, contractual employees or their dependents or beneficiaries.
(b) On or prior to the date hereof, the Company has delivered to the
Purchaser Representative or its counsel accurate and complete copies of each of
the following with respect to each of the Employee Plans, all to the extent
applicable: (i) all plan documents and all amendments thereto, (ii) summary plan
descriptions and summaries of modifications, (iii) trust documents, insurance
contracts and other funding instruments, (iv) the two most recently prepared
financial statements and actuarial reports, (v) the two most recent annual
reports and (vi) determination letters received from the Internal Revenue
Service.
(c) Except as disclosed in Item 2.17 of the Disclosure Letter: (i)
each of the Employee Plans sponsored by the Company or any Subsidiary of the
Company that is qualified under Section 401 of the Code has received a favorable
determination letter from the Internal Revenue Service as to the qualification
of such Employee Plan, and such letter has not been modified, revoked or limited
by the failure to satisfy any condition thereof or by a subsequent amendment
thereto, or failure to amend such Employee Plan; (ii) each Employee Plan has
been operated and administered in accordance with its terms and is in compliance
with ERISA, the Internal Revenue Code of 1986 (the "Code") and all other
applicable Laws; (iii) all contributions due and payable in respect of any
Employee Plan have been made in full and in proper form, or adequate accruals
have been provided for in the most recent financial statements included in the
Company SEC Filings made prior to the date hereof for such amounts; (iv) neither
the Company nor any Subsidiary of the Company, nor to the knowledge of the
Company, any other "disqualified person" or "party in interest" (as defined in
Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect
to an Employee Plan has breached the fiduciary rules of ERISA or engaged in a
prohibited transaction which could subject the Company or any Subsidiary of the
Company to any tax or penalty imposed under Sections 4975 of the Code or Section
502 (i), (j) or (l) of ERISA; (v) each Employee Plan which is subject to the
requirements of the Consolidated Omnibus Budget Reconciliation of 1985 ("COBRA")
and the Health Insurance Portability and Accountability Act ("HIPAA") has been
maintained in compliance with COBRA and HIPAA, including all notice
requirements, and no tax payable on account of Section 4980B or any other
section of the Code has been or is expected to be incurred; (vi) neither the
Company nor any Subsidiary of the Company is or ever has been obligated to
contribute to any "multiemployer plan" (within the meaning of Section 3(37) of
ERISA, a "multiple employer plan" (within the meaning of Section 413 of the
Code, or a defined benefit plan (within the meaning of Section 3(35) of ERISA;
(vii) with respect to any Employee Plan, there has not been any act or omission
by the Company or any Subsidiary of the Company that has given rise to or could
give rise to any fines, penalties or related charges under ERISA or the Code for
which the Company or any Subsidiary of the Company could be liable; (viii) no
claims, actions, suits or
14
proceedings (other than routine benefit claims) are pending or, to the knowledge
of the Company, threatened against or relating to any Employee Plan, or any
fiduciary thereof, and to the knowledge of the Company, there is no basis for
any such claim, action, suit or proceeding; (ix) the Company has timely
deposited and transmitted all amounts withheld from employees for contributions
or premium payments for each Employee Plan into the appropriate trusts or
accounts; (x) each Employee Plan that allows loans to plan participants has been
operated in accordance with its terms, the plan's written loan policy and all
applicable laws; (xi) no individual who has been classified by the Company as a
non-employee (such as an independent contractor, leased employee or consultant)
shall have a claim against the Company for eligibility to participate in any
Employee Plan, if such individual is later reclassified as an employee of the
Company and (xii) no benefit payable or which may become payable by the Company
pursuant to any Employee Plan shall constitute an "excess parachute payment,"
within the meaning of Section 280G of the Code, which is or may be subject to
the imposition of an excise tax under Section 4999 of the Code or which would
not be deductible by reason of Section 280G of the Code.
SECTION 2.18. Customers. Except as set forth in Item 2.18 of the
Disclosure Schedule or as disclosed in the Company SEC Filings made prior to the
date hereof, since January 1, 2000, neither the Company nor any Subsidiary of
the Company has lost, and the Company has not been notified that either the
Company or any of its Subsidiaries will lose or suffer material diminution in
any relationship with any customer that was one of the Company's and its
Subsidiaries' largest 25 customers (determined on the basis of revenues) for the
twelve months ended June 30, 2001 ("Material Customers").
SECTION 2.19. Labor Matters. Neither the Company nor any of its
Subsidiaries is or has been a party to any collective bargaining or union
agreement, and no such agreement is or has been applicable to any of their
employees. There are no labor union grievances or unfair labor practice or labor
arbitration proceedings pending, or, to the knowledge of the Company, threatened
against the Company or any Subsidiary thereof. There are no labor unions or
other organizations representing or purporting to represent any employees of the
Company or any of its Subsidiaries and there are not any organizational efforts
being made or, to the knowledge of the Company, threatened involving any of such
employees. There are no material controversies between the Company or any of its
Subsidiaries, on the one hand, and any of their respective employees, leased
employees or independent contractors, on the other hand, and (ii) the Company
and its Subsidiaries have complied in all material respects with all Laws
relating to the hiring and retention of employees, leased employees and
independent contractors including those relating to wages, hours, equal
opportunity, collective bargaining and the withholding and payment of social
security and other taxes.
SECTION 2.20. Environmental Matters. The Company and each Subsidiary
of the Company conducts its business in material compliance with all applicable
environmental Laws, and neither the Company nor any Subsidiary thereof has
received notice of any claim, action, suit, proceeding, hearing or investigation
based upon or related to the manufacture, pro-
15
cessing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste (each, an "Environmental Event") by or on behalf of the Company or any
Subsidiary of the Company. To the knowledge of the Company, no notice of any
Environmental Event was given to any person or entity that occupied any of the
premises occupied or used by the Company or any Subsidiary thereof prior to the
date such premises were so occupied by the Company or such Subsidiary. Without
limiting the generality of the foregoing, neither the Company nor any Subsidiary
of the Company or, to the knowledge of the Company, any agent thereof, has
disposed of or placed on or in any real property, any waste materials or
hazardous substances in violation of any environmental Law.
SECTION 2.21. Insurance Coverage. The insurance coverage maintained
by the Company and its Subsidiaries is customary and adequate for corporations
of similar size engaged in the same business as the Company and its
Subsidiaries. The Company and its Subsidiaries have paid all premiums due under
all insurance policies maintained by them. All such insurance policies are in
full force and effect and no notice of termination or cancellation or denial of
coverage has been received in respect thereof.
SECTION 2.22. Offering of the Securities. Assuming the accuracy of
the representations and warranties of the Purchasers set forth in Article III
hereof, neither the Company nor any person acting on the Company's behalf has
taken or will take any action (including, without limitation, any offer,
issuance or sale of any securities of the Company under circumstances which
might require the integration of such transactions with the sale of the Initial
Securities) which would subject the offering, issuance or sale of the Initial
Securities to the Purchasers pursuant to this Agreement to the registration
provisions of the Securities Act.
SECTION 2.23. Related-Party Transactions. Except as disclosed in the
Company SEC Filings made prior to the date hereof, there are no existing
arrangements or proposed transactions between the Company or any Subsidiary
thereof, on the one hand, and any other person or entity (each a "Related
Party") on the other hand, that the Company would be required to disclose
pursuant to Item 404 of Regulation S-K of the SEC if a proxy statement of the
Company were required to be filed on or as of the date hereof.
SECTION 2.24. Proxy Statement. The Proxy Statement (as hereinafter
defined) will not at the time of mailing thereof or at the time of the Company
Shareholder Meeting (as hereinafter defined), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, except that no
representation is being made by the Company with respect to statements made
therein based solely on information supplied by the Purchasers and their
representatives for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form with the applicable provisions of the Exchange Act.
16
SECTION 2.25. Anti-Takeover Statutes and Certain Charter Provisions;
Rights Plan. The approval of this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby by the Board of Directors of the
Company at the Board Meeting is sufficient to render inapplicable to (A) the
issuance and delivery of the Initial Securities, the Conversion Shares, the
Additional Securities, and any securities issuable upon conversion or exercise
of the Additional Securities, and the Purchaser's ownership and voting of such
securities, the provisions of Section 351.459 of the General and Business
Corporation Law of the State of Missouri (the "Missouri Code") and (B) the
issuance and delivery of the Initial Securities, the Conversion Shares, the
Additional Securities, and any securities issuable upon conversion or exercise
of the Additional Securities, the provisions of Article X of the Articles of
Incorporation of the Company. Upon the adoption and effectiveness of the Rights
Plan Amendment, the provisions of the Rights Agreement dated as of February 11,
2000 between the Company and American Stock Transfer & Trust Company (the
"Rights Plan") will be rendered inapplicable to the issuance and delivery of the
Initial Securities, the Conversion Shares, the Additional Securities to the
Purchasers, and any securities issuable upon conversion or exercise of the
Additional Securities. Section 351.407 of the Missouri Code is not applicable to
the issuance and delivery of the Initial Securities, the Conversion Shares, the
Additional Securities, and any securities issuable upon conversion or exercise
of the Additional Securities and the Purchasers' ownership and voting of such
securities.
SECTION 2.26. Osborn Acquisition Agreement. All representations and
warranties made by the Company in or pursuant to the Osborn Acquisition
Agreement are true and correct in all material respects on and as of the date
hereof and shall be true and correct in all material respects on and as of the
closing date of the Osborn Acquisition.
SECTION 2.27. Completeness of Disclosure. No representation, warranty
or statement by the Company in this Agreement or in any Ancillary Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make any statement herein or therein, in light of the circumstances
in which they were made, not misleading.
SECTION 2.28. Brokers. All negotiations relative to this Agreement
and the Ancillary Agreements and the transactions contemplated hereby and
thereby have been carried on by the Company directly with the Purchasers,
without the intervention of any other person on behalf of the Company in such
manner as to give rise to any valid claim by any other person for a finder's
fee, advisory fee, investment banking fee, brokerage commission or similar
payment.
17
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and warrants to
the Company as follows, except that WCAS shall be jointly and severally liable
with each other Purchaser with respect to the representations and warranties of
each such Purchaser:
SECTION 3.01. Organization and Authority. WCAS is a limited
partnership duly organized, validly existing and in good standing under the Laws
of the State of Delaware. Each of the Purchasers has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform such Purchaser's respective obligations hereunder the thereunder.
SECTION 3.02. Authorization. The execution, delivery and performance
by such Purchaser of this Agreement and the Ancillary Agreements to which such
Purchaser is a party have been duly authorized by all requisite action on the
part of such Purchaser and will not violate any provision of Law or any Order
applicable to such Purchaser, the charter, limited partnership agreement or
other governing documents of such Purchaser, if any, or any provision of any
material indenture, agreement or other instrument by which such Purchaser or any
of such Purchaser's properties or assets are bound, or conflict with, result in
a breach of or constitute (with or without due notice or lapse of time or both)
a default under any such material indenture, agreement or other instrument.
SECTION 3.03. Validity. This Agreement has been duly executed and
delivered by such Purchaser and constitutes the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, except that (a) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now
or hereafter in effect, relating to or limiting creditors' rights generally and
(b) the remedy of specific performance and injunctive and other terms of
equitable relief may be subject to equitable defenses and the discretion of the
court before which a proceeding therefor may be brought. Each of the Ancillary
Agreements to which such Purchaser is a party, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, except that (a) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now
or hereafter in effect, relating to or limiting creditors' rights generally, (b)
the remedy of specific performance and injunctive and other terms of equitable
relief may be subject to equitable defenses and the discretion of the court
before which a proceeding therefor may be brought and (c) the indemnification
provisions contained in the Registration Rights Agreement may be limited by
applicable federal or state securities laws.
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SECTION 3.04. Investment Representations. (a) Such Purchaser is
acquiring the Initial Securities being purchased by such Purchaser hereunder
for such Purchaser's own account, for investment, and not with a view toward
the resale or distribution thereof.
(b) Such Purchaser understands that such Purchaser must bear the
economic risk of such Purchaser's investment for an indefinite period of time,
because the Initial Securities are not and, when issued, the Conversion Shares
will not be registered under the Securities Act or any applicable state
securities laws and may not be resold unless subsequently registered under the
Securities Act and such other laws or unless an exemption from such registration
is available. Such Purchaser also understands that, except as provided in the
Registration Rights Agreement, it is not contemplated that any registration will
be made under the Securities Act to permit resale of the Initial Securities or
the Conversion Shares.
(c) Such Purchaser is able to fend for itself in the transactions
contemplated by this Agreement and has the ability to bear the economic risks of
the investment in the Initial Securities being purchased hereunder for an
indefinite period of time. Such Purchaser further acknowledges that such
Purchaser has had the opportunity to ask questions of, and receive answers from,
officers of the Company with respect to the business and financial condition of
the Company and the terms and conditions of the purchase and sale of the Initial
Securities and to obtain additional information necessary to verify such
information to the extent that the Company can acquire it without unreasonable
effort or expense.
(d) Such Purchaser has such knowledge and experience in financial and
business matters that such Purchaser is capable of evaluating the merits and
risks of its investment in the Initial Securities. Such Purchaser further
represents that such Purchaser, is an "accredited investor" as such term is
defined in Rule 501 of Regulation D of the SEC under the Securities Act with
respect to its purchase of the Initial Securities, and that any such Purchaser
that is a limited partnership or other entity has not been formed solely for the
purpose of purchasing the Initial Securities.
SECTION 3.05. Governmental Approvals. No registration or filing with,
or consent or approval of, or other action by, any Governmental Body is or will
be necessary by such Purchaser for the valid execution, delivery and performance
by such Purchaser of this Agreement.
SECTION 3.06. Information Supplied. None of the written information
supplied by any Purchaser specifically for inclusion or incorporation by
reference in the Proxy Statement will at the time of filing or mailing thereof
or at the time of the Company Shareholder Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading.
19
SECTION 3.07. Ownership of Capital Stock of the Company. The
Purchasers do not beneficially own (within the meaning of Rule 13d-3 under the
Exchange Act) any securities of the Company. No Purchaser shall acquire
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of any security of the Company prior to the Closing. For purposes of this
Section 3.07 only, neither the execution, delivery or performance of this
Agreement nor the execution, delivery or performance of the Voting Agreement (as
hereinafter defined) shall be deemed to give rise to any beneficial ownership of
securities by the Purchasers.
ARTICLE IV.
COVENANTS OF THE PARTIES
PENDING THE CLOSING
SECTION 4.01. Conduct of the Company's Business. Except as otherwise
agreed to in writing by the Purchaser Representative on behalf of the Purchasers
subsequent to the date hereof, or as otherwise set forth in Item 4.01 of the
Disclosure Schedule or as expressly contemplated hereby, at all times between
the date hereof and the Closing Date, the Company shall, and shall cause each of
its Subsidiaries to:
(a) operate its business only in the usual, regular and ordinary
manner and on a basis consistent with past practice, and use its
commercially reasonable efforts to preserve its current business
organization, keep available the services of its officers and employees
and preserve its present relationships with its customers and suppliers
and all other persons with which it has material business dealings;
(b) maintain its material assets and properties in good repair,
order and condition, reasonable wear and tear excepted;
(c) maintain its books of account and records in the usual, regular
and ordinary manner, on a basis consistent with past practice, and use its
commercially reasonable efforts to comply in all material respects with
all Laws applicable to it and perform all of its material contractual
obligations without default;
(d) not amend its Articles or Certificate of Incorporation or
By-Laws;
(e) not change the character of its business in any manner;
(f) not incur any material obligation, debt or liability of any kind
or nature whatsoever (whether fixed, absolute, accrued, contingent,
secured or unsecured, known or unknown or otherwise, and whether due or to
become due), except in the ordinary course of business and consistent with
past practice;
20
(g) not discharge or satisfy any material Lien or pay any material
obligation, debt or liability of any kind or nature whatsoever (whether
fixed, absolute, accrued, contingent, secured or unsecured, known or
unknown or otherwise, and whether due or to become due), other than
payments of obligations, debts or liabilities in the ordinary course of
business and consistent with past practice;
(h) not mortgage, pledge or subject to any Lien (other than
Permitted Liens) any of its material assets or properties;
(i) not transfer, lease or otherwise dispose of any of its material
assets or properties except for fair consideration in the ordinary course
of business and consistent with past practice or, except in the ordinary
course of business and consistent with past practice, acquire any material
assets or properties;
(j) other than distributions by wholly-owned Subsidiaries of the
Company to the Company or to other wholly-owned Subsidiaries of the
Company, not declare, set aside or pay any distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital
stock or redeem or otherwise acquire any of its capital stock or split,
combine, reclassify or otherwise similarly change its capital stock or
authorize the creation or issuance of, or, other than in connection with
the issuance or exercise of Company Stock Options, issue or sell any of
its capital stock or any securities or obligations convertible into or
exchangeable therefor, or give any person any right to acquire any of its
capital stock;
(k) not make any loan or investment of a capital nature, whether by
purchase of stock or securities, contributions to capital, property
transfers or otherwise, in any other partnership, corporation or other
entity;
(l) not cancel or compromise any material debt or claim, except in
the ordinary course of business and consistent with past practice;
(m) not waive or release any rights of material value or surrender
or cause to be revoked or otherwise terminated any Material Permit;
(n) not transfer or grant any material rights under or with respect
to any material intellectual property, or permit any license, permit or
other form of authorization relating to any material intellectual property
to lapse;
(o) not make or grant any wage, salary or benefit increase or bonus
payment applicable to any group or classification of employees generally,
enter into or amend in any material respect the terms of any employment
contract with, or make any material loan to, or grant any severance
benefits to, or enter into or amend in any material respect
21
the terms of any material transaction of any other nature with, any
officer, director, employee or Related Party;
(p) not enter into any contract, agreement, license or lease which
involves payments by the Company or any of its Subsidiaries in excess of
$200,000 per annum or $750,000 in the aggregate;
(q) not enter into any other transaction, contract or commitment,
except in the ordinary course of business and consistent with past
practice;
(r) not take any action, enter into any transaction or make any
agreement or commitment, or knowingly permit any event to occur, which
would result in (A) any of the representations or warranties of the
Company contained in Article II of this Agreement not being true and
correct in any material respect at and as of the time immediately after
the occurrence of such action, transaction or event or on the Closing Date
or (B) any of the conditions precedent set forth in Article V not being
satisfied at Closing; or
(s) not agree to take or enter into any agreement or commitment to
take any of the actions prohibited by clauses (a)-(r) of this Section
4.01.
SECTION 4.02. (a) Access to Information Concerning the Company and
its Subsidiaries. Between the date of this Agreement and the Closing Date, the
Company shall afford, and shall cause its Subsidiaries to afford, the
representatives of the Purchasers reasonable access during normal business hours
to the offices, facilities, books and records of the Company and its
Subsidiaries and the opportunity to discuss the affairs of the Company and its
Subsidiaries with the officers, employees, accountants, customers, suppliers and
landlords of the Company and its Subsidiaries familiar therewith. Any
investigation pursuant to this Section 4.02 shall be conducted in a manner that
does not unreasonably interfere with the conduct of business by the Company and
its Subsidiaries.
(b) Except as required by Law, the Purchasers shall hold, and will
cause their respective officers, employees, partners, representatives and agents
to hold, any confidential information obtained by them in accordance with the
terms and conditions of the letter agreement dated May 3, 2001 between the
Company and WCAS (the "Confidentiality Agreement").
(c) No investigation pursuant to this Section 4.02 shall affect, add
to or subtract from any representations or warranties of the parties hereto or
the conditions to the obligations of the parties hereto to effect the
transactions contemplated hereby.
SECTION 4.03. Authorizations, Consents, Waivers and Approvals.
Between the date hereof and the Closing Date, the Company shall use its
commercially reasonable efforts to promptly apply for and seek to obtain and
to make, and cause its Subsidiaries to promptly apply
22
for and seek to obtain and to make, all authorizations, consents, waivers and
approvals and all notices, filings and registrations required, or reasonably
requested by the Purchaser Representative, in connection with the execution,
delivery and performance by the Company of this Agreement, the Ancillary
Agreements and the Osborn Acquisition Documents.
SECTION 4.04. Further Assurances. Between the date hereof and the
Closing Date, subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement.
SECTION 4.05. Notification of Certain Matters. The Company shall give
prompt notice to the Purchaser Representative of (i) the occurrence, or failure
to occur, of any event that would cause any of its representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to Closing Date and (ii) any material failure
of the Company to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder prior to the Closing. No notice
pursuant to this Section 4.05 shall affect, add to or subtract from any
representations or warranties of the parties hereto or the conditions to the
obligations of the parties hereto to effect the transactions contemplated
hereby.
SECTION 4.06. Anti-Takeover Statutes; Rights Plan Amendment. The
Company shall (i) take all action necessary to ensure that no "business
combination", "fair price," "control share acquisition" or other similar
anti-takeover statute or regulation, including the provisions of Sections
351.407 and 351.459 of the Missouri Code, is or becomes applicable to the
issuance and delivery of the Initial Securities or any Conversion Shares or any
of the other transactions contemplated by this Agreement or the Ancillary
Agreements (including any Series C Preferred Transaction or Series B Note
Transaction) or to the ownership or voting of any of such securities (including
any securities issued in any Series C Preferred Transaction or Series B Note
Transaction) and (ii) if any such anti-takeover statute or similar statute or
regulation becomes applicable to any of such transactions or to the ownership or
voting of any of such securities, take all action necessary to ensure that each
of such transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the Ancillary Agreements and otherwise to
minimize the effect of such statute or regulation on such transactions and the
ownership and voting of such securities. Prior to the Closing Date, the Company
shall cause the Rights Plan Amendment to be executed and delivered by the
parties thereto and become effective in accordance with its terms.
SECTION 4.07. The Osborn Acquisition. (a) The Company shall use its
commercially reasonable efforts to cause Parent, ChoicePoint and Osborn to
afford the representatives of the Purchasers reasonable access during normal
business hours to the offices, facilities, books and records of Osborn and its
subsidiaries and the opportunity to discuss the
23
affairs of Osborn and its subsidiaries with the officers, employees,
accountants, customers, suppliers and landlords of Osborn and its subsidiaries
familiar therewith.
(b) The Company shall given prompt notice to the Purchaser
Representative of the occurrence of any event (that with or without the passage
of time or the giving of notice) constitutes a default or event of default of
any party under the Osborn Acquisition Agreement.
(c) Prior to the Closing, the Company shall not, without the prior
written consent of the Purchaser Representative, amend, supplement or modify the
terms and conditions of, or waive any of its rights or closing conditions under,
the Osborn Acquisition Agreement or any other agreement or instrument entered
into or to be entered into in connection with the Osborn Acquisition (together
with the Osborn Acquisition Agreement, the "Osborn Acquisition Documents"). True
and correct copies of the Osborn Acquisition Documents (as in effect on the date
hereof) have been delivered to the Purchaser Representative and to the
Purchasers' counsel.
(d) The Company shall keep the Purchaser Representative informed of,
and consult with it on a prompt and regular basis on, all matters and
developments regarding the Osborn Acquisition.
SECTION 4.08. Nasdaq Quotation. The Company shall use all
commercially reasonable efforts to cause the Conversion Shares that are Company
Common Stock to be authorized for quotation on the Nasdaq Stock Market, subject
only to official notice of issuance thereof.
SECTION 4.09. SEC and Other Filings. The Company shall promptly
provide the Purchaser Representative and the Purchasers' counsel with copies of
all filings made or to be made by the Company with the SEC or any other
Governmental Body in connection with this Agreement or the Osborn Acquisition
Agreement and the transactions contemplated hereby and thereby and a reasonable
opportunity to comment thereon.
SECTION 4.10. Certificates of Designation. Prior to the Closing, the
Company shall cause to be filed with the Secretary of State of the State of
Missouri the Series B-1 Preferred Certificate of Designation and the Series B-2
Preferred Certificate of Designation pursuant to and in accordance with the
Missouri Code.
ARTICLE V.
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Obligations of Each
Party. The obligation of each party hereto to consummate the purchase and
sale of the Initial Securities at Closing is subject to the satisfaction, on
or before the Closing Date, of the following conditions,
24
any or all of which may be waived in whole or in part by the Purchaser
Representative on behalf of the Purchasers, on the one hand, or the Company, on
the other hand:
(a) No Legal Prohibition. No injunction or other Order of any court
or other Governmental Body of competent jurisdiction nor any Law shall be in
effect that would prevent the consummation of the transactions contemplated by
this Agreement or the Ancillary Agreements. No legal action or proceeding shall
have been instituted by or before any Governmental Body that seeks to restrain,
prohibit, invalidate or otherwise materially affect the consummation of the
transactions contemplated by this Agreement or any Ancillary Agreement.
(b) Osborn Acquisition. Simultaneously with the Closing hereunder,
the Osborn Acquisition shall have been consummated in accordance with the terms
of the Osborn Acquisition Documents and all applicable Laws, without the giving
of any waivers by the Company (unless such waivers were approved with the
written consent of the Purchaser Representative), and the Company shall have so
certified to the Purchasers in writing.
SECTION 5.02. Conditions Precedent to the Obligations of the
Purchasers. The obligation of each Purchaser to consummate the purchase and sale
of the Initial Securities at Closing is subject to the satisfaction, on or
before the Closing Date, of the following conditions, any or all of which may be
waived in whole or in part by the Purchaser Representative on behalf of all of
the Purchasers:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Company set forth in Article II of this
Agreement that are qualified with reference to a Material Adverse Effect or
otherwise qualified by reference to materiality shall be true and correct in all
respects and all representations and warranties that are not so qualified shall
be true and correct in all material respects, in each case, as of the Closing
Date with the same force and effect as if made on the Closing Date (except that
representations and warranties made as of a particular date shall be true and
correct as of such date), and the Company shall have so certified to the
Purchasers in writing.
(b) Performance. The Company shall have performed and complied in all
material respects with all agreements and conditions contained herein that are
required to be performed or complied with by it prior to or on the Closing Date,
and the Company shall have so certified to the Purchasers in writing.
(c) All Proceedings to Be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements and the Osborn
Acquisition Documents shall have been taken or obtained by the Company, and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser Representative and the Purchasers' counsel.
25
(d) No Material Adverse Change. There shall not have occurred since
the Balance Sheet Date any event which could reasonably be expected to have a
Material Adverse Effect, and the Company shall have so certified to the
Purchasers in writing.
(e) Consents and Approvals. All authorizations, consents, waivers and
approvals required in connection with the execution, delivery and performance of
this Agreement and each Ancillary Agreement, including, without limitation, all
such authorizations, consents, waivers and approvals indicated as being so
required in Item 2.04(c) and Item 2.06 of the Disclosure Schedule, shall have
been duly obtained and shall be in form and substance reasonably satisfactory to
the Purchaser Representative and the Purchasers' counsel.
(f) Rights Plan Amendment. The Rights Plan shall have been amended by
an amendment thereto in the form of Exhibit G hereto (the "Rights Plan
Amendment") and such amendment shall be in full force and effect.
(g) Certificates of Designation. The Series B-1 Preferred Certificate
of Designation and the Series B-2 Preferred Certificate of Designation shall
have each been filed in accordance with the Articles of Incorporation of the
Company and the Missouri Code.
(h) Opinion of Counsel. The Purchasers shall have received the
opinion of Morrison & Hecker LLP, counsel to the Company, dated the Closing Date
and substantially in the form of Exhibit H hereto.
(i) Registration Rights Agreement. The Company shall have
executed and delivered a counterpart to the Registration Rights Agreement in
the form attached as Exhibit I hereto (the "Registration Rights Agreement").
(j) Warrant Agreement. The Company shall have executed and
delivered a counterpart to the Warrant Agreement.
(k) Voting Agreement. The Voting Agreement, dated as of the date
hereof, between WCAS and the Stockholders (as defined therein) (the "Voting
Agreement") shall have been executed and delivered by the parties thereto (other
than WCAS) and shall be in full force and effect.
(l) Quotation of Company Common Stock. The Conversion Shares that are
Company Common Stock shall have been authorized for quotation on the Nasdaq
Stock Market, subject only to official notice of issuance thereof.
(m) Supporting Documents. The Purchaser Representative or the
Purchasers' counsel shall have received copies of the following supporting
documents:
26
(i) (A) the Articles of Incorporation of the Company certified as of
a recent date by the Secretary of State of the State of Missouri and (B) a
certificate of such Secretary of State as to the due incorporation,
existence and good standing of the Company and listing all documents on
file with said official;
(ii) a certificate of the Secretary of the Company dated the Closing
Date and certifying (A) that attached thereto is a true and complete copy
of the By-Laws of the Company as in effect on the date of such
certification and (B) other than the filing of the Series B-1 Preferred
Certificate of Designation and the Series B-2 Preferred Certificate of
Designation, that the Articles of Incorporation of the Company have not
been amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above;
(iii) certified copies of (A) all resolutions of the Board of
Directors of the Company relating to this Agreement, the Ancillary
Agreements, the Osborn Acquisition Documents and the transactions
contemplated hereby and thereby and (B) the Osborn Acquisition Documents;
and
(iv) such additional officer's and secretary's certificates with
respect to the Company and its Subsidiaries and other supporting documents
and information with respect to the operations and affairs of such
entities as the Purchaser Representative or the Purchasers' counsel may
reasonably request.
All such documents shall be reasonably satisfactory in form and substance to the
Purchaser Representative and the Purchasers' counsel.
SECTION 5.03. Conditions Precedent to the Obligations of the Company.
The obligation of the Company to consummate the purchase and sale of the Initial
Securities at Closing is subject to the satisfaction, on or before the Closing
Date, of the following conditions, any or all of which may be waived in whole or
in part by the Company:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Purchasers set forth in Article III of
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as if made on the Closing Date, and the
Purchasers shall have so certified to the Company in writing.
(b) Performance. The Purchasers shall have performed and complied in
all material respects with all agreements and conditions contained herein that
are required to be performed or complied with by them prior to or on the Closing
Date, and the Purchasers shall have so certified to the Company in writing.
27
(c) Opinion of Counsel. The Company shall have received the opinion
of Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel to the Purchasers,
dated the Closing Date and substantially in the form of Exhibit J hereto.
(d) Registration Rights Agreement. Each Purchaser shall have
executed and delivered a counterpart to the Registration Rights Agreement.
ARTICLE VI.
POST-CLOSING COVENANTS AND AGREEMENTS
SECTION 6.01. Legends; Reservation of Shares. (a) So long as
applicable, each certificate representing Initial Securities or Conversion
Shares shall contain, in addition to any legend required under the Rights Plan,
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
OTHER SECURITIES LAWS OR UNLESS EXEMPTIONS FROM SUCH REGISTRATION
REQUIREMENTS ARE APPLICABLE WITH RESPECT TO SUCH DISPOSITION."
(b) So long as any of the Initial Securities remain outstanding, the
Company shall at all times keep reserved for issuance upon the conversion of the
Series B-1 Preferred Shares (including on an as-converted basis (assuming
Company Shareholder Approval is obtained) all outstanding Series B-2 Preferred
Shares) and/or the exercise of the Initial Warrants, a sufficient number of
shares of Company Common Stock to satisfy its obligations to issue Conversion
Shares under the Series B-1 Preferred Certificate of Designation and the Initial
Warrants. So long as any of the Series B-2 Preferred Shares remain outstanding,
the Company shall at all times keep reserved for issuance upon conversion of the
Series B-2 Preferred Shares, a sufficient number of Series B-1 Preferred Shares
to satisfy its obligation to issue Conversion Shares under the Series B-2
Preferred Certificate of Designation.
SECTION 6.02. Board Composition. (a) Subject to the provisions
of Sections 6.02(b) and 6.02(d):
(i) So long as the Purchasers and their respective Affiliates
beneficially own (determined in accordance with Rule 13d-3 under the
Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred Shares
and/or Conversion Shares which represent 50% or more of the shares of
Company Common Stock purchased hereunder on the
28
Closing Date (determined on an as-converted basis assuming conversion of
all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon
Company Shareholder Approval and conversion of all Series B-1 Preferred
Shares (including those which are Conversion Shares) into Company Common
Stock), the Purchaser Representative shall have the right to nominate for
election on behalf of the Purchasers and such Affiliates three directors
to serve on the Company's Board of Directors.
(ii) So long as the Purchasers and their respective Affiliates
beneficially own (determined in accordance with Rule 13d-3 under the
Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred Shares
and/or Conversion Shares which represent 25% or more (but less 50%) of the
shares of Company Common Stock purchased hereunder on the Closing Date
(determined on an as-converted basis assuming conversion of all Series B-2
Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder
Approval and conversion of all Series B-1 Preferred Shares (including
those which are Conversion Shares) into Company Common Stock), the
Purchaser Representative shall have the right to nominate for election on
behalf of the Purchasers and such Affiliates two directors to serve on the
Company's Board of Directors.
(iii) So long as the Purchasers and their respective Affiliates
beneficially own (determined in accordance with Rule 13d-3 under the
Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred Shares
and/or Conversion Shares and such shares represent less than 25% (but more
than 5%) of the shares of Company Common Stock purchased hereunder on the
Closing Date (determined on an as-converted basis assuming conversion of
all Series B-2 Preferred Shares into Series B-1 Preferred Shares upon
Company Shareholder Approval and conversion of all Series B-1 Preferred
Shares (including those which are Conversion Shares) into Company Common
Stock), the Purchaser Representative shall have the right to nominate for
election on behalf of the Purchasers and such Affiliates one director to
serve on the Company's Board of Directors.
(iv) So long as the Purchasers and their respective Affiliates
beneficially own (determined in accordance with Rule 13d-3 under the
Exchange Act) at least 5% of the shares of Company Common Stock purchased
hereunder (determined on an as-converted basis assuming conversion of all
Series B-2 Preferred Shares into Series B-1 Preferred Shares upon Company
Shareholder Approval and conversion of all Series B-1 Preferred Shares
(including those which are Conversion Shares) into Company Common Stock,
in addition to the right to nominate for election directors under clause
(i), (ii) or (iii) above, as applicable (the directors so nominated, the
"WCAS Directors" and the other members of the Board of Directors of the
Company (other than the Jointly-Selected Director (as hereinafter
defined)), the "Company Directors"), one of the members of the Board of
Directors of the Company not nominated by the Purchaser Representative
pursuant to clause (i), (ii) or (iii) above, as applicable, shall be a
person mutually agreed upon by the Purchaser Representative and the
Company Directors (the "Jointly-Selected Director" and together with the
Company Directors, the "Non-WCAS Directors").
29
The term "Affiliate" when used herein shall have the meaning provided in Rule
501(b) promulgated under the Securities Act.
(b) Notwithstanding anything to the contrary contained in Section
6.02(a) above, until such time as Company Shareholder Approval has been
obtained, but only so long as the Purchasers and their respective Affiliates
beneficially own (determined in accordance with Rule 13d-3 under the Exchange
Act) at least 5% of the shares of Company Common Stock purchased hereunder
(determined on an as-converted basis assuming conversion of all Series B-2
Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder
Approval and conversion of all Series B-1 Preferred Shares (including those
which are Conversion Shares) into Company Common Stock, the Purchaser
Representative shall have the right to nominate on behalf of the Purchasers and
such Affiliates one director to serve on the Board of Directors of the Company
(it being understood that (x) until Company Shareholder Approval is obtained,
the provisions of this Section 6.02(b) and not the provisions of Section 6.02(a)
shall govern and (y) once Company Shareholder Approval is obtained, the
provisions of this Section 6.02(b) shall no longer be of any force or effect and
the provisions of Section 6.02(a) shall govern).
(c) For so long as the Purchaser Representative is entitled to
nominate directors to serve on the Board of Directors of the Company on behalf
of the Purchasers and their Affiliates under the provisions of Section 6.02(a)
or 6.02(b), the Company shall, (i) in connection with any vote or meeting of
stockholders of the Company at which directors are to be elected, nominate the
nominees of the Purchaser Representative as set forth above and (ii) use its
reasonable best efforts to cause their election to the Board of Directors of the
Company by the holders of the Common Stock, including (A) nominating such
nominee, (B) including the nominee in the Company's proxy statement, (C)
recommending a vote for such nominee, (D) casting votes pursuant to proxies
given to the Company in favor of such nominee and (E) taking or causing to be
taken, all other actions and doing, or causing to be done, all other things
necessary (in the reasonable opinion of the Purchaser Representative) to give
effect to the provisions of Sections 6.02(a) or 6.02(b) above, as applicable. If
the Purchaser Representative for any reason fails to nominate a person to fill
any such directorship, such directorship shall remain vacant until such time as
the Purchaser Representative nominates a director to fill such directorship and
such directorship shall not be filled by resolution or vote of the Company's
Board of Directors or the Company's other stockholders. All persons nominated to
the Board of Directors of the Company by the Purchaser Representative pursuant
to this Section 6.02 shall receive the same compensation and benefits (including
equity-based compensation) that are provided to the other non-executive members
of the Board of Directors of the Company. In addition, for so long as the
provisions of this Section 6.02 remain in effect, the Company shall maintain
policies of directors and officers liability insurance, with financially sound
and reputable insurers, having terms that are customary for companies similarly
situated.
(d) The provisions of this Section 6.02 are intended to operate in
conjunction with the provisions contained in Section 7(c) of the Series B-1
Preferred Certificate of Designation, such that, if the holders of Series B-1
Preferred Shares are entitled to elect directors
30
pursuant to said Section 7(c), the number of directors that such holders are
entitled to elect pursuant to said Section 7(c) shall reduce the number of
directors to be nominated by the Purchaser Representative on behalf of the
Purchasers and their Affiliates pursuant to this Section 6.02.
(e) So long as the Purchasers and/or their Affiliates are entitled to
nominate directors to the Board of Directors of the Company pursuant to Section
6.02(a) or 6.02(b) above, as applicable, (i) the Board of Directors of the
Company shall at all times consist of seven directors and (ii) the Purchasers
and such Affiliates shall also be entitled to proportionate representation by
WCAS Directors on each committee and subcommittee of the Board of Directors of
the Company (other than the audit committee to the extent prohibited by
applicable Law), such committee and subcommittee representatives to be
designated by the WCAS Directors. In the event the WCAS Directors are entitled
to designate one or more directors to serve on a committee or subcommittee of
the Board of Directors of the Company under this Section 6.02(e), the Company
shall use its reasonable best efforts to cause their appointment to such
committee or subcommittee.
(f) The Purchasers agree that, from the Closing Date until the
seventh anniversary of the Closing Date, such Purchasers shall (i) use their
reasonable best efforts to cause the election or appointment to the Board of
Directors of the Company of the persons nominated by the Company Directors to
fill the positions on such Boards of Directors allocated to the Company
Directors, (ii) use their reasonable best efforts to cause the Company Directors
to have proportionate representation on all committees of such Boards of
Directors and (iii) not directly or indirectly take any action to seek or cause
the removal of any Company Director as such a director or committee member
without the written consent of a majority of the Non-WCAS Directors.
SECTION 6.03. Standstill Agreement. WCAS agrees that, from the
Closing Date until the seventh anniversary of the Closing Date, or, if earlier,
until the first date upon which the Purchasers and their respective Affiliates
hold fewer than 5% of the shares of Company Common Stock purchased hereunder
determined on an as-converted basis assuming (i) the conversion of all Series
B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder
Approval, (ii) the conversion of all Series B-1 Preferred Shares (including
those which are Conversion Shares) into Company Common Stock, (iii) the exercise
of all Initial Warrants, (iv) the conversion of all other convertible securities
held by WCAS and its Affiliates (including any Series C-1 Preferred Shares or
Series C-2 Preferred Shares) and (v) the exercise of all other outstanding
warrants (including any Additional Warrants) held by WCAS and its Affiliates,
the Purchasers will not take, or encourage or cause any other person or entity
to take, any of the following actions without the prior written consent of a
majority of the Non-WCAS Directors: (i) acquire, offer to acquire, or agree to
acquire ownership (including without limitation beneficial ownership within the
meaning of Rule 13d-3 under the Exchange Act), by purchase or otherwise, of any
Voting Securities (as hereinafter defined), assets or business of the Company or
any Subsidiary, or direct or indirect rights or options to acquire any Voting
Securities, assets or
31
business of the Company or any Subsidiary (other than Voting Securities (1) in
connection with transfers of Securities among the Purchasers and their
Affiliates, (2) the acquisition of Series C-1 Preferred Shares, Series C-2
Preferred Shares or Additional Warrants as contemplated hereby, (3) upon the
conversion of any Series B-1 Preferred Shares, Series B-2 Preferred Shares,
Series C-1 Preferred Shares or Series C-2 Preferred Shares or upon the exercise
of any Initial Warrants or Additional Warrants, (4) the acquisition of Voting
Securities in connection with hedging transactions (so long as such transactions
do not increase the overall holdings of Voting Securities of the Purchasers that
are involved), (5) in connection with the Voting Agreement and (6) shares of
Company Common Stock and/or options to purchase shares of Company Common Stock
granted to individual Purchasers who are directors of the Company in connection
with equity-based compensation provided to non-executive members of the Board of
Directors of the Company; (ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are used in the
Exchange Act rules) or consents with respect to any Voting Securities of the
Company or any Subsidiary or become a participant in any election contest; (iii)
execute any written consent in lieu of a meeting of the holders of any class of
Voting Securities that is solicited by or on behalf of any shareholder of the
Company; (iv) initiate, propose or otherwise solicit shareholders for the
approval of any shareholder proposal (as described in Rule 14a-8 under the
Exchange Act or otherwise); (v) make any public announcement with respect to,
submit any public proposal for or public offer of, or approach any party other
than the Company regarding any extraordinary transaction involving the
acquisition of the Company or its securities or assets; (vi) form, join or in
any way participate in or assist in the formation of a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) in connection with any of the
foregoing; (vii) otherwise act, alone or in concert with others, in a manner
designed or having the deliberate effect of circumventing the restrictions
otherwise imposed hereunder; (viii) disclose or publicly announce any intention,
plan or arrangement inconsistent with the foregoing; or (ix) finance any other
persons or entities in connection with any of the activities prohibited by the
foregoing clauses (i) through (viii). As used herein, "Voting Securities" means
all securities of the Company ordinarily having the power to vote for the
election of any director of the Company and any securities or indebtedness
convertible into or exchangeable or exercisable for, directly or indirectly, any
such securities.
SECTION 6.04. Right To Purchase Series C Preferred Shares. (a) The
Company agrees that, from the Closing Date until the third anniversary of the
Closing Date (the "Restricted Period"), it shall not conduct any Equity Offering
(as hereinafter defined) unless and until it first grants to WCAS pursuant to
this Section 6.04 the right to purchase, together with its Affiliates, general
partners, and other related co-investors that are reasonably acceptable to the
Company (collectively, "Co-Investors"), (A) if Company Shareholder Approval has
been obtained, Series C-1 Preferred Shares or (B) if Company Shareholder
Approval has not yet been obtained, Series C-2 Preferred Shares, in either case,
for a purchase price of $1,000 per share. This Section 6.04 shall apply to all
proposed Equity Offerings during the Restricted Period; provided, that (i) WCAS
and its Co-Investors shall not have the right to purchase in any single
transaction pursuant to this Section 6.04 (each such transaction, a "Series C
Preferred Transaction") Series C-1 Preferred Shares or Series C-2 Preferred
Shares with a stated value in excess of the amount
32
proposed to be raised by the Company pursuant to the related proposed Equity
Offering and (ii) WCAS and its Co-Investors shall not have the right to purchase
more than $15,000,000 in the aggregate of Series C-1 Preferred Shares and Series
C-2 Preferred Shares pursuant to this Section 6.04 (measured by reference to the
stated value thereof).
(b) For purposes of this Section 6.04, "Equity Offering" shall mean
any offer by the Company to sell or sale by the Company of any shares of capital
stock of the Company, or any debt or equity security convertible into or
exchangeable for, or carrying rights or options to purchase, capital stock of
the Company, other than:
(i) the issuance of Series A Preferred Shares of the Company,
the Series B-1 Preferred Shares, the Series B-2 Preferred Shares, the
Series C-1 Preferred Shares or the Series C-2 Preferred Shares, shares of
capital stock upon conversion thereof or shares of capital stock upon
exercise of the Initial Warrants or the Additional Warrants or upon the
conversion or exercise of any other option, warrant or convertible
security outstanding on the date hereof and disclosed in Item 6.04(b) of
the Disclosure Schedule;
(ii) the issuance of options (or Company Common Stock upon the
exercise of such options) to employees, consultants, contractors, officers
or directors of the Company or its Subsidiaries pursuant to any
compensation plan or arrangement approved by the Board of Directors of the
Company;
(iii) the issuance of securities constituting, in the aggregate,
not more than three percent of the outstanding Company Common Stock on a
fully-diluted basis to banks or institutional lenders in connection with
debt financings, equipment financings or similar transactions or to
strategic partners in primarily non-financing transactions, in all such
cases as approved by the Board of Directors of the Company;
(iv) the issuance of Additional Warrants pursuant to Section
6.05;
(v) the issuance of rights and other securities under and
pursuant to the Rights Plan, and
(vi) the issuance of shares in connection with stock splits,
stock dividends or like transactions.
(c) Prior to issuing any securities pursuant to a proposed Equity
Offering, the Company shall give written notice thereof to WCAS. Such notice
shall set forth the material terms and conditions of such Equity Offering and
the securities to be sold in connection therewith, including the aggregate
amount that the Company intends to raise in such Equity Offering. In the event
that the consideration to be received by the Company for such securities is
other than cash, such notice shall state the fair value of such consideration as
determined in good faith by the Board of Directors of the Company. Each such
notice shall constitute an offer by the
33
Company to sell to WCAS and its Co-Investors, for $1,000 per share, Series C-1
Preferred Shares or Series C-2 Preferred Shares, as applicable (depending on
whether Company Shareholder Approval has been obtained), with an aggregate
stated value equal to the lesser of (x) $15,000,000 less the aggregate amount of
all Series C-1 Preferred Shares and/or Series C-2 Preferred Shares purchased in
all previous Series C Preferred Transactions, if any, or (y) the amount proposed
to be raised by the Company in such Equity Offering. For a period of thirty days
following the giving of such notice, WCAS shall be entitled, by written notice
to the Company, to elect to purchase all or any portion of such Series C-1
Preferred Shares or Series C-2 Preferred Shares, as applicable. In the event
that WCAS shall not elect pursuant to this Section 6.04 to purchase any or all
of the shares in connection with the Equity Offering described in such notice,
the Company may issue such securities not elected to be purchased by WCAS in
such amounts and on such terms and conditions without further compliance with
this Section 6.04 within the sixty day period following the end of such
thirty-day period. In the event that any such offer is accepted by WCAS within
such thirty-day period, the Company shall sell to WCAS and its Co-Investors, and
WCAS and its Co-Investors shall purchase from the Company, the Series C-1
Preferred Shares or Series C-2 Preferred Shares, as the case may be, elected to
be purchased by WCAS as soon as practicable pursuant to a definitive stock
purchase agreement that is customary for similar transactions and contains
standard and adequate representations, warranties, covenants, conditions and
indemnities which are no less favorable to WCAS and its Co-Investors than those
contained in this Agreement and which are, subject to reasonable and appropriate
modification, substantially similar to those contained in this Agreement (it
being understood that such agreement would not contain provisions similar to
those contained in Sections 6.02, 6.03, 6.04, 6.05 or 6.08 hereof).
(d) The initial conversion price of any Series C-1 Preferred Shares
issued in any Series C Preferred Transaction shall be equal to the lower of:
(i) the product of (x) the average closing price per share of
Company Common Stock for the twenty trading days immediately
preceding the closing date of such Series C Preferred Transaction
("Market Price") and (y) 1.1; and
(ii) a conversion price determined as follows:
CP = [(7.5 x EBITDA) - (ND + PS)] / FDS
As used in the above formula, the following shall have the meanings set
forth below:
CP = the initial conversion price of such Series C-1 Preferred
Shares
EBITDA = the consolidated net income of the Company before interest,
income taxes, depreciation and amortization for the twelve
months ending prior to the closing date of such Series C
Preferred Transaction, adjusted for synergies related to
acquisitions during such prior twelve month period in
34
such amount, if any, as may be agreed upon by the Company and
the Purchaser Representative but excluding non-recurring gains
or losses to the extent agreed upon by the Company and the
Purchaser Representative
ND = all Indebtedness (as hereinafter defined) of the Company and
its Subsidiaries as of the last day of the last full month
preceding the closing date of such Series C Preferred
Transaction (the "Reference Date") less the sum of (i) the cash
and cash equivalents of the Company and its Subsidiaries as of
the Reference Date and (ii) the aggregate exercise price of all
stock options of the Company that are outstanding on the
Reference Date and that have an exercise price less than the
Market Price ("In-the-Money Options")
PS = the aggregate liquidation preference of all shares of
preferred stock of the Company outstanding on the Reference
Date, excluding any shares of convertible preferred stock
having a conversion price less than the Market Price
("In-the-Money Preferred Stock")
FDS = the number of shares of Company Common Stock outstanding on
the Reference Date on a fully-diluted basis giving effect to the
exercise of all then outstanding In-the-Money Options and the
conversion of all then outstanding In-the-Money Preferred Stock
All calculations made pursuant to this Section 6.04(d) shall be made in
accordance with GAAP and certified by the Chief Executive Officer or Chief
Financial Officer of the Company.
(e) In the event that Series C-2 Preferred Shares are issued in a
Series C Preferred Transaction (the "Original Transaction"), and thereafter
Company Shareholder Approval is obtained, the conversion price of the Series C-1
Preferred Shares to be issued upon the automatic conversion of the Series C-2
Preferred Shares issued in such Original Transaction shall be calculated as if
such Series C-1 Preferred Shares were issued on the closing date of the Original
Transaction (giving effect to any adjustments that would have been made in
accordance with the terms and provisions of the Series C-1 Preferred Certificate
of Designation (if such Series C-1 Preferred Shares were outstanding from the
closing date of the Original Transaction to the date of such conversion).
(f) The Company agrees that, so long as any Series B-1 Preferred
Shares, Series B-2 Preferred Shares, Series C-1 Preferred Shares and/or Series
C-2 Preferred Shares remain outstanding, it will not issue any Series C-1
Preferred Shares or Series C-2 Preferred Shares to anyone other than WCAS and
its Co-Investors.
SECTION 6.05. Issuance of Series B Notes In Connection With
Subsequent Acquisitions. (a) If, at any time after the date hereof and
prior to the termination of this Section
35
6.05 as provided in Section 6.05(f) below, the Company shall identify an
acquisition opportunity for the Company, the consummation of which would require
the Company to obtain third-party debt financing (other than debt which by its
terms is not subordinate to any other debt or obligations of the Company) (each
a "Potential Acquisition"), the Company shall notify WCAS of such Potential
Acquisition and the need to obtain such financing. Any such notice (each a
"Potential Acquisition Notice") shall include all material information
reasonably available to the Company with respect to the entity or business
proposed to be acquired (the "Potential Acquisition Target") and all other
material information reasonably available to the Company that is relevant to
WCAS's decision whether or not to finance such acquisition. Without limiting the
generality of the foregoing, each Potential Acquisition Notice shall include a
description of the terms and conditions upon which the Company would expect to
consummate such Potential Acquisition, the amount of such debt (in the form of
Series B Notes) that the Company proposes to issue and the terms and conditions
of any Other Financing (as hereinafter defined) that the Company would expect to
obtain in connection with such Potential Acquisition.
(b) As promptly as reasonably practicable after the giving of any
Potential Acquisition Notice, and, in any event within ten days of the giving of
such notice, appropriate representatives of the Company and WCAS shall make
themselves available to discuss the status of the Potential Acquisition, the
Company's strategic rationale therefor and the information provided to WCAS in
connection with the Potential Acquisition Notice. As soon as practicable after
the conclusion of such discussions and following the delivery to WCAS of any
follow-up information reasonably requested by WCAS (and, in any event, within
ten days thereof) WCAS shall provide the Company either (i) a non-binding
indication of interest with respect to the sale and purchase of the Series B
Notes proposed to be issued to finance the Potential Acquisition (a "Series B
Note Transaction") or (ii) a notification that WCAS will not proceed with such
Series B Note Transaction (a "WCAS Cessation of Interest Notice").
(c) In connection with any Potential Acquisition and related Series B
Note Transaction, the Company shall use all commercially reasonable efforts to
afford the representatives of WCAS reasonable access during normal business
hours to the offices, facilities, books and records of the Potential Acquisition
Target and the opportunity to discuss the affairs of the Potential Acquisition
Target with the officers, employees, accountants, customers, suppliers and
landlords of the Company and such Potential Acquisition Target familiar
therewith. In addition, the Company shall keep the WCAS informed of, and consult
with it on a prompt and regular basis on, all matters and developments regarding
each Potential Acquisition and the proposed financing therefor.
(d) If, after completion of their respective due diligence
investigations with respect to such Potential Acquisition, and in light of the
proposed terms and conditions upon which such acquisition would be financed and
consummated, (i) the Board of Directors of the Company concludes that such
Potential Acquisition, the related Series B Note Transaction and any Other
Financing transactions related thereto would be in the best interest of the
Company and its shareholders and approves such transactions and (ii) WCAS
concludes that the Series B Note
36
Transaction would be in its best interest and approves such transaction (the
approvals described in clauses (i) and (ii) are collectively referred to herein
as "Mutual Approval"), the Series B Note Transaction will be consummated as
follows:
(i) Each such Series B Note Transaction shall be consummated
pursuant to the terms and conditions set forth in a definitive note
purchase agreement that is customary for similar transactions and contains
standard and adequate representations, warranties, covenants, conditions
and indemnities which are no less favorable in the aggregate to WCAS and
its Co-Investors than those contained in this Agreement and which are,
subject to reasonable and appropriate modification, substantially similar
to those contained in this Agreement (a "Definitive Note Purchase
Agreement"); and
(ii) In connection with the issuance of Series B Notes in any
such Series B Note Transaction the Company shall also issue to WCAS and
its Co-Investors an aggregate number of Additional Warrants to be
determined as follows:
(A) If the average closing price per share of Company Common Stock
for the twenty trading days immediately preceding the closing
date of such Series B Note Transaction is equal to or less than
$35.00 (as adjusted for any stock splits, stock dividends,
reverse stock splits, share consolidations or similar
transactions), then the aggregate number of Additional Warrants
to be issued in such Series B Note Transaction (SBW) shall be
determined as follows:
SBW = M x P
---------------
$15,000,000
(B) If the average closing price per share of Company Common Stock
for the twenty trading days immediately preceding the closing
date of such Series B Note Transaction exceeds $35.00 (as
adjusted for any stock splits, stock dividends, reverse stock
splits, share consolidations or similar transactions), then the
aggregate number of Additional Warrants to be issued in such
Series B Note Transaction (SBW) shall be determined as follows:
SBW = 0.25 x P
--------
S
As used in the above formulas, the following shall have the meanings set
forth below:
S = the average closing price per share of Company Common Stock
for the twenty trading days immediately preceding the closing
date of such Series B Note Transaction
37
P = the aggregate principal amount of Series B Notes to be issued
in such Series B Note Transaction
M = the number of Additional Warrants that would be issued if P
was equal to $15,000,000 and S was less than or equal to $35.00
(as adjusted for any stock splits, stock dividends, reverse
stock splits, share consolidations or similar transactions),
determined in accordance with the following table:
S M
------------------------------------
Less than $10.00 300,000
$10.01 - $15.00 275,000
$15.01 - $20.00 225,000
$20.01 - $25.00 175,000
$25.01 - $30.00 150,000
$30.01 - $35.00 100,000
(all such figures as adjusted for any stock splits, stock
dividends, reverse stock splits, share consolidations or similar
transactions)
(e) WCAS hereby agrees that it shall use its commercially reasonable
efforts to conduct its due diligence investigations, obtain its internal
approvals and consummate any Series B Note Transactions contemplated hereby, in
each case, subject to the other provisions of this Section 6.05, in accordance
with any reasonable timetable proposed by the Company in connection with any
Potential Acquisition.
(f) Notwithstanding anything to the contrary contained herein, (i)
the Company agrees that it shall not seek to obtain any debt financing (other
than debt which by its terms is not subordinate to any other debt or obligations
of the Company) for any Potential Acquisition from any person other than WCAS
and its Co-Investors ("Other Financing") unless and until WCAS and its
Co-Investors are offered an opportunity to finance such acquisition through the
purchase of Series B Notes as provided in this Section 6.05; provided, that the
aggregate principal amount of Series B Notes issued pursuant to this Section
6.05 shall not exceed $15,000,000 (i.e., the Company shall not be restricted by
this Section 6.05 from obtaining Other Financing once $15,000,000 in aggregate
principal amount of Series B Notes have been issued hereunder in one or more
Series B Note Transactions) and (ii) the Company's ability to obtain Other
Financing shall at all times remain subject to the provisions of Section 6.04.
(g) WCAS may terminate the provisions of this Section 6.05 at any
time after the date hereof by delivering to the Company a written notice of such
termination. The Company may terminate the provisions of this Section 6.05 at
any time after the third anniversary of the Closing Date by delivering to WCAS a
written notice of such termination.
38
(h) Notwithstanding anything to the contrary set forth above, nothing
in this Section 6.05 shall be construed as a commitment of WCAS to provide
financing for any Potential Acquisition. The parties hereto understand and agree
that no agreement or agreement to agree providing for any Series B Note
Transaction shall be deemed to exist between the parties as a result of this
Section 6.05 unless and until Mutual Approval has been obtained and a final
Definitive Note Purchase Agreement with respect thereto shall have been executed
and delivered by the parties. In addition, (i) the Company acknowledges that
WCAS may deliver a WCAS Cessation of Interest Notice at any time after delivery
of a Potential Acquisition Notice and prior to the execution and delivery of a
Definitive Note Purchase Agreement and (ii) the Company may, at any time,
without liability to WCAS hereunder (except as provided in Section 9.02 below),
determine not to proceed with any Potential Acquisition.
SECTION 6.06. Company Shareholder Approval. (a) As soon as reasonably
practicable after the Closing Date, the Company shall take all action necessary
in accordance with all applicable Laws and its Articles of Incorporation and
By-Laws to duly call, give notice of and convene a meeting (the "Company
Shareholder Meeting") of its shareholders to consider and vote upon the approval
of (1) the termination of the application of the "Conversion Cap" described in
Section 4(a)(ii) of the Series B-1 Preferred Certificate of Designation, (2) the
automatic conversion of the Series B-2 Preferred Shares into Series B-1
Preferred Shares pursuant to Section 4(a) of the Series B-2 Preferred
Certificate of Designation, (3) the automatic conversion of any and all Series
C-2 Preferred Shares into Series C-1 Preferred Shares pursuant to Section 4(a)
of the Series C-2 Preferred Certificate of Designation, (4) the rights of the
holders of the Series B-1 Preferred Shares to elect directors to the Board of
Directors of the Company as described in paragraphs 7(c)(ii) and 7(c)(iii) of
the Series B-1 Preferred Certificate of Designation and (5) an amendment to the
Articles of Incorporation of the Company (the "Charter Amendment") substantially
in the form of Exhibit K hereto ("Company Shareholder Approval"). The Board of
Directors of the Company has approved the matters referred to in (1) through (4)
above and shall approve the matters referred to in (5) above and shall recommend
that the shareholders of the Company vote to approve such matters. The Company
shall use all commercially reasonable efforts to solicit from its shareholders
proxies in favor of Company Shareholder Approval. The date on which Company
Shareholder Approval is obtained, if at all, is hereinafter referred to as the
"Approval Date".
(b) The Company shall, as promptly as practicable after the Closing
Date, but in no event later than 30 days after the Closing Date, prepare and
file with the SEC (after giving the Purchaser Representative and the Purchasers'
counsel the opportunity to review and comment thereon) a proxy statement to be
used in connection with the Company Shareholder Meeting (such proxy statement,
together with the form of proxy included therein and any amendments thereof or
supplements thereto, in the form mailed to the Company's shareholders, is herein
referred to as, the "Proxy Statement"). The Company will use all commercially
reasonable efforts to cause the Proxy Statement to be mailed to its shareholders
at the earliest practicable date and shall use all commercially reasonable
efforts to hold the Company Shareholder Meeting as soon as practicable after the
Closing Date.
39
(c) The Company shall notify the Purchaser Representative of the
receipt of any comments of the staff of the SEC and of any requests by the staff
for amendments or supplements to the Proxy Statement, or for additional
information, and shall promptly supply the Purchaser Representative with copies
of all correspondence between the Company or its representatives and the staff
of the SEC with respect thereto. If, at any time prior to the Company
Shareholder Meeting, any event should occur relating to or affecting the Company
or its Subsidiaries, which event should be described in an amendment or
supplement to the Proxy Statement, the Company shall promptly inform the
Purchaser Representative and shall promptly prepare, file (after giving the
Purchaser Representative and the Purchasers' counsel the opportunity to review
and comment thereon) and clear with the SEC and, if required by applicable Law,
distribute to the Company's shareholders, such amendment or supplement.
(d) Prior to the Approval Date, the Company shall make appropriate
provision and take appropriate action such that a sufficient number of vacancies
will exist on the Company's Board of Directors on the Approval Date that the
holders of the Series B-1 Preferred Shares are able to elect the appropriate
number of directors to the Company's Board of Directors on the Approval Date, as
described in Section 7(c) of the Series B-1 Preferred Certificate of
Designation.
SECTION 6.07. Tax Consistency. The Company shall treat the Series B-1
Preferred Shares, the Series B-2 Preferred Shares, the Series C-1 Preferred
Shares and the Series C-2 Preferred Shares as stock that participates in the
corporate growth of the Company to a significant extent within the meaning of
Treasury Regulation ss. 1.305-5(a), and not as "preferred stock" for purposes of
the Section 305 of the Code and the Treasury Regulations promulgated thereunder,
unless otherwise required pursuant to a final determination or a change in
applicable statutes or regulations.
SECTION 6.08 Certain Veto Rights Applying After Company Shareholder
Approval. From and after the Approval Date, and so long as the Purchasers and
their respective Affiliates beneficially own (determined in accordance with Rule
13d-3 under the Exchange Act) Series B-1 Preferred Shares, Series B-2 Preferred
Shares and/or Conversion Shares which represent 35% or more of the shares of
Company Common Stock purchased hereunder on the Closing Date (determined on an
as-converted basis after giving effect to the conversion of all of the Series
B-2 Preferred Shares into Series B-1 Preferred Shares upon Company Shareholder
Approval and conversion of all Series B-1 Preferred Shares (including those
which are Conversion Shares) into Company Common Stock), the Purchaser
Representative on behalf of the Purchaser and such Affiliates shall have the
right to approve, on behalf of the Purchasers and such Affiliates, the following
transactions: (i) any merger or consolidation involving the Company or any sale
of all or substantially all of the assets of the Company and its Subsidiaries
taken as a whole, (ii) any acquisition (or series of related acquisitions) of
stock or assets of any entity or business by the Company or any Subsidiary of
the Company outside of the ordinary course of business (whether by merger or
purchase of stock or assets or otherwise) for consideration greater than
$10,000,000 (it being agreed that the value of all non-cash
40
consideration payable in respect thereof will be determined in good faith by the
Board of Directors of the Company and include the Board of Director's
determination of the value of any contingent consideration payable in such
transaction or series of related transactions), (iii) any sale, lease, transfer
or other divestiture of material assets outside the ordinary course of business
by the Company or any Subsidiary of the Company, (iv) any capital project or
series of related capital projects costing in excess of $3,000,000, (v) any
material changes in the Company's and its Subsidiaries' business strategy or
operations from those in existence on the date hereof, (vi) any Restricted
Payments (as hereinafter defined), (vii) any Prohibited Transactions With
Affiliates (as hereinafter defined), (viii) any material change to any equity
incentive plan of the Company or any of its Subsidiaries, (ix) any material
increase in the compensation or benefits payable under any management incentive
plan of the Company or any of its Subsidiaries and (x) any restructuring of
senior management of the Company and its Subsidiaries.
SECTION 6.09 Certain Negative Covenants Relating to the Series B-2
Preferred Shares, Series C-2 Preferred Shares, Series A Notes and Series B
Notes. From and after the Closing Date, and so long as any Series B-2 Preferred
Shares, Series C-2 Preferred Shares, Series A Notes or Series B Notes remain
outstanding, the Company shall comply with the following covenants and
agreements and cause each of its Subsidiaries to comply with the following
covenants and agreements unless compliance is waived in writing by (x) the
holders of a majority of the outstanding Series B-2 Preferred Shares and Series
C-2 Preferred Shares, voting together as a single class, and (y) the holders of
not less than a majority in principal amount of the "Notes" (such term being
used herein as defined in the form of Senior Subordinated Note attached as
Exhibit D hereto):
(a) Limitation on Indebtedness and Disqualified Stock. The
Company will not and will not permit any of its Subsidiaries to,
directly or indirectly:
(i) contract, create, incur, assume or suffer or permit to
exist any Indebtedness (including by way of transferring to any third
party any Indebtedness of the Company or any Subsidiary of the
Company presently held by the Company or any Subsidiary of the
Company), except:
(A) Indebtedness represented by the Notes;
(B) Indebtedness under Sections 1.4 of the Osborn
Acquisition Agreement;
(C) up to $28,000,000 of Indebtedness of the Company
and its Subsidiaries under the line of credit letter agreement,
dated March 8, 2000, between the Company and Commerce Bank N.A.,
as amended, modified, supplemented, amended and restated,
extended, renewed, refinanced and/or replaced in an aggregate
principal amount not exceeding such amount ("Senior Credit
Agreement Indebtedness");
41
(D) Indebtedness in respect of the City of Lenexa,
Kansas Taxable Industrial Revenue Bonds (LabOne, Inc. Project)
Series 1998A outstanding on the date hereof (the "Industrial
Revenue Bonds") under the (x) Reimbursement Agreement, dated as
of September 1, 1998, between the Company and Commerce Bank
N.A., as amended, modified, supplemented, amended and restated,
refinanced and/or replaced, and (y) the Lease, dated as of
September 1, 1998, between the Company and the City of Lenexa,
Kansas, in an aggregate amount not to exceed $16,300,000, as
reduced by the amount of all payments of principal on the
Industrial Revenue Bonds made after the date hereof ("IRB
Indebtedness" and, together with the Senior Credit Agreement
Indebtedness, "Senior Indebtedness");
(E) other Indebtedness of the Company and its
Subsidiaries existing on the date hereof and set forth in Item
6.09(a)(i)(E) of the Disclosure Schedule ("Existing
Indebtedness") and Indebtedness incurred in connection with any
subsequent extension, renewal or refinancing thereof; provided,
that (x) the amount thereof is not increased and (y) the terms
thereof are no less favorable to the holders of the Series B-2
Preferred Shares, the Series C-2 Preferred Shares and the Notes
than the terms of the agreement or instrument being extended,
renewed or refinanced;
(F) Indebtedness owing by the Company or any
Subsidiary of the Company to any wholly-owned Subsidiary of
the Company or to the Company;
(G) Capitalized Lease Obligations (as hereinafter
defined) of the Company and its Subsidiaries in an amount not to
exceed $1,000,000 in the aggregate;
(H) Indebtedness related solely to interest rate
protection or currency hedging obligations entered into to
protect the Company and its Subsidiaries from fluctuations in
interest or currency exchange rates and not for speculative
purposes;
(I) Indebtedness of the Company or any of its
Subsidiaries in connection with standby letters of credit or
performance, surety or appeal bonds issued in the ordinary
course of business;
(J) Indebtedness of any Person acquired by the Company
or any Subsidiary, existing at the time of acquisition and not
incurred in contemplation thereof;
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(K) Indebtedness that is incurred and used to
repurchase all of the outstanding Series A Notes and Series B
Notes or to redeem all of the outstanding Series B-2 Preferred
Shares and Series C-2 Preferred Shares pursuant to obligations
of the Company to effect such repurchases or redemptions;
provided, that any such Indebtedness that is used to redeem the
Series B-2 Preferred Shares and Series C-2 Preferred Shares
shall (x) be subordinated to all Notes then outstanding, if any,
and (y) not require repayment of principal prior to the
scheduled repayment at maturity of any Notes then outstanding;
(L) other Indebtedness of the Company and its
Subsidiaries so long as the aggregate amount of all Indebtedness
of the Company and its Subsidiaries, after giving effect to the
incurrence thereof, does not exceed three times the consolidated
net income of the Company before interest, income taxes,
depreciation and amortization for the twelve months ending as of
the date of such incurrence, adjusted for synergies from pending
or completed acquisitions on such date in such amount, if any,
as may be agreed upon by the Company and the Purchaser
Representative which agreement will not be unreasonably withheld
or delayed ("Additional Indebtedness"); and
(M) guarantees of Indebtedness otherwise permitted
hereunder; or
(ii) issue any capital stock of the Company or any of its
Subsidiaries (other than Series C-1 Preferred Shares and/or Series
C-2 Preferred Shares) which by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures, or is
mandatorily redeemable, whether pursuant to a sinking fund obligation
or otherwise, or redeemable at the option of the holder thereof, in
whole or in part prior to the later of Company Shareholder Approval
and December 31, 2008 ("Disqualified Stock").
As used herein, "Indebtedness" means, with respect to the Company or
any Subsidiary of the Company, (i) indebtedness for borrowed money;
(ii) liabilities or obligations in respect of guarantees or letters
of credit, excluding obligations with respect to trade letters of
credit entered into in the ordinary course of business to the extent
that such letters of credit are not are not drawn upon or, if drawn
upon, to the extent the drawing is reimbursed no later than the third
business day following receipt by the Company of a demand for
reimbursement; (iii) the deferred purchase price of assets or
services purchased (excluding trade accounts payable and accrued
obligations incurred in the ordinary course of business); (iv)
43
any obligation to pay a specified purchase price for goods or
services whether or not delivered or accepted pursuant to any
agreement; (v) liabilities or obligations of the Company or any
Subsidiary of the Company, as lessee, under any lease of property
(whether real, personal or mixed) which, in accordance with GAAP,
should be classified as a capital lease ("Capitalized Lease
Obligations") (i.e., not operating leases); or (vi) liabilities or
obligations in respect of any sale-leaseback transaction.
(b) Restricted Payments. The Company will not and will not
permit any of its Subsidiaries to, directly or indirectly:
(i) declare or pay any dividends on, or make any other
distribution or payment on account of, or redeem, retire, purchase or
otherwise acquire for value, any shares of any class of capital
stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, whether in cash, property or in
obligations of the Company or any of its Subsidiaries, except for:
(A) any of the foregoing with respect to the Company's
Series B-1 Preferred Shares, Series B-2 Preferred Shares, Series
C-1 Preferred Shares or Series C-2 Preferred Shares;
(B) dividends or distributions payable in capital
stock (other than Disqualified Stock) or in options, warrants,
or other rights to purchase capital stock (other than
Disqualified Stock);
(C) dividends, distributions or payments by any
Subsidiary to the Company or to any wholly-owned Subsidiary of
the Company; and
(D) repurchases of shares of any class of stock of the
Company from employees upon termination of employment; provided,
that the aggregate amount of such repurchases shall not exceed
$100,000 in any calendar year; or
(ii) make any voluntary or optional payments of principal
of, or retire, redeem, purchase or otherwise acquire for value any
Indebtedness other than payments in respect of (A) Senior Credit
Agreement Indebtedness, (B) payments of IRB Indebtedness which
correspond to scheduled payments of principal on the Industrial
Revenue Bonds or (C) payments in respect of Additional Indebtedness.
The declarations, payments, purchases, redemptions, retirements,
acquisitions or distributions prohibited by this Section 6.09(b) are
herein called "Restricted Payments".
44
The provisions of Section 6.09(b) shall not be violated by reason of:
(1) the redemption, repurchase, defeasance or other acquisition
or retirement for value of the Series A Notes, the Series B Notes,
the Series B-2 Preferred Shares and/or the Series C-2 Preferred
Shares (including the premium, if any, and accrued and unpaid
interest thereon) with the proceeds of, or in exchange for,
Indebtedness incurred under Section 6.09(a)(i)(K);
(2) payments or distributions to dissenting stockholders
pursuant to applicable Law in connection with a consolidation, merger
or transfer of assets that complies with the provisions of this
Agreement, the Notes and the Series B-1 Preferred Certificate of
Designation, the Series B-2 Preferred Certificate of Designation,
Series C-1 Preferred Certificate of Designation, and the Series C-2
Preferred Certificate of Designation applicable to mergers,
consolidations and transfers of all or substantially all of the
property and assets of the Company;
(3) repurchases of capital stock deemed to occur upon the
exercise of stock options if such options or capital stock represents
a portion of the exercise price thereof; and
(4) payments not to exceed $250,000 in the aggregate solely to
enable the Company to make payments to holders of its Series B-1
Preferred Shares, Series B-2 Preferred Shares, Series C-1 Preferred
Shares and/or Series C-2 Preferred Shares in lieu of the issuance of
fractional shares of its capital stock.
(c) Limitation on Liens. The Company will not and will not
permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or otherwise cause or suffer to exist any consensual Liens (other
than Permitted Liens) on any property or asset now owned or hereafter
acquired, or on any income or profits therefrom, or assign or convey any
right to receive income therefrom, except for:
(A) Liens securing Senior Indebtedness or Additional
Indebtedness that is subordinated to no other Indebtedness of
the Company;
(B) Liens existing on the date hereof and set forth in
Item 6.09(c)(A) of the Disclosure Schedule, together with any
subsequent extensions or renewals thereof; provided that neither
the Indebtedness secured thereby nor the property subject
thereto is increased;
(C) Liens granted by a Subsidiary of the Company in
favor of the Company or a wholly-owned Subsidiary of the Company
to secure Indebtedness owing to the Company or such wholly-owned
Subsidiary;
45
(D) Liens with respect to the property of any Person
acquired by the Company or any Subsidiary after the date hereof,
existing at the time of acquisition and not incurred in
contemplation thereof, which Liens are not applicable to any
property of the Company or any Subsidiary other than the
property so acquired;
(E) Liens that (1) restrict in a customary manner the
subletting, assignment or transfer of any property or asset that
is subject to a lease, license, conveyance or similar contract
or (2) exist by virtue of any transfer of, agreement to
transfer, option or right with respect to, any property or
assets of the Company or any Subsidiary not otherwise prohibited
hereunder;
(F) Liens in connection with operating leases; and
(G) other Liens arising after the date hereof in the
ordinary course of business so long as the value of the property
secured thereby (as determined in good faith by the Board of
Directors of the Company) does not exceed $500,000 in the
aggregate.
(d) Consolidation, Merger, Sale or Purchase of Assets, Etc.
The Company will not and will not permit any of its Subsidiaries to:
(i) wind up, liquidate or dissolve;
(ii) enter into any transaction of merger or consolidation,
unless (x) the Company is the surviving corporation or unless the
surviving corporation shall assume in writing the Company's
obligations under the Series B-2 Preferred Shares, the Series C-2
Preferred Shares, the Series A Notes and the Series B Notes and (y)
no Event of Default (as such term is defined in the Notes) exists
immediately prior to or will exist after such transaction under the
terms of the Notes and no default exists immediately prior to or will
exist after such transaction under the terms of the Series B-2
Preferred Stock, the Series C-2 Preferred Stock, any Material
Contract, or any instrument evidencing material Indebtedness of the
Company or any Subsidiary;
(iii) directly or indirectly, sell or otherwise dispose of
or transfer all or any part of its property or assets (including,
without limitation, any sale of capital stock or other securities
convertible into capital stock other than the sale of directors'
qualifying shares) other than to the Company or a wholly-owned
Subsidiary of the Company; provided that, the foregoing shall not
prohibit sales or other dispositions of property or assets (other
than as provided in clause (iv) below) for an amount at least equal
to the fair value of such property or assets (as
46
determined in good faith by the Board of Directors of the Company) so
long as such aggregate fair value of such assets or property does not
exceed $500,000 in respect of any single transaction or series of
related transactions or $1,000,000 in the aggregate;
(iv) sell any capital stock of any wholly-owned
Subsidiary of the Company unless the sale is for all such capital
stock;
(v) after Company Shareholder Approval, directly or
indirectly (A) acquire, whether through merger, purchase of assets or
stock or otherwise, any corporation, partnership, limited liability
company or other business enterprise or any division or line of
business thereof, or (B) make any investment of a capital nature in
or loan to any corporation, partnership, limited liability company or
other business enterprise (other than investments in and/or loans to
wholly-owned Subsidiaries of the Company), in either case, in any
single transaction or series of related transaction valued at
$10,000,000 or more (as determined in good faith by the Board of
Directors of the Company); or
(vi) after Company Shareholder Approval, make any
capital expenditures or engage in any capital project or series of
related capital projects costing in excess of $3,000,000.
(e) Prohibitions Against Certain Dividends and Other
Restrictions. The Company will not and will not permit any of its
Subsidiaries to create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the
ability of:
(i) any Subsidiary of the Company to (A) pay dividends or
make any other distributions permitted by applicable Law on any
capital stock of such Subsidiary; (B) pay any Indebtedness owed to
the Company or any other Subsidiary of the Company or (C) make loans
or advances to the Company or any other Subsidiary of the Company; or
(ii) the Company to redeem the Series B-2 Preferred Shares
or Series C-2 Preferred Shares in accordance with the terms of the
Series B-2 Preferred Certificate of Designation or the Series C-2
Preferred Certificate of Designation, as applicable;
provided, that this Section 6.09(e) shall not restrict the Liens
listed in Section 6.09(c)(A)-(E), encumbrances or restrictions
existing on the Closing Date, and any extension, renewal or
refinancing of the instruments or agreements underlying such
restrictions so long as the terms thereof are no less favorable to
the holders of the Series B-2 Preferred Shares, the Series C-2
Preferred Shares and the Notes
47
than the terms of the agreement or instrument being extended,
renewed or refinanced.
(f) Limitation on Transactions with Related Parties. The Company
shall not enter into, or permit any of its Subsidiaries to enter into, any
transaction with any of the types of persons described in Item 404(a) of
Regulation S-K of the SEC, except for (i) normal employment arrangements,
benefit programs and employee incentive option programs on reasonable
terms, (ii) normal compensation arrangements with directors of the Company
and its Subsidiaries, (iii) any transaction approved by the Board of
Directors of the Company or the shareholders of the Company in accordance
with the provisions of Section 351.327 of the Missouri Code, (iv)
transactions in the ordinary course of business and on arm's length terms
and (v) transactions with the Purchasers and their Affiliates in
accordance with this Agreement and the Ancillary Agreements. ("Prohibited
Related Party Transactions").
(g) Employee Matters. The Company shall not make (i) any
material change to any equity incentive plan of the Company or any of its
Subsidiaries, (ii) any material increase in the compensation or benefits
payable under any management incentive plan of the Company or any of its
Subsidiaries, and (iii) any restructuring of any senior management of the
Company or its Subsidiaries.
ARTICLE VII.
TERMINATION PRIOR TO CLOSING
SECTION 7.01. Termination of Agreement. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any
time prior to the Closing:
(a) by the mutual written consent of the Company and the Purchaser
Representative on behalf of the Purchasers;
(b) by the Purchaser Representative on behalf of the Purchasers if
there shall have been a material breach by the Company of any of its
representations, warranties, covenants or agreements contained in this
Agreement and such breach would result in the failure to satisfy one or
more of the conditions set forth in Section 5.01 or Section 5.02 and such
breach (x) by its nature is not capable of being cured or (y) shall not
have been cured within ten days after notice thereof shall have been
received by the Company;
(c) by the Company if there shall have been a material breach by the
Purchasers of any of their representations, warranties, covenants or
agreements contained in this Agreement and such breach would result in the
failure to satisfy one or more of the conditions set forth in Section 5.01
or Section 5.03 and such breach (x) by its nature is not capable of being
cured or (y) shall not have been cured within ten days after notice
48
thereof shall have been received by the Purchaser Representative on
behalf of the Purchasers;
(d) by either the Company or the Purchaser Representative on behalf
of the Purchasers if the Closing shall not have occurred prior to the
close of business on September 30, 2001, provided, that, the right to
terminate this Agreement under this Section 7.01(d) shall not be available
to any party whose breach of this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before the close of
business on such date;
(e) by either the Company or the Purchaser Representative on behalf
of the Purchasers if the Obsorn Acquisition Agreement is terminated in
accordance with the terms of Section 9 thereof; provided, that, the
Company shall not have the right to terminate this Agreement under this
Section 7.01(e) if it shall have consented to such termination of the
Osborn Acquisition Agreement in violation of Section 4.07(c); or
(f) upon the issuance of a final and non-appealable Order by any
Governmental Body of competent jurisdiction enjoining the consummation of
the transactions contemplated hereby; provided, that, the right to
terminate this Agreement under this Section 7.01(f) shall not be available
to any party whose actions or inaction has been the cause of the
imposition of such injunction or the failure to have such injunction
removed.
Any party desiring to terminate this Agreement pursuant to this Section 7.01
shall give notice to the other parties in accordance with Section 9.04.
SECTION 7.02. Effect of Termination. In the event of termination of
this Agreement pursuant to Section 7.01, this Agreement, except for the
provisions of Section 4.02(b) and Articles VII and IX, shall become void and
have no effect, without any liability on the part of any party or its
Affiliates, directors, officers, employees, agents, partners or stockholders,
provided, that nothing in this Section 7.02 shall relieve any party of liability
for a breach of any provision of this Agreement occurring prior to such
termination.
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS; INDEMNIFICATION
SECTION 8.01. Survival of Representations, Warranties, Covenants and
Agreements. All representations, warranties, covenants and agreements contained
in or made pursuant to this Agreement and the Ancillary Agreements shall survive
the Closing Date for a period of eighteen months; provided, that (i) the
representations and warranties made in Sections 2.01, 2.03, 2.04, 2.05, 3.01 and
3.02 shall survive the Closing Date indefinitely, (ii) the
49
representations and warranties made in Sections 2.16 and 2.17 shall survive
until 90 days after the expiration of all applicable statutes of limitation
(including all periods of extension, whether automatic or permissive) and (iii)
all covenants and agreements that require or contemplate performance after the
Closing Date shall survive in accordance with their respective terms. For
purposes of this Article VIII, each statement contained in a certificate or
other instrument delivered by a party pursuant to this Agreement or any
Ancillary Agreement shall be deemed to constitute a representation made by such
party pursuant hereto or thereto. Notwithstanding the foregoing, if notice of an
indemnification claim shall have been delivered before the aforementioned time
period has elapsed with respect to a breach of representation, warranty,
covenant or agreement, such representation, warranty, covenant or agreement
shall survive until such claim is finally resolved. The right to
indemnification, payment of Damages (as hereinafter defined) or any other remedy
based on the representations, warranties, covenants and agreements contained in
or made pursuant to this Agreement or any Ancillary Agreement will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance or non-compliance with, any such
representation, warranty, covenant or agreement. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or agreement, will not affect the right to
indemnification, payment of Damages, or any other remedy based on such
representations, warranties, covenants and agreements.
SECTION 8.02. Indemnification. (a) Subject to the terms and
conditions of this Article VIII, the Company hereby agrees to indemnify, defend
and hold the Purchasers and their respective Affiliates, officers, directors,
employees, agents, shareholders, partners and other representatives
(collectively, the "Purchaser Group") harmless from and against all demands,
claims, actions, causes of action, assessments, losses (including any diminution
in the value of the Initial Securities or the Conversion Shares), damages,
liabilities, costs and expenses, including without limitation interest,
penalties and reasonable attorneys' fees and expenses (collectively, "Damages"),
asserted against, resulting to, imposed upon, suffered by or incurred by any
member of the Purchaser Group by reason of, resulting from or arising out of (i)
any breach or inaccuracy of any representation or warranty of the Company
contained in or made pursuant to this Agreement or any Ancillary Agreement, (ii)
any breach of or non-compliance with any covenant or agreement of the Company
contained in or made pursuant to this Agreement or any Ancillary Agreement,
(iii) any claim, action, proceeding or investigation or threat of claim, action,
proceeding or investigation brought by or on behalf of any person other than the
Company that relates to this Agreement, the Ancillary Agreements, the Osborn
Acquisition Documents or the transactions contemplated hereby or thereby, or
(iv) any untrue statement or alleged untrue statement of any material fact
contained in the Proxy Statement or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading (except to the extent arising out of or based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in conformity with information furnished by the Purchasers in
writing specifically for use
50
in such Proxy Statement); provided, that, (x) the Company shall not be liable
under this Section 8.02(a) unless the aggregate amount of Damages with respect
to all matters referred to in this Section 8.02(a) exceeds $500,000 (in which
case all such Damages shall be made subject to indemnification hereunder), (y)
the Company's maximum liability under this Section 8.02(a) shall not exceed
$50,000,000 in the aggregate and (z) if the Damages for which the
indemnification is being sought are the result of a misrepresentation or breach
of warranty, then a written claim for indemnification must be delivered to the
Company within the applicable survival period set forth in Section 8.01. Any
payment made to any Purchaser hereunder in respect of any Damages shall be
treated as an adjustment to the purchase price of the Securities.
(b) Subject to the terms and conditions of this Article VIII, each
Purchaser, severally and not jointly (other than WCAS, whose obligations
hereunder shall be joint and several with each other Purchaser with respect to
the obligations of such other Purchasers) hereby agrees to indemnify, defend and
hold the Company and its Affiliates, officers, directors, employees, agents,
shareholders, and other representatives (collectively, the "Company Group")
harmless from and against all demands, claims, actions, causes of action,
assessments, losses, damages, liabilities, costs and expenses, including without
limitation interest, penalties and reasonable attorneys' fees and expenses,
asserted against, resulting to, imposed upon, suffered by or incurred by any
member of the Company Group by reason of, resulting from or arising out of (i)
any breach or inaccuracy of any representation or warranty of the Purchasers
contained in or made pursuant to this Agreement or any Ancillary Agreement or
(ii) any breach of or non-compliance with any covenant or agreement of the
Purchasers contained in or made pursuant to this Agreement or any Ancillary
Agreement; provided, that, (x) the Purchasers shall not be liable under this
Section 8.02(b) unless the aggregate amount of Damages with respect to all
matters referred to in this Section 8.02(b) exceeds $500,000 (in which case all
such Damages shall be made subject to indemnification hereunder), (y) each
Purchaser's liability under this Section 8.02(b) shall not exceed the amount of
the purchase price paid by such Purchaser for the Initial Securities and (z) if
the Damages for which the indemnification is being sought are the result of a
misrepresentation or breach of warranty, then a written claim for
indemnification must be delivered to the Purchasers within the applicable
survival period set forth in Section 8.01.
SECTION 8.03. Conditions of Indemnification. (a) In order for a
member of the Purchaser Group or Company Group to be entitled to indemnification
pursuant Section 8.02 of this Agreement in respect of, arising out of, or
involving a claim made by any person not a party to this Agreement (a "Third
Party Claim"), the indemnified party must within 20 days after receipt of notice
of commencement of any action, suit or proceeding relating to a Third Party
Claim give the indemnifying party written notice thereof together with a copy of
such claim, process or other legal pleading (provided that failure so to notify
the indemnifying party of the assertion of a claim within such period shall not
affect the indemnifying party's indemnity obligation hereunder except as and to
the extent that such failure shall actually and materially adversely affect the
defense of such claim), and, subject to Sections 8.03(b), (c) and (e) below, the
indemnifying party shall have the right to undertake the defense thereof by
counsel of its own choosing that is reasonably acceptable to the indemnified
party; provided, that if the
51
indemnifying party is also a party to such proceeding and the indemnified party
determines in good faith upon advice of counsel that joint representation would
be inappropriate, the indemnifying party shall not have the right to undertake
such defense but shall remain liable for the fees and expenses of counsel
incurred by the indemnified party in defending such Third Party Claim.
(b) In the event that the indemnifying party, by the 20th day after
receipt of notice of any such Third Party Claim (or, if earlier, by the tenth
day preceding the day on which an answer or other pleading must be served in
order to prevent judgment by default in favor of the person asserting such Third
Party Claim), does not elect to defend against such claim, the indemnified party
will have the right to undertake the defense, compromise or settlement of such
claim on behalf of and for the account and risk of the indemnifying party.
(c) If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, it being understood that the indemnifying party
shall control such defense.
(d) If the indemnifying party assumes the defense of a Third Party
Claim, (i) no compromise or settlement of such Third Party Claim may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Law or any violation of the
rights of any person and no effect on any other claims that may be made against
the indemnified party and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party and (ii) the indemnified party will
have no liability with respect to any compromise or settlement of such Third
Party Claim effected without its consent.
(e) Anything in this Section 8.03 to the contrary notwithstanding,
the indemnifying party shall not be entitled to assume the defense of any Third
Party Claim if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the indemnified
party that the indemnified party reasonably determines, after conferring with
counsel, cannot be separated from any related claim for money damages (it being
understood that if such equitable relief or other relief portion of the Third
Party Claim can be so separated from that for money damages, the indemnifying
party shall be entitled to assume the defense of the portion relating to money
damages). In such event, the indemnified party will have the right to undertake
the defense, compromise or settlement of such claim on behalf of and for the
account and risk of the indemnifying party; provided, that no compromise or
settlement of such Third Party Claim may be effected by the indemnified party
without the indemnifying party's consent.
(f) In connection with any Third Party Claim, the indemnified party
will cooperate with all reasonable requests of the Company and the Company will
cooperate with all reasonable requests of the indemnified party.
52
SECTION 8.04. Other Claims. In the event any indemnified party should
have a claim against the indemnifying party that does not involve a Third Party
Claim being asserted against or sought to be collected from such indemnified
party, the indemnified party shall deliver notice of such claim with reasonable
promptness to the indemnifying party. Subject to the provisions in this Article
VIII governing the time periods within which claims for indemnification may be
made, the failure by any indemnified party to so notify the indemnifying party
shall not relieve the indemnifying party from any liability that it may have to
such indemnified party, except to the extent that the indemnifying party
demonstrates that it has been materially prejudiced by such failure. If the
indemnifying party does not notify the indemnified party within 20 days
following its receipt of such notice that the indemnifying party disputes its
liability to the indemnified party, such claim specified by the indemnified
party in such notice shall be conclusively deemed a liability of the
indemnifying party and the indemnifying party shall pay the amount of such
liability to the indemnified party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined. If the indemnifying party has timely disputed its liability
with respect to such claim, as provided above, the indemnifying party shall
promptly pay any amount of such claim that is not disputed and such dispute
shall be resolved in accordance with Section 9.10 below.
SECTION 8.05. Remedies Cumulative. Except to the extent a party may
be entitled to the remedy of specific performance, and except for a breach of
any representation, warranty, or covenant as a result of any matter constituting
fraud or criminal activity under applicable Law, the indemnification provisions
of this Article VIII shall be the exclusive remedy of the parties hereto against
any other party under this Agreement with respect to claims relating to this
Agreement and the transactions contemplated hereby.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Specific Performance. The parties hereto agree that
irreparable damage would occur and that a remedy at law would not be adequate in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties hereto shall be entitled by any court of
competent jurisdiction to an injunction or injunctions, without actual proof of
damages or the necessity of posting bond, to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 9.02. Expenses, Etc. (a) The Company hereby agrees that,
whether or not the transactions contemplated hereby are consummated, it shall
pay up to $500,000 of the out-of-pocket costs and expenses of the Purchasers,
including fees and disbursements of counsel,
53
advisors, accountants and consultants, that are incurred by the Purchasers in
connection with (i) the negotiation, preparation, execution and delivery of this
Agreement and the Ancillary Agreements, (ii) the Purchasers' due diligence
investigations with respect to the Company and its Subsidiaries and the Osborn
Acquisition and (iii) the closing of the transactions contemplated by this
Agreement, the Ancillary Agreements and the Osborn Acquisition Agreement
("Transaction Expenses"); provided, that, (A) the Company shall not be required
to pay the Transaction Expenses of the Purchasers pursuant to this Section 9.02
if the transactions contemplated hereby are not consummated solely as a result
of a material breach of this Agreement by any Purchaser and (B) 50% of the fees
and expenses of each of Reboul, MacMurray, Hewitt, Maynard & Kristol and Ernst &
Young LLP, in each case relating to the Osborn Acquisition, are being billed to
the Company separate and apart from the Transaction Expenses and shall be paid
directly by the Company and shall not therefor apply against the $500,000
limitation set forth above. In addition, the Company hereby agrees to pay (A)
all of the reasonable out-of-pocket costs and expenses of WCAS and its
Co-Investors, including fees and disbursements of counsel, advisors, accountants
and consultants, incurred in connection with (x) any and all Series C Preferred
Transactions and Series B Notes Transactions and (y) the preparation and review
of the Proxy Statement and the Company Shareholder Meeting and (B) any fees and
expenses associated with any filing required to be made under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with any
conversion of any Series B-1 Preferred Shares, Series B-2 Preferred Shares,
Series C-1 Preferred Shares or Series C-2 Preferred Shares or any exercise of
any Initial Warrants or Additional Warrants.
(b) The Company, on the one hand, and the Purchasers, severally and
not jointly (other than WCAS, whose obligations hereunder shall be joint and
several with each other Purchaser with respect to the obligations of such other
Purchasers), on the other hand, will indemnify the other and hold it or them
harmless from and against any claims for finders' fees, advisory or investment
banking fees or brokerage commissions in relation to or in connection with the
transactions contemplated hereby as a result of any agreement or understanding
between such indemnifying party and any third party.
SECTION 9.03. Execution in Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Any or
all such counterparts may be executed by facsimile.
SECTION 9.04. Notices. All notices, requests, instructions and other
documents that are required to be or may be given or delivered pursuant to the
terms of this Agreement shall be in writing and shall be sufficient in all
respects if delivered by hand or national overnight courier service, transmitted
by facsimile or mailed by registered or certified mail, postage prepaid, as
follows:
54
if to the Company, to it at:
10101 Renner Boulevard
Lenexa, Kansas 66219
Attention: Joseph C. Benage, Esq.
Facsimile: (913) 859-6832
and
Attention: John McCarty
Facsimile: (913) 859-6804
with a copy to:
Morrison & Hecker LLP
2600 Grand Avenue
Kansas City, MO 64108-4606
Attention: Whitney F. Miller, Esq.
Facsimile: (816) 474-4208
if to any Purchaser, to the Purchaser Representative:
c/o Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022-6815
Attention: Paul B. Queally
Facsimile: (212) 893-9566
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Othon A. Prounis, Esq.
Fax: (212) 841-5725
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Such notices, requests,
instructions and other documents shall be deemed given or delivered (i) five
business days following sending by registered or certified mail, postage
prepaid, (ii) one business day following sending by national overnight courier
service, (iii) when sent, if sent by facsimile (but only if such facsimile is
actually received) or (iv) when delivered, if delivered by hand.
55
SECTION 9.05. Amendments and Waivers. The Company, on the one hand,
and the Purchaser Representative on behalf of the Purchasers, on the other hand,
may, by written notice to the other, (i) extend the time for the performance of
any of the obligations or other actions of the other(s) under this Agreement;
(ii) waive any inaccuracies in the representations or warranties of the other(s)
contained in this Agreement or in any document delivered pursuant to this
Agreement; (iii) waive compliance with any of the conditions or covenants of the
other(s) contained in this Agreement; or (iv) waive performance of any of the
obligations of the other(s) under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement or otherwise,
including without limitation any investigation by or on behalf of the Company,
on the one hand, or the Purchasers, on the other hand, shall be deemed to
constitute a waiver by the party or parties taking such action of compliance
with any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by the Company, on the one hand, and the Purchaser
Representative on behalf of the Purchasers, on the other hand, of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
SECTION 9.06. Amendments, Supplements, Etc. At any time this
Agreement may be amended or supplemented by such additional agreements, articles
or certificates as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate the consummation of any of the
transactions contemplated hereby. Any such instrument must be in writing and
signed by the Company and the Purchaser Representative on behalf of the
Purchasers. Notwithstanding anything to the contrary contained above, from and
after the date hereof and until the second business day preceding the Closing
Date, WCAS shall have the right to amend the names of the other Purchasers
appearing on Schedule I hereto and the allocation of the Initial Securities
among the Purchasers by written notice to the Company; provided, that, no such
amendment shall modify the aggregate amounts of Series B Preferred Shares,
Initial Warrants and/or Series A Notes being purchased hereunder or the
respective purchase prices therefor; provided, further, that, prior to the
Closing Date, any additional Purchaser(s) added to Schedule I by WCAS shall (i)
agree in writing to be bound by the terms of this Agreement as a Purchaser
hereunder and (ii) be reasonably acceptable to the Company.
SECTION 9.07. Entire Agreement. This Agreement, including its
exhibits and the Disclosure Schedule, together with the Ancillary Agreements and
the Confidentiality Agreement, constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and, except as provided in
Section 4.02(b), supersede all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof
other than the Confidentiality Agreement which shall survive the execution and
delivery of this Agreement and the Closing.
SECTION 9.08. Benefit of Agreement; Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and
their respective successors and
56
permitted assigns and nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto, their respective
successors and permitted assigns, with respect to Article VIII, the members of
the Purchaser Group or Company Group not party hereto, any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The rights and
obligations of the parties hereto shall not be assigned without the consent of
the Company, in the case of any assignment by a Purchaser, or the Purchaser
Representative, on behalf of the Purchasers, in the case of any assignment by
the Company, and any attempted assignment in violation of this Section 9.08
shall be null and void; provided, that, the Purchasers' rights hereunder are
assignable, in connection with any transfer of Initial Securities or Conversion
Shares, to any Affiliate thereof, and in the case of the Purchasers other than
WCAS, to any family member or trust for the benefit of such Purchaser or such
family members.
SECTION 9.09. Governing Law. This Agreement and all disputes arising
out of or relating to this Agreement, its subject matter, the performance by the
parties of their respective obligations hereunder or the claimed breach hereof,
whether in tort, contract or otherwise, shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to its choice of law principles, except that Missouri corporate Law shall apply
to all matters relating to the corporate affairs of the Company.
SECTION 9.10. Jurisdiction and Venue. Each suit, action or proceeding
arising out of or relating to this Agreement or any Ancillary Agreement, the
subject matter hereof or thereof, the performance by the parties of their
obligations hereunder or thereunder or the claimed breach hereof or thereof,
whether brought at law or in equity and whether based in tort, contract or
otherwise, shall be brought in the federal or state courts located in the County
of New York, New York, and each of the parties to this Agreement hereby submits
with regard to any such suit, action or proceeding for itself and in respect to
its property, generally and unconditionally, to the exclusive jurisdiction of
the aforesaid courts and of the appropriate appellate courts therefrom. Each of
the parties hereto hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any such suit, action or
proceeding (a) any claim that it is not personally subject to the jurisdiction
of such courts for any reason other than the failure to lawfully serve process,
(b) that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), (c) that the suit, action or
proceeding in any such court is brought in an inconvenient forum, (d) that the
venue of such suit, action or proceeding is improper, (e) that this Agreement or
any Ancillary Agreement or the subject matter hereof or thereof may not be
enforced in or by such courts or (f) any right to a trial by jury which is
hereby waived. Each party hereto agrees that process in any such suit, action or
proceeding may be served on such party anywhere in the world, whether within or
without the jurisdiction of such courts and that service of process on such
party as provided in Section 9.04 shall be deemed effective service of process
on such party.
57
SECTION 9.11. Severability. Each provision of this Agreement shall be
treated as a separate and independent clause, and the unenforceability of any
one clause shall in no way impair the enforceability of any of the other clauses
contained herein. If one or more of the provisions contained in this Agreement
shall for any reason be held to be unenforceable, such provision or provisions
shall be construed by the appropriate judicial body by limiting or reducing it
or them, so as to be enforceable to the maximum extent compatible with
applicable Law, and no other provision hereof shall be affected by such holding,
limitation or reduction.
SECTION 9.12. Publicity. Except as otherwise required by applicable
Law, and except for disclosures jointly approved by the Company and the
Purchaser Representative as to content, timing and manner of publication, no
party hereto shall issue, or cause or allow any Subsidiary or other controlled
Affiliate thereof to issue, any press release or otherwise publicly disclose any
information, or make, or cause or allow any Subsidiary or other controlled
Affiliate thereof to make, any other public statement relating to or connected
with this Agreement or the Ancillary Agreements or the matters contained herein
or therein. In the event that any party hereto believes in good faith that such
a public disclosure is required by applicable Law, it shall nonetheless use its
good faith efforts to consult (as to the content, timing and manner of
publication thereof) with the Company or the Purchaser Representative, as
applicable, a reasonable period of time prior to making such disclosure.
SECTION 9.13. Appointment of the Purchaser Representative. The
Purchasers hereby appoint WCAS as their agent and attorney-in-fact to act as
"Purchaser Representative" hereunder, to take and receive notices on behalf of
the Purchasers hereunder, to execute on behalf of the Purchasers hereunder
waivers, amendments and consents relating hereto, and to take all other actions
necessary or appropriate in the judgment of WCAS for the accomplishment of the
foregoing or to carry out the purposes of this Agreement (WCAS, in such
capacity, is herein referred to as the "Purchaser Representative"). A decision,
act, waiver, consent or instruction of WCAS as Purchaser Representative
hereunder shall constitute the action of each of the Purchasers and shall be
final, binding and conclusive upon each of such Purchasers. For such purposes,
notices or communications to or from the Purchaser Representative shall
constitute notice to or from each of the Purchasers.
SECTION 9.14. Interpretation. (a) As used herein, the words "hereof",
"herein", "herewith" and words of similar import shall, unless otherwise stated,
be construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and the words "Article" and "Section" are
references to the articles and sections of this Agreement unless otherwise
specified. Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation". Each accounting term used in this Agreement has the meaning given
to it in accordance with GAAP. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms. Any
agreement, instrument or statute defined or referred to herein means such
agreement, instrument or statute as from time to time amended, qualified or
supplemented, including (in the
58
case of agreements and instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes. References to the
Securities Act and the Exchange Act are also references to the rules and
regulations of the SEC promulgated thereunder. References to a person are also
to its successors and permitted assigns.
(b) The parties have participated jointly in the negotiation and
drafting of this Agreement and each Ancillary Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement and
each Ancillary Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement or any
Ancillary Agreement.
59
IN WITNESS WHEREOF, the Company, the Purchasers and the Purchaser
Representative have executed this Securities Purchase Agreement as of the day
and year first above written.
LABONE, INC.
By: /s/ W. Thomas Grant II
---------------------------------------
Name: W. Thomas Grant II
Title: Chairman of the Board, President and
Chief Executive Officer
WELSH, CARSON, ANDERSON &
STOWE IX, L.P.
By: WCAS IX Associates LLC,
Its General Partner
By: /s/ Jonathan M. Rather
---------------------------------------
Jonathan M. Rather
Managing Member
WCAS MANAGEMENT CORPORATION
By: /s/ Jonathan M. Rather
---------------------------------------
Jonathan M. Rather
Treasurer
Patrick J. Welsh
Russell Carson
Bruce K. Anderson
Thomas E. McInerney
Robert A. Minicucci
Lawrence B. Sorrel
Anthony J. De Nicola
Paul B. Queally
IRA FBO Jonathan M. Rather
D. Scott Mackesy
Sanjay Swani
John D. Clark
IRA FBO James R. Mathews
Sean Traynor
John Almeida
Eric J. Lee
By: /s/ Jonathan M. Rather
---------------------------------------
Jonathan M. Rather
as Attorney-in-Fact
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION
OF
SERIES B-1 CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
LABONE, INC.
(Attached as Exhibit 4.2 to the Form 8-K/A Amendment No. 2 dated August 31,
2001)
EXHIBIT B
---------
WARRANT AGREEMENT
Among
LABONE, INC.,
WELSH, CARSON, ANDERSON & STOWE IX, L.P.
and
THE OTHER HOLDERS NAMED
ON THE SIGNATURE PAGES HERETO
Dated as of August 31, 2001
(Attached as Exhibit 4.3 to the Form 8-K/A Amendment No. 2 dated August 31,
2001)
EXHIBIT C
---------
CERTIFICATE OF DESIGNATION
OF
SERIES B-2 CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
LABONE, INC.
(Attached as Exhibit 4.4 to the Form 8-K/A Amendment No. 2 dated August 31,
2001)
EXHIBIT D
---------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH STATE SECURITIES LAWS OR UNLESS EXEMPTIONS
THEREFROM ARE APPLICABLE WITH RESPECT TO SUCH PLEDGE, SALE, OFFER, TRANSFER OR
OTHER DISPOSITION.
[THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") AS DEFINED BY SECTION
1273(a)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE FOLLOWING
INFORMATION IS PROVIDED PURSUANT TO THE INFORMATION REPORTING REQUIREMENTS SET
FORTH IN TREASURY REGULATION 1.1275-3.
THE ISSUE PRICE OF THIS DEBT INSTRUMENT IS [$___________]. THE AMOUNT OF OID ON
THIS DEBT INSTRUMENT IS [$___________]. THE ISSUE DATE OF THIS DEBT INSTRUMENT
IS [_______________]. THE PER ANNUM YIELD TO MATURITY OF THIS DEBT INSTRUMENT IS
[___]% COMPOUNDED SEMI-ANNUALLY.]<1>
LABONE, INC.
Series [A] [B] Senior Subordinated Note
Due August 31, 2008
(Attached as Exhibit 4.5 to the Form 8-K/A Amendment No. 2 dated August 31,
2001)
EXHIBIT E
---------
CERTIFICATE OF DESIGNATION
OF
SERIES C-1 CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
LABONE, INC.
(Pursuant to Section 351.180 of the
General and Business Corporation Law of Missouri)
-------------------------------------------
LabOne, Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under the General and Business Corporation Law of
Missouri (the "GBCL"), hereby certifies that, pursuant to authority vested in
the Board of Directors of the Corporation by Article III of the Articles of
Incorporation of the Corporation, the following resolution was duly adopted at a
meeting of the Board of Directors of the Corporation duly called and held on
[________] [__], [20__]:
"RESOLVED that, pursuant to authority vested in the Board of
Directors of the Corporation by Article III of the Articles of Incorporation of
the Corporation, there is hereby created a series of Preferred Stock designated
as "Series C-1 Cumulative Convertible Preferred Stock" (the "Series C-1
Preferred Stock"), consisting of [____________ (________)] shares of the
authorized but unissued shares of preferred stock, $.01 par value per share, of
the Corporation;
FURTHER RESOLVED, that the Series C-1 Preferred Stock shall have the
powers, preferences and rights, and qualifications, limitations and restrictions
thereof set forth in Appendix C-1 attached hereto."
IN WITNESS WHEREOF, this Certificate of Designation has been executed
by the Corporation by its President and attested by its Secretary this [___] day
of [_________] [______].
LABONE, INC.
--------------------------------
[--------------]
President
Attest:
-------------------------
[----------]
Secretary
2
STATE OF KANSAS )
)ss:
COUNTY OF JOHNSON )
I, [_____________________], a Notary Public, do hereby certify that
on the [_____] day of [_________] [_____], personally appeared before me
[_______________] who being by me first duly sworn, declared that he is the
President of LabOne, Inc., that he signed the foregoing document of the
Corporation, and that the statements therein contained are true.
----------------------------------------
Notary Public
My commission expires: _________________
3
APPENDIX C-1
POWERS, RIGHTS AND PREFERENCES OF
SERIES C-1 CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
LABONE, INC.
1. Multiple Subseries. All shares of Series C-1 Preferred Stock issued on
the same date may, from time to time, be referred to herein as a "Subseries",
however all shares of Series C-1 Preferred Stock, regardless of Subseries label,
shall constitute one single series of preferred stock.
2. Rank. The Series C-1 Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution and winding up, rank (i) pari
passu with the Corporation's Series B-1 Cumulative Convertible Preferred Stock
(the "Series B-1 Preferred Stock"), Series B-2 Cumulative Convertible Preferred
Stock (the "Series B-2 Preferred Stock") and Series C-2 Cumulative Convertible
Preferred Stock (the "Series C-2 Preferred Stock", and together with the Series
C-1 Preferred Stock, the Series B-1 Preferred Stock, and the Series B-2
Preferred Stock, the "Preferred Stock") and (ii) senior to all classes of the
Corporation's common stock, par value $.01 per share ("Common Stock"), and to
each other class of capital stock of the Corporation now or hereafter
established (collectively, the "Junior Securities"). The definition of Junior
Securities shall also include any rights or options exercisable for or
convertible into any of the Junior Securities.
3. Dividends.
(a) Each holder of record of Series C-1 Preferred Stock shall be entitled
to receive cumulative dividends in an amount per share equal to six percent (6%)
per annum on the Accrued Value. Such dividends shall accrue from and after the
date of issue (except that dividends on any amounts added to the Accrued Value
shall accrue only from the date such amounts are added to the Accrued Value) and
shall be added to the Accrued Value semi-annually, whether or not declared and
whether or not there are any funds of the Corporation legally available for the
payment of dividends, on February 28th and August 31st of each year (each such
date being a "Dividend Accrual Date" and each such semi-annual period being a
"Dividend Period"), commencing with the first such date following the Original
Date of Issue of shares of such Subseries. Dividends for any period shorter than
a Dividend Period shall be computed on the basis of the actual number of days
elapsed over twelve 30-day months and a 360-day year. Notwithstanding the
foregoing, the Put/Call Date of each Subseries shall be treated as a Dividend
Accrual Date, and after the Put/Call Date for such Subseries, accrued dividends
shall be payable in the form of cash on each succeeding Dividend Accrual Date,
out of funds legally available for the payment of dividends. If any dividends
accrued after the relevant Put/Call Date are not paid in cash on any Dividend
Accrual Date occurring after the
4
relevant Put/Call Date, the unpaid amount thereof shall be added to the Accrued
Value on each such Dividend Accrual Date for purposes of calculating succeeding
periods' dividends.
(b) In case the Corporation shall make any dividend or distribution to
holders of Common Stock, whether payable in cash, securities or other property
(other than dividends or distributions payable solely in Common Stock), the
holder of each share of Series C-1 Preferred Stock on the record date for such
dividend or distribution shall be entitled to receive an equivalent dividend or
distribution based on the number of shares of Common Stock into which such share
of Series C-1 Preferred Stock is convertible on such record date.
(c) So long as any shares of the Series C-1 Preferred Stock are
outstanding, no Junior Securities shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly (except by conversion into or exchange for
Junior Securities) or any cash dividend made on any Junior Security other than
(i) a dividend on the Corporation's Common Stock as determined and declared by
the Board of Directors in which the holders of the Series C-1 Preferred Stock
participate in accordance with subparagraph (b) above or (ii) repurchases of
shares from employees of the Corporation and its subsidiaries upon termination
of the holder's employment.
(d) The date on which the Corporation initially issues any particular
share of Series C-1 Preferred Stock shall be deemed to be its "date of issue"
for purposes hereof regardless of the number of times transfer of such share is
made on the stock records maintained by or for the Corporation and regardless of
the number of certificates that may be issued to evidence such share. The date
on which the Corporation issues shares of a particular Subseries of Series C-1
Preferred Stock shall be referred to as the "Original Date of Issue" of such
Subseries.
4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (each a "Liquidation Event"),
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holder of each share of Series C-1 Preferred Stock shall be
entitled to receive an amount per share equal to the Liquidation Value of such
share on the date of distribution, and such holders shall not be entitled to any
further payment. If, upon any Liquidation Event, the assets of the Corporation,
or proceeds thereof, distributable among the holders of the Preferred Stock
shall be insufficient to pay in full the preferential amount due on such shares,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares of Preferred Stock if all amounts
payable thereon were paid in full. Solely for the purposes of this paragraph 4,
a Change of Control shall not be deemed to be a
5
Liquidation Event.
(b) After payment shall have been made in full to the holders of the
Preferred Stock, as provided in this paragraph 4, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed to holders of capital stock of the
Corporation, and the holders of the Preferred Stock shall not be entitled to
share therein.
5. Conversion.
(a) Subject to the provisions of this paragraph 5, each holder of shares
of Series C-1 Preferred Stock shall have the right, at any time and from time to
time, at such holder's option, to convert its outstanding shares of Series C-1
Preferred Stock, in whole or in part, into fully paid and non-assessable shares
of Common Stock. The number of shares of Common Stock deliverable upon
conversion of each share of a particular Subseries of Series C-1 Preferred Stock
shall be equal to (i) the Accrued Value of such share on the date of conversion
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date), divided by (ii) the Conversion Price on such date.
No notice delivered by the Corporation pursuant to paragraph 6 or 7 will limit
in any way any holder's rights to convert pursuant to this paragraph 5(a). In
order to exercise the conversion privilege set forth in paragraph 5(a), the
holder of the shares of Series C-1 Preferred Stock to be converted shall
surrender the certificate representing such shares at the office of the
Corporation, with a written notice of election to convert completed and signed,
specifying the number of shares to be converted. Each conversion pursuant to
paragraph 5(a) shall be deemed to have been effected immediately prior to the
close of business on the date on which the certificates for shares of Series C-1
Preferred Stock shall have been surrendered and such notice received by the
Corporation as aforesaid, and the person in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder of record of the shares of
Common Stock represented thereby at such time on such date. Effective upon such
conversion, the shares of Series C-1 Preferred Stock so converted shall no
longer be deemed to be outstanding, and all rights of a holder with respect to
such shares surrendered for conversion shall immediately terminate except the
right to receive the Common Stock and other amounts payable pursuant to this
paragraph 5.
(b) (i) Unless the shares issuable on conversion pursuant to this
paragraph 4 are to be issued in the same name as the name in which such shares
of Series C-1 Preferred Stock are registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form reasonably
satisfactory to the Corporation, duly executed by the holder or the holder's
duly authorized attorney and an amount sufficient to pay any transfer or similar
tax.
(ii) As promptly as possible, but in any event within 5 business
days, after the surrender by the holder of the certificates for shares of Series
C-1 Preferred
6
Stock with a written notice of election to convert as aforesaid, the Corporation
shall issue and shall deliver to such holder, or on the holder's written order
(upon compliance with subparagraph (b)(i) hereof and federal and state
securities laws applicable thereto which require the holder to take any action)
to the holder's transferee, a certificate or certificates for the whole number
of shares of Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this paragraph 5.
(iii)All shares of Common Stock delivered upon conversion of the
Series C-1 Preferred Stock will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges (other than caused
by the holder) and not subject to any preemptive rights.
(c) (i) Upon receipt by the Corporation of the shares of Series C-1
Preferred Stock to be converted and a notice of election to convert pursuant to
paragraph 5(a) above, the right of the Corporation to purchase such shares of
Series C-1 Preferred Stock shall terminate, regardless of whether a Put/Call
Corporation Notice has been given pursuant to paragraph 7.
(ii) From and after the effectiveness of conversion of Series C-1
Preferred Stock into Common Stock pursuant to paragraph 5(a) above, in lieu of
dividends on such Series C-1 Preferred Stock pursuant to paragraph 2, such
Series C-1 Preferred Stock shall participate equally and ratably with the
holders of shares of Common Stock in all dividends paid on the Common Stock.
(d) (i) The Corporation shall at all times reserve and keep available,
free from preemptive rights, such number of its authorized but unissued shares
of Common Stock as shall be required for the purpose of effecting conversion of
the Series C-1 Preferred Stock.
(ii) Prior to the delivery of any securities which the Corporation
shall be obligated to deliver upon conversion of the Series C-1 Preferred Stock,
the Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation.
(e) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock on conversion of the Series C-1 Preferred Stock pursuant hereto;
provided, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock in a name other than that of the holder of the Series C-1
Preferred Stock to be converted and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
7
(f) Conversion Price.
(i) In order to prevent dilution of the conversion rights granted
under this paragraph 5, the Conversion Price shall be subject to adjustment from
time to time pursuant to this paragraph (f).
(ii) With respect to shares of any Subseries if and whenever on or
after the Original Date of Issue of shares of such Subseries the Corporation
issues or sells, or in accordance with paragraph (g) is deemed to have issued or
sold, any shares of its Common Stock without consideration or at a price per
share less than the Conversion Price of shares of such Subseries in effect
immediately prior to such issuance or sale (or deemed issuance or sale), then in
each such case, such Conversion Price, upon each such issuance or sale, except
as hereinafter provided, shall be lowered so as to be equal to an amount
determined by multiplying such Conversion Price in effect immediately prior to
such issuance or sale by the following fraction:
P + N
-----------
P + F
where
P = the number of shares of Common Stock outstanding immediately prior to
such issuance or sale, assuming the exercise or conversion of all outstanding
securities exercisable for or convertible into Common Stock at any time on or
after the date of such calculation
N = the number of shares of Common Stock which the net aggregate
consideration, if any, received by the Corporation for the total number of such
additional shares of Common Stock so issued or sold would purchase at such
Conversion Price in effect immediately prior to such issuance or sale
F = the number of additional shares of Common Stock so issued or sold.
(iii)Notwithstanding the foregoing, there shall be no adjustment in
the Conversion Price under this paragraph 5 as a result of (A) any issue or sale
(or deemed issue or sale under paragraph (g)(i)) of Common Stock to employees,
consultants, contractors, officers and directors of the Corporation, pursuant to
(or upon exercise of Options issued pursuant to) compensation plans or
arrangements approved by the Corporation's Board of Directors so long as the per
share consideration determined in good faith by the Board of Directors to have
been received for such shares or the exercise price of any such Options is not
less than the fair market value (as determined in accordance with the applicable
compensation plan or arrangement) of a share of Common Stock on the date such
shares or Options are issued, (B) any issuance of shares of Common Stock upon
conversion of any Preferred Stock, (C) the issuance of any rights ("Rights")
under the Corporation's Rights Agreement dated as of February 11, 2000, as
8
amended (the "Rights Plan"), (D) with respect to any holder of Series C-1
Preferred Stock, the issuance of securities as contemplated by the Rights Plan
as a result of such holder becoming an Acquiring Person within the meaning of
the Rights Plan, (E) any issuance or exercise of warrants or other rights issued
to banks or institutional lenders in connection with debt financings, equipment
financings or similar transactions or to strategic partners in primarily
non-financing transactions, in all such cases as approved by the Board of
Directors of the Corporation so long as the aggregate number of such shares of
Common Stock does not exceed 400,000 (as adjusted for any stock splits, stock
dividends, reverse stock splits, share consolidations or other similar
transactions) in the aggregate, or (F) the issuance of Common Stock upon the
exercise of Options outstanding on the Original Date of Issue of such Subseries.
(g) Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price for shares of any Subseries under
paragraph (f), the following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner
grants or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Conversion Price of shares of such Subseries in effect immediately prior to
the time of the granting or sale of such Options, then the total maximum number
of shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to be
outstanding and to have been issued and sold by the Corporation at the time of
the granting or sale of such Options for such price per share. For purposes of
this paragraph, the "price per share for which Common Stock is issuable" shall
be determined by dividing (A) the total amount, if any, received or receivable
by the Corporation as consideration for the granting or sale of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such Options
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the conversion
or exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
the Conversion Price of shares of such Subseries in effect immediately prior to
the time of such issue or sale, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities shall
be deemed to be outstanding
9
and to have been issued and sold by the Corporation at the time of the issuance
or sale of such Convertible Securities for such price per share. For the
purposes of this paragraph, the "price per share for which Common Stock is
issuable" shall be determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Price had been
or are to be made pursuant to other provisions of this paragraph (g), no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
(iii)Change in Option Price or Conversion Rate. Except for Options
granted in accordance with the provisions of paragraph (f)(iii) above or
non-exerciseable rights issued in accordance with the Rights Plan, if the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price of
shares of such Subseries in effect at the time of such change shall be
immediately adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold. For purposes of
paragraph (g), if the terms of any Option or Convertible Security which was
outstanding as of the Original Date of Issue of shares of such Subseries are
changed in the manner described in the immediately preceding sentence, then such
Option or Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change; provided, that no such change shall at any time
cause the Conversion Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise in full of any
such Option or right, the Conversion Price of shares of such Subseries then in
effect hereunder shall be adjusted immediately to the Conversion Price which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding and unexercised
immediately prior to such expiration or termination, never been issued. For
purposes of paragraph (g), the expiration or termination of any Option or
Convertible Security which was outstanding as of the Original Date of Issue of
shares of such Subseries shall not cause the Conversion Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms of such
Option or Convertible Security caused it to be deemed to have been issued after
the Original Date of Issue of shares of such Subseries.
10
(v) Calculation of Consideration Received. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor. If any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Corporation shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving Corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any consideration
other than cash and securities shall be determined jointly by the Corporation
and the holders of a majority of the outstanding Series C-1 Preferred Stock. If
such parties are unable to reach agreement within a reasonable period of time,
the fair value of such consideration shall be determined by an independent
appraiser experienced in valuing such type of consideration jointly selected by
the Corporation and the holders of a majority of the outstanding Series C-1
Preferred Stock. The determination of such appraiser shall be final and binding
upon the parties, and the fees and expenses of such appraiser shall be borne by
the Corporation.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(vii)Record Date. If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (a) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (b) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
payment of such dividend or upon the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(h) Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price of shares of each outstanding
Subseries in effect immediately prior to such subdivision shall be
proportionately reduced, and if the Corporation at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price of shares of
each outstanding Subseries in effect immediately prior to such combination shall
be
11
proportionately increased, it being understood that in either such case, no
further adjustment to the Conversion Price of shares of any such Subseries shall
be made by virtue of any adjustments made to any other securities of the
Corporation that were outstanding on the Original Date of Issue of shares of any
such Subseries due to such subdivision or combination.
(i) Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Corporation's assets or other transaction, in
each case which is effected in such a manner that the holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, is
referred to herein as an "Organic Change". Prior to the consummation of any
Organic Change, the Corporation shall make appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of the Series C-1
Preferred Stock then outstanding) to insure that each of the holders of Series
C-1 Preferred Stock shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series C-1 Preferred Stock, such shares of stock, securities or assets
as such holder would have received in connection with such Organic Change if
such holder had converted its Series C-1 Preferred Stock immediately prior to
such Organic Change. In each such case, the Corporation shall also make
appropriate provisions (in form and substance reasonably satisfactory to the
holders of a majority of the Series C-1 Preferred Stock then outstanding) to
insure that the provisions of paragraph 5 hereof shall thereafter be applicable
to the Series C-1 Preferred Stock (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is other than the Corporation, an immediate adjustment of the Conversion Price
of shares of each outstanding Subseries pursuant to the provisions of this
paragraph 5 to give effect to the value for the Common Stock reflected by the
terms of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and receivable
upon conversion of Series C-1 Preferred Stock, if the value so reflected is less
than the Conversion Price of shares of each such Subseries in effect immediately
prior to such consolidation, merger or sale). The Corporation shall not effect
any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance reasonably satisfactory to the holders of a
majority of the Series C-1 Preferred Stock then outstanding), the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.
(j) Certain Events. If any event occurs of the type contemplated by the
provisions of paragraph 5 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price of shares of each outstanding Subseries so
12
as to protect the rights of the holders of Series C-1 Preferred Stock; provided
that no such adjustment shall increase the Conversion Price of shares of any
Subseries as otherwise determined pursuant to paragraph 5 or decrease the number
of shares of Common Stock issuable upon conversion of each share of Series C-1
Preferred Stock.
(k) Notices.
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series C-1
Preferred Stock, setting forth in reasonable detail and certifying the
calculation of such adjustment for each Subseries.
(ii) The Corporation shall give written notice to all holders of
Series C-1 Preferred Stock at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii)The Corporation shall also give written notice to the holders of
Series C-1 Preferred Stock at least 20 days prior to the date on which any
Organic Change shall take place.
(l) Certain Mergers. In connection with any consolidation with or merger
with or into, any person in a transaction where the Common Stock is converted
into or exchanged for securities of such person or an affiliate of such person,
the Corporation covenants that as a condition precedent to the consummation of
any such consolidation or merger it shall provide the holders of the Series C-1
Preferred Stock with a certificate, in form and substance satisfactory to the
holders of a majority of the Series C-1 Preferred Stock signed by a duly
authorized officer of the Corporation indicating that the person issuing such
securities will be organized and existing under the laws of a jurisdiction which
allows for the issuance of preference stock and that the Series C-1 Preferred
Stock shall be converted into or exchanged for and shall become shares of such
person having in respect of such person substantially the same powers,
preference and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon that the Series C-1
Preferred Stock had immediately prior to such transaction.
(m) Conversion at the Option of the Corporation. If on any date after the
third anniversary of the Original Date of Issue of any given Subseries but
before the Put/Call Date for such Subseries, the Daily Price has been at least
two times the Initial Conversion Price of shares of such Subseries (as adjusted
for any stock splits, stock dividends, reverse stock splits, share
consolidations or other similar transactions) during any 30 trading days out of
any consecutive 45 trading day period, the Corporation may elect, by written
notice delivered to the Transfer Agent (with a copy to each holder of shares of
such Subseries), no later than five business days after such date, to cause all
outstanding
13
shares of such Subseries to be converted into fully paid and nonassessable
shares of Common Stock. Any such conversion shall be deemed to have been
effected, without further action by any party, immediately prior to the close of
business on the date such notice is received by the Transfer Agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series C-1 Preferred Stock are (or an
affidavit of loss in form reasonably acceptable to the Corporation is) delivered
to the Transfer Agent. The number of shares of Common Stock deliverable upon
conversion of one share of any Subseries shall be equal to (i) the Accrued Value
of such share on the date of conversion (treating such date as a Dividend
Accrual Date for purposes of calculating the Accrued Value on such date),
divided by (ii) the Conversion Price of such share on such date.
6. Change of Control Offer.
(a) Not less than 20 days prior to the consummation of any Consensual
Change of Control and promptly after the occurrence of any Non-Consensual Change
of Control (the date of any such Change of Control being the "Change of Control
Date"), the Corporation shall commence (or cause to be commenced) an offer to
purchase all outstanding shares of Series C-1 Preferred Stock pursuant to the
terms described in subparagraph (e) below (the "Change of Control Offer") at a
purchase price to be determined in accordance with subparagraph (b) below, and
shall purchase (or cause the purchase of) any shares of Series C-1 Preferred
Stock tendered in response to the Change of Control Offer pursuant to the terms
hereof; provided, that with respect to any Consensual Change of Control, the
Corporation may condition its offer to purchase on consummation of the
Consensual Change of Control.
(b) At the option of the Corporation, the per share purchase price payable
to each tendering holder shall be payable (A) in cash in an amount equal to the
Change of Control Amount or (B) in a number of shares of Acceptable Stock
determined by dividing the Change of Control Amount by the Market Price per
share of the Common Stock as of the Change of Control Payment Date (which
formula, if the Acceptable Stock is to be common stock of a corporation other
than the Corporation, will determine a number of shares of Common Stock that
will, in turn, be used to determine the number of shares of Acceptable Stock
that the holder is entitled to receive based on the exchange ratio to be
otherwise applied to Common Stock and such Acceptable Stock in such Change of
Control transaction); provided, that if the consideration is to be in the form
of Acceptable Stock and the Market Price per share for such shares as of the
Change of Control Date is below the Conversion Price of such Subseries (taking
into consideration the applicable exchange ratio, if Acceptable Stock other than
Common Stock is to be issued in such Change of Control transaction), then such
per share purchase price shall be equal to a number of such shares equal to (1)
the Accrued Value as of the Change of Control Payment Date (treating such date
as a Dividend Accrual Date for purposes of calculating the Accrued Value on such
date) divided by (2) the Market Price per share of such shares of Acceptable
Stock as of the Change of Control Payment Date divided by (3) 0.95.
14
(c) Notwithstanding anything to the contrary contained in subparagraph (b)
above, the Corporation shall not have the option of paying the purchase price
required by subparagraph (b) above in Acceptable Stock (and shall pay such
amount in cash) if (i) any holders of the Series C-1 Preferred Stock would be
required to recognize gain or loss for federal or state income tax purposes in
connection with such transaction, (ii) the holders of the Common Stock would
receive any consideration other than Acceptable Stock for their shares of Common
Stock in connection with such transaction, (iii) the average weekly trading
volume of the class of stock to be received for the six month period preceding
such Change of Control Date or market capitalization (excluding shares held by
officers, directors and affiliates thereof) of the issuer of such Acceptable
Stock (with respect to such class of stock) is less than that of the Corporation
for such six month period or as of such date, in each case, prior to giving
effect to such Change of Control transaction.
(d) If the Corporation elects to pay the Change of Control Amount in cash,
prior to the mailing of the Change of Control Notice referred to in paragraph
(5)(e), the Corporation shall (A) promptly determine if the purchase of the
Series C-1 Preferred Stock for cash would violate or constitute a default under
the indebtedness of the Corporation and (B) either shall repay to the extent
necessary all such indebtedness that would prohibit the repurchase of the Series
C-1 Preferred Stock pursuant to a Change of Control Offer or obtain any
requisite consents or approvals under instruments governing any indebtedness to
permit the repurchase of the Series C-1 Preferred Stock for cash. The
Corporation shall first comply with this subparagraph 6(d) before it shall
repurchase for cash any Series C-1 Preferred Stock pursuant to this paragraph 6.
(e) Not less than 20 days prior to the consummation of any Consensual
Change of Control or within 20 days following the date on which any
Non-Consensual Change of Control has occurred, the Corporation shall send, by
first-class mail, postage prepaid, a notice (a "Change of Control Notice") to
each holder of Series C-1 Preferred Stock. Such notice shall contain all
instructions and materials necessary to enable such holders to tender Series C-1
Preferred Stock pursuant to the Change of Control Offer. Such notice shall
state:
(i) that a Change of Control has occurred or will occur, as
applicable, that a Change of Control Offer is being made pursuant to this
paragraph 6 and that, subject in the case of a Consensual Change of Control to
the consummation of the Consensual Change of Control (if the Corporation has so
conditioned its Change of Control Offer), all Series C-1 Preferred Stock validly
tendered and not withdrawn will be accepted for payment;
(ii) the purchase price to be paid for shares tendered in such offer
(estimated as closely as possible in the case of a Consensual Change of
Control), the form of consideration to be paid for tendered shares, and the
purchase date (which shall be the Change of Control Date in the case of a
Consensual Change of Control and a date no earlier than 30 days nor later than
60 days from the date such notice is mailed in the case
15
of a Non-Consensual Change of Control) (the "Change of Control Payment Date");
(iii)that any shares of Series C-1 Preferred Stock not tendered
will continue to accrue dividends;
(iv) that, unless the Corporation defaults in making payment
therefor, any share of Series C-1 Preferred Stock accepted for payment pursuant
to the Change of Control Offer shall cease to accrue dividends after payment
therefor on the Change of Control Payment Date;
(v) that holders electing to have any shares of Series C-1 Preferred
Stock purchased pursuant to a Change of Control Offer will be required to
surrender stock certificates representing such shares of Series C-1 Preferred
Stock, properly endorsed for transfer, together with such other customary
documents as the Corporation and the Transfer Agent may reasonably request to
the Transfer Agent at the address specified in the notice prior to the close of
business on the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their election if the
Corporation receives, not later than five business days prior to the Change of
Control Payment Date, a telegram, facsimile transmission or letter setting forth
the name of the holder, the number of shares of Series C-1 Preferred Stock the
holder delivered for purchase and a statement that such holder is withdrawing
its election to have such shares of Series C-1 Preferred Stock purchased;
(vii)that holders who tender only a portion of the shares of Series
C-1 Preferred Stock represented by a certificate delivered will, upon purchase
of the shares tendered, be issued a new certificate representing the unpurchased
shares of Series C-1 Preferred Stock; and
(viii) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income, cash
flow and capitalization after giving effect to such Change of Control).
(f) The Corporation will comply with any tender offer rules under the
Exchange Act which may then be applicable in connection with any offer made by
the Corporation to repurchase the shares of Series C-1 Preferred Stock as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with provisions hereof, the Corporation
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligation hereunder by virtue thereof.
(g) On the Change of Control Payment Date, subject in the case of a
Consensual Change of Control to the consummation of the Consensual Change of
Control (if the Corporation has so conditioned its Change of Control Offer), the
Corporation shall (A) accept for payment the shares of Series C-1 Preferred
Stock validly
16
tendered pursuant to the Change of Control Offer, (B) pay to the holders of
shares so accepted the purchase price therefor, at the option of the
Corporation, in cash or Acceptable Stock as provided in paragraph (b) above and
(C) cancel each surrendered certificate and retire the shares represented
thereby. Unless the Corporation defaults in the payment for the shares of Series
C-1 Preferred Stock tendered pursuant to the Change of Control Offer, dividends
will cease to accrue with respect to the shares of Series C-1 Preferred Stock
tendered and all rights of holders of such tendered shares will terminate,
except for the right to receive payment therefor on the Change of Control
Payment Date.
(h) To accept the Change of Control Offer, the holder of a share of Series
C-1 Preferred Stock shall deliver, prior to the close of business on the Change
of Control Payment Date, written notice to the Corporation (or an agent
designated by the Corporation for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Series C-1 Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.
7. Put/Call.
(a) At any time on or after the seventh anniversary of the Original Date
of Issue of a given Subseries (the "Put/Call Date"), (x) the holders of a
majority of the shares of such Subseries then outstanding may, by written notice
to the Corporation (the "Put Notice"), require the Corporation to purchase all
of the outstanding shares of such Subseries (the "Put Right") and (y) the
Corporation may, by written notice to each holder of shares of such Subseries,
elect to purchase all of the outstanding shares of such Subseries (the "Call
Right"). If either the Put Right or the Call Right is exercised, the
consideration per share payable by the Corporation for the shares to be
repurchased (the "Put/Call Consideration") shall be, at the option of the
Corporation, either:
(i) payable in cash in an amount equal to the Accrued Value as of the
Put/Call Purchase Date (treating such date as a Dividend Accrual Date
for purposes of calculating the Accrued Value on such date); or
(ii) payable through the issuance of the number of shares of Common Stock
equal to (A) if the Market Price per share for the Common Stock as of
the Put/Call Purchase Date is at or above the Conversion Price of
such Subseries, (x) the Accrued Value as of the Put/Call Purchase
Date (treating such date as a Dividend Accrual Date for purposes of
calculating the Accrued Value on such date) divided by (y) the Market
Price per share of the Common Stock as of the Put/Call Purchase Date
or (B) if the Market Price per share for the Common Stock as of the
Put/Call Purchase Date is below the Conversion Price of such
Subseries, (x) the Accrued Value as of the Put/Call Purchase Date
(treating such date as a Dividend Accrual Date for purposes of
calculating the Accrued Value on such date), divided by (y) the
Market Price per share of the Common Stock as of the Put/Call
Purchase Date, divided by (z) 0.95.
17
(b) If the Corporation shall elect to exercise its Call Right, or if the
Corporation shall receive a Put Notice, the Corporation shall promptly give
notice to each holder of record of the applicable Subseries; provided, that
neither the failure to give such notice nor any defect therein shall affect the
validity of the giving of notice for the purchase of any share of Series C-1
Preferred Stock to be purchased except as to the holder to whom the Corporation
has failed to give said notice or except as to the holder whose notice was
defective. Each such notice (the "Put/Call Corporation Notice") shall state: (i)
the date of purchase (the "Put/Call Purchase Date"), which shall be no earlier
than 30 days from the date of the Put/Call Corporation Notice and no later than
45 days from the date of the Put Notice, if one has been given; (ii) the form
and amount of the Put/Call Consideration; (iii) the place or places where
certificates for such shares are to be surrendered for payment of the Put/Call
Consideration; and (iv) that dividends on the shares to be purchased will cease
to accrue on the Put/Call Purchase Date.
(c) The Put/Call Corporation Notice having been given as aforesaid, from
and after the Put/Call Purchase Date (unless default shall be made by the
Corporation in providing for the payment of the Put/Call Consideration on such
date), dividends on the shares of such Subseries shall cease to accrue, and all
rights of the holders thereof as stockholders of the Corporation (except the
right to receive from the Corporation the Put/Call Consideration) shall cease.
Upon surrender in accordance with said notice of the certificates for any shares
so purchased (properly endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require and the notice shall so state),
such shares shall be purchased by the Corporation for the Put/Call
Consideration.
(d) If the Put/Call Consideration is to be in the form of Common Stock,
then each holder of the shares to be repurchased shall receive shares and cash
ratably in accordance with the number of shares of such Subseries held by such
holder.
(e) For the avoidance of doubt, nothing in this paragraph 6 shall restrict
the right of the holders of Series C-1 Preferred Stock to convert their shares
of Series C-1 Preferred Stock into shares of Common Stock prior to such holder's
acceptance of the Put/Call Consideration on the Put/Call Purchase Date.
8. Voting Rights.
(a) Each holder of Series C-1 Preferred Stock shall be entitled to vote on
or give or withhold consent with respect to all matters submitted to the
stockholders of the Corporation for a vote or action by written consent and
shall be entitled to that number of votes equal to the lesser of (i) the number
of shares of Common Stock into which such holder's shares of Series C-1
Preferred Stock could be converted pursuant to the provisions of paragraph 5
hereof or (ii) the product of (A) the number of shares of Common Stock into
which all outstanding shares of Series C-1 Preferred Stock could be converted
pursuant to the provisions of paragraph 5 hereof if the Conversion Price for
each Subseries on the Original Date of Issue of each such Subseries were equal
to the Daily Price on the day immediately prior to the Original Date of Issue of
each such Subseries and (B) a fraction, the numerator of which is equal to the
number of shares of
18
Series C-1 Preferred Stock held by such holder, and the denominator of which is
equal to the number of shares of Series C-1 Preferred Stock then outstanding, in
each case on the record date for the determination of shareholders entitled to
vote on such matter or, if no such record date is established, on the date such
vote is taken or any written consent of shareholders is solicited; provided,
that nothing contained herein shall in any way affect or restrict the rights of
any holder to vote shares of any other series of capital stock of the
Corporation held by such holder. Except as otherwise expressly provided herein
or as required by law, the holders of shares of Series C-1 Preferred Stock and
Common Stock shall vote together as a single class on all matters.
(b) In addition, so long as any of the Series C-1 Preferred Stock is
outstanding, the affirmative vote of the holders of (x) 66 2/3% of the
outstanding shares of Series C-1 Preferred Stock, voting together as a single
class, shall be necessary to alter or change the preferences, rights or powers
of the Series C-1 Preferred Stock, and (y) a majority of the outstanding shares
of Series C-1 Preferred Stock, voting together as a single class, shall be
necessary to: (i) increase or decrease the authorized number of shares of Series
C-1 Preferred Stock, (ii) amend, alter, repeal or waive any provision of the
Corporation's articles of incorporation (including any certificate of
designation or articles of amendment and whether by amendment, merger or
otherwise) or by-laws so as to adversely affect the preferences, rights or
powers of the Series C-1 Preferred Stock, including, without limitation, the
voting powers, dividend rights and liquidation preference of the Series C-1
Preferred Stock, or change the Series C-1 Preferred Stock into any other
securities (other than as required by paragraph 5(i)), cash or other property,
or (iii) issue any additional Series C-1 Preferred Stock (other than pursuant to
the terms of the Purchase Agreement or upon conversion of Series C-2 Preferred
Stock) or create, authorize or issue any capital stock that ranks prior to or
pari passu with (whether with respect to dividends or upon liquidation,
dissolution, winding up or otherwise) the Series C-1 Preferred Stock (other than
the Series B-1 Preferred Stock, the Series B-2 Preferred Stock, and the Series
C-2 Preferred Stock).
9. Miscellaneous.
(a) Upon any conversion or exchange of shares of Series C-1 Preferred
Stock pursuant to Section 5, 6 or 7 hereof (each such conversion or exchange, a
"Series C-1 Conversion or Exchange") into or for shares of Common Stock or
Acceptable Stock ("Conversion or Exchange Securities"), prior to the delivery of
such Conversion or Exchange Securities, the Corporation and/or any other Person
issuing such Conversion or Exchange Securities shall (i) comply with all
statutes, rules and regulations applicable thereto at that time, including any
and all regulations of the principal trading market on which such Conversion or
Exchange Securities are then trading, including, if necessary, any shareholder
approval requirement under NASD Rule 4350(i), as it may be amended from time to
time, (ii) take all necessary action to assure that any such Conversion or
Exchange Securities will, upon delivery, be duly and validly issued, fully paid
and non-assessable, free of all liens, pledges and other security interests
(other than caused by the holder), and not subject to any preemptive rights, and
(iii) pay any and all documentary stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of such
19
Conversion or Exchange Securities, provided, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or deliver of such Conversion or Exchange Securities in a name
other than that of the holder of the Series C-1 Preferred Stock.
(b) Any fractional share interests payable upon any Series C-1 Conversion
or Exchange shall not be paid in Conversion or Exchange Securities but shall
instead be paid in cash in an amount equal to such fractional interest
multiplied by the Market Price per share of the Conversion or Exchange
Securities to be delivered as of the date of such Series C-1 Conversion or
Exchange.
(c) Notwithstanding anything to the contrary herein contained, if in
connection with any Series C-1 Conversion or Exchange, the amount of Conversion
or Exchange Securities to be received by one or more holders of the Series C-1
Preferred Stock (each, an "Affected Holder") would result in such Series C-1
Conversion or Exchange being subject to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder, or
any successor thereto (the "HSR Act"), then compliance with the HSR Act shall be
a condition precedent to the consummation of such Series C-1 Conversion or
Exchange. The provisions of this paragraph 9(c) shall in no way limit the
obligation of the Corporation to comply with the provisions of Sections 6 and 7
hereof.
(d) Each holder of Series C-1 Preferred Stock hereby agrees, by acceptance
of its shares of Series C-1 Preferred Stock, to use its commercially reasonable
efforts to make all filings required by the HSR Act and comply with all other
provisions of the HSR Act as promptly as practicable to the extent necessary in
connection with any Series C-1 Conversion or Exchange or as provided in
subparagraph (e).
(e) If the Corporation shall have received notice from one or more holders
of Series C-1 Preferred Stock within 10 business days after receipt by the
holders of the Series C-1 Preferred Stock of any Change of Control Notice
relating to a Consensual Change of Control to the effect that (A) such holder
would be an Affected Holder if such holder were to elect to either (x) convert
its shares of Series C-1 Preferred Stock into Common Stock pursuant to Section
5(a) at such time or (y) accept the Change of Control Offer to which such Change
of Control Notice relates and (B) such holder reasonably expects to either
convert its shares of Series C-1 Preferred Stock in connection with such Change
of Control or accept Conversion or Exchange Securities in connection with its
acceptance of such Change of Control Offer, the Corporation shall not consummate
such Consensual Change of Control unless there shall have occurred the
expiration or earlier termination of the waiting period under the HSR Act with
respect to the acquisition of such Conversion or Exchange Securities by each
such Affected Holder.
(f) Notwithstanding anything to the contrary contained above, the
provisions of Section 9(e) shall not prevent or delay any Consensual Change of
Control (A) for a period of more than 60 days from the date that the Change of
Control Notice related thereto is received by the holders of the Series C-1
Preferred Stock or (B) if, prior to such
20
Consensual Change of Control, adequate provision shall have been made (pursuant
to an amendment to the certificate or articles of incorporation of the issuer of
the Conversion or Exchange Securities) to prevent (to the extent necessary to
allow each Affected Holder to acquire the Conversion or Exchange Securities it
proposes to acquire without a resulting violation of the HSR Act) each Affected
Holder from voting the Conversion or Exchange Securities to be issued to it in
connection with such Consensual Change of Control at all times prior to such
Affected Holder's compliance with the requirements of the HSR Act (the adequacy
of such provision to be determined by mutual agreement of the Corporation and
each Affected Holder).
(g) Reacquired Shares. Any shares of Series C-1 Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of preferred
stock and may be reissued as part of a new series of preferred stock to be
created by an amendment or amendments of the Corporation's articles of
incorporation adopted by the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
(h) Notices. (i) All notices, requests, demands and other communications
to the Corporation hereunder shall be in writing and shall be delivered
personally, sent by facsimile or sent by certified mail (return receipt
requested) or by express mail or overnight courier, addressed to the President
of the Corporation at the Corporation's principal executive offices.
(ii) All notices, requests, demands and other communications to the
holders of Series C-1 Preferred Stock hereunder shall be in writing and shall be
delivered personally, sent by facsimile or sent by certified mail (return
receipt requested) or by express mail or overnight courier, addressed to each
holder of record at such holder's address appearing on the stock transfer
register of the Corporation.
(iii)Such notices, requests, demands and other communications shall
be deemed given or delivered (A) three business days following sending by
registered or certified mail, postage prepaid, (B) upon delivery by express mail
or overnight courier, (C) when sent, if sent by facsimile (but only if such
facsimile is actually received) or (D) when delivered, if delivered by hand.
10. Definitions. The following terms, as used herein, shall have the
following meanings:
"Acceptable Stock" means the Common Stock or, in connection with a
Consensual Change of Control, the common stock of another publicly-traded
corporation so long as (x) such common stock is listed on the New York Stock
Exchange or American Stock Exchange or quoted on the Nasdaq National Market and
(y) the issuance of such stock or the transfer or exchange thereof is pursuant
to an effective registration statement in accordance with the Securities Act.
21
"Accrued Value" equals, with respect to one share of a particular
Subseries of Series C-1 Preferred Stock on any date, $1,000 (or, in the case of
any share issued upon conversion of any Series C-2 Preferred Stock, the amount
determined in accordance with 5(a) of the Certificate of Designation for the
Series C-2 Preferred Stock) plus the amount of all dividends added to the
Accrued Value in accordance with paragraph 3(a) (which aggregate amount shall be
subject to adjustment whenever there shall occur a stock split, combination,
re-classification or other similar event involving the Series C-1 Preferred
Stock).
"Change of Control" means a Consensual Change of Control or a
Non-Consensual Change of Control.
"Consensual Change of Control" means: (i) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all the
assets of the Corporation and its subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act), other than to a
wholly-owned subsidiary of the Corporation or (ii) the consummation of any
transaction approved by the Board of Directors of the Corporation (including any
merger or consolidation) the result of which is that any "person" (as defined
above), becomes the beneficial owner (as determined in accordance with Rules
13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to
have beneficial ownership of all shares that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the Voting Securities of
the Corporation; provided, however, that "person" as used in clauses (i) and
(ii) shall not include any Purchaser (as defined in the Purchase Agreement).
"Change of Control Amount" means, with respect to one share of a
particular Subseries of Series C-1 Preferred Stock, 101% of the Accrued Value of
such share on the Change of Control Payment Date (treating such date as a
Dividend Accrual Date for purposes of calculating the Accrued Value on such
date); provided, that if the Change of Control occurs prior to the third
anniversary of the Original Date of Issue of the Subseries of which such share
is a part, the Change of Control Amount shall be calculated assuming the Change
of Control had occurred on the third anniversary of the Original Date of Issue
of such Subseries (and assuming that no dividends had been paid in cash with
respect to such share from the actual date of the Change of Control through the
third anniversary of the Original Date of Issue of such Subseries).
"Continuing Directors" means individuals who constituted the Board of
Directors of the Corporation on the original date of issue of the Series B-1
Preferred Stock after giving effect to the issuance of the Series B-1 Preferred
Stock (the "Incumbent Directors"); provided, that any individual becoming a
director during any year shall be considered to be an Incumbent Director if such
individual's election, appointment or nomination was recommended or approved by
at least two-thirds of the other Incumbent Directors continuing in office
following such election, appointment or nomination present, in person or by
telephone, at any meeting of the Board of Directors of the
22
Corporation, after the giving of a sufficient notice to each Incumbent Director
so as to provide a reasonable opportunity for such Incumbent Directors to be
present at such meeting or (ii) such individual was nominated, appointed or
selected by the holders of Series B-1 Preferred Stock or nominated, appointed or
selected in accordance with Section 6.02 of the Purchase Agreement.
"Conversion Price" means, with respect to a particular Subseries, the
Initial Conversion Price of the shares of such Subseries subject to adjustment
from time to time as provided in paragraph 5.
"Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Initial Conversion Price" of each share of a particular Subseries means
the initial conversion price of each such share as determined pursuant to
Section 6.04(d) of the Purchase Agreement.
"Liquidation Value" on any date means, with respect to one share of Series
C-1 Preferred Stock, the greater of (i) the Accrued Value on such date (treating
such date as a Dividend Accrual Date for purposes of calculating the Accrued
Value on such date) and (ii) the amount that would have been payable in
connection with such Liquidation Event on the number of shares of Common Stock
into which a share of Series C-1 Preferred Stock was convertible on such date.
"Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the closing price on the NASDAQ System, or, if on any day such security
is not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization (such price, with respect to any particular day, the "Daily
Price"), in each such case averaged over a period of 21 business days consisting
of the day as of which "Market Price" is being determined and the 20 consecutive
business days prior to such day. If at any time such security is not listed on
any securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the "Market Price" shall be the fair value thereof determined jointly by
the Corporation and the holders of a majority of the Series C-1 Preferred Stock.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an independent appraiser
experienced in valuing securities jointly selected by the Corporation and the
holders of a majority of the Series C-1 Preferred Stock. The determination of
such appraiser shall be final and binding upon the parties, and the Corporation
shall pay the fees and expenses of such appraiser.
23
"Non-Consensual Change of Control" means: (i) the consummation of any
transaction the result of which is that any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), becomes the beneficial owner (as
determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act
except that a person will be deemed to have beneficial ownership of all shares
that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the Voting Securities of the Corporation without the approval of the
Board of Directors of the Corporation or (ii) the first day on which a majority
of the members of the Board of Directors are not Continuing Directors; provided,
however, that "person" as used in clause (i) shall not include any Purchaser (as
defined in the Purchase Agreement).
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Person" as used herein means any corporation, limited liability company,
partnership, trust, organization, association, other entity or individual.
"Purchase Agreement" means the Securities Purchase Agreement dated as of
the original date of issue of the Series B-1 Preferred Stock among the
Corporation, Welsh, Carson, Anderson & Stowe IX, L.P. and the other purchasers
named therein.
"Securities Act" means the Securities Act of 1933, as amended.
"Transfer Agent" means the transfer agent for the Series C-1 Preferred
Stock appointed by the Corporation, and if none is appointed, the Corporation.
"Voting Securities" means securities of the Corporation ordinarily having
the power to vote for the election of directors of the Corporation; provided,
that when the term "Voting Securities" is used with respect to any other Person
it means the capital stock or other equity interests of any class or kind
ordinarily having the power to vote for the election of directors or other
members of the governing body of such Person.
24
EXHIBIT F
---------
CERTIFICATE OF DESIGNATION
OF
SERIES C-2 CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
LABONE, INC.
(Pursuant to Section 351.180 of the
General and Business Corporation Law of Missouri)
-------------------------------------------
LabOne, Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under the General and Business Corporation Law of
Missouri (the "GBCL"), hereby certifies that, pursuant to authority vested in
the Board of Directors of the Corporation by Article III of the Articles of
Incorporation of the Corporation, the following resolution was duly adopted at a
meeting of the Board of Directors of the Corporation duly called and held on
[_______] [__], [_____]:
"RESOLVED that, pursuant to authority vested in the Board of
Directors of the Corporation by Article III of the Articles of Incorporation of
the Corporation, there is hereby created a series of Preferred Stock designated
as "Series C-2 Cumulative Convertible Preferred Stock" (the "Series C-2
Preferred Stock"), consisting of [____________ (________)] shares of the
authorized but unissued shares of preferred stock, $.01 par value per share, of
the Corporation;
FURTHER RESOLVED, that the Series C-2 Preferred Stock shall have the
powers, preferences and rights, and qualifications, limitations and restrictions
thereof set forth in Appendix C-2 attached hereto."
IN WITNESS WHEREOF, this Certificate of Designation has been executed
by the Corporation by its President and attested by its Secretary this [___] day
of [_______] [_____].
LABONE, INC.
--------------------------------
-------------------
President
Attest:
-------------------------
---------------
Secretary
2
STATE OF [MISSOURI][KANSAS])
) ss:
COUNTY OF [_______] )
I, [_____________________], a Notary Public, do hereby certify that
on the [_____] day of [__________] [______], personally appeared before me
____________ who being by me first duly sworn, declared that he is the President
of LabOne, Inc., that he signed the foregoing document of the Corporation, and
that the statements therein contained are true.
----------------------------------------
Notary Public
My commission expires: _________________
3
APPENDIX C-2
POWERS, RIGHTS AND PREFERENCES OF
SERIES C-2 CUMULATIVE
CONVERTIBLE PREFERRED STOCK
OF
LABONE, INC.
1. Multiple Subseries. All shares of Series C-2 Preferred Stock issued on
the same date may, from time to time, be referred to herein as a "Subseries",
however all shares of Series C-2 Preferred Stock, regardless of Subseries label,
shall constitute one single series of preferred stock.
2. Rank. The Series C-2 Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution and winding up, rank (i) pari
passu with the Corporation's Series B-1 Cumulative Convertible Preferred Stock
(the "Series B-1 Preferred Stock"), Series B-2 Cumulative Convertible Preferred
Stock (the "Series B-2 Preferred Stock"), and Series C-1 Cumulative Convertible
Preferred Stock (the "Series C-1 Preferred Stock", and together with the Series
B-1 Preferred Stock, the Series B-2 Preferred Stock, and the Series C-2
Preferred Stock, the "Preferred Stock") and (ii) senior to all classes of the
Corporation's common stock, par value $.01 per share ("Common Stock"), and to
each other class of capital stock of the Corporation now or hereafter
established (collectively, the "Junior Securities"). The definition of Junior
Securities shall also include any rights or options exercisable for or
convertible into any of the Junior Securities.
3. Dividends.
(a) Each holder of record of Series C-2 Preferred Stock shall be
entitled to receive cumulative dividends in an amount per share equal to the
Dividend Rate per annum on the Accrued Value. Such dividends shall accrue from
and after the date of issue (except that dividends on any amounts added to the
Accrued Value shall accrue only from the date such amounts are added to the
Accrued Value) and shall be added to the Accrued Value semi-annually, whether or
not declared and whether or not there are any funds of the Corporation legally
available for the payment of dividends, on February 28th and August 31st of each
year (each such date being a "Dividend Accrual Date" and each such semi-annual
period being a "Dividend Period"), commencing with the Original Date of Issue of
shares of such Subseries. Dividends for any period shorter than a Dividend
Period shall be computed on the basis of the actual number of days elapsed over
twelve 30-day months and a 360-day year.
(b) In case the Corporation shall make any dividend or distribution to
holders of Common Stock, whether payable in cash, securities or other property
(other than dividends or distributions payable solely in Common Stock), the
holder of each share of Series C-2 Preferred Stock on the record date for such
dividend or distribution shall be entitled to receive an equivalent dividend or
distribution based on the number of shares of Common Stock underlying
4
such Series C-2 Preferred Stock (after conversion of such Series C-2 Preferred
Stock into Series C-1 Preferred Stock and assuming the Approval Date had
occurred on such record date).
(c) In case the Corporation shall make any dividend or distribution to
holders of Series C-1 Preferred Stock, whether payable in cash, securities or
other property (other than dividends or distributions referred to in subsection
(b) or dividends or distributions payable solely in Series C-1 Preferred Stock),
the holder of each share of Series C-2 Preferred Stock on the record date for
such dividend or distribution shall be entitled to receive an equivalent
dividend or distribution based on the number of shares of Series C-1 Preferred
Stock into which such Series C-2 Preferred Stock would be convertible on such
record date if the Approval Date had occurred on such record date.
(d) So long as any shares of the Series C-2 Preferred Stock are
outstanding, no Junior Securities shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly (except by conversion into or exchange for
Junior Securities) or any cash dividend made on any Junior Security other than
(i) a dividend on the Corporation's Common Stock as determined and declared by
the Board of Directors in which the holders of the Series C-2 Preferred Stock
participate in accordance with subparagraph (b) above or (ii) repurchases of
shares from employees of the Corporation and its subsidiaries upon termination
of the holder's employment.
(e) The date on which the Corporation initially issues any particular
share of Series C-2 Preferred Stock shall be deemed to be its "date of issue"
for purposes hereof regardless of the number of times transfer of such share is
made on the stock records maintained by or for the Corporation and regardless of
the number of certificates that may be issued to evidence such share. The date
on which the Corporation initially issues shares of a particular Subseries of
Series C-2 Preferred Stock shall be referred to as the "Original Date of Issue"
and the date on which the Corporation initially issues the first share of Series
B-1 Preferred Stock or Series B-2 Preferred Stock shall be referred to as the
"Series B Original Date of Issue".
4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (each a "Liquidation Event"),
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holder of each share of Series C-2 Preferred Stock shall be
entitled to receive an amount per share equal to the Liquidation Value of such
share on the date of distribution, and such holders shall not be entitled to any
further payment. If, upon any Liquidation Event, the assets of the Corporation,
or proceeds thereof, distributable among the holders of the Preferred Stock
shall be insufficient to pay in full the preferential amount due on such shares,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares of Preferred Stock if all amounts
payable thereon were paid in full.
5
Solely for the purposes of this paragraph 4, a Change of Control shall not be
deemed to be a Liquidation Event.
(b) After payment shall have been made in full to the holders of the
Preferred Stock, as provided in this paragraph 4, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed to holders of capital stock of the
Corporation, and the holders of the Preferred Stock shall not be entitled to
share therein.
5. Conversion.
(a) Subject to the provisions of this paragraph 5, each share of
Series C-2 Preferred Stock shall be automatically converted into one share of
Series C-1 Preferred Stock on the Approval Date without any further action
required by the Corporation or the holder of such share. The Accrued Value of
the share of Series C-1 Preferred Stock into which each share of a particular
Subseries of Series C-2 Preferred Stock shall convert on the Approval Date shall
be: (i) if the Approval Date occurs prior to the date which is six months from
the Series B Original Date of Issue, equal to the Accrued Value which a share of
Series C-1 Preferred Stock issued on the Original Date of Issue of shares of
such Subseries would have had on the Approval Date or (ii) if the Approval Date
occurs on or after the date which is six months from the Series B Original Date
of Issue, equal to the Accrued Value of each share of such Subseries of Series
C-2 Preferred Stock on such date (treating such date as a Dividend Accrual Date
for purposes of calculating the Accrued Value on such date). For the avoidance
of doubt, the "Conversion Price" (as defined in the certificate of designation
for the Series C-1 Preferred Stock) of the share of Series C-1 Preferred Stock
into which each share of a particular Subseries of Series C-2 Preferred Stock
shall convert on the Approval Date shall be equal to the Conversion Price which
a share of Series C-1 Preferred Stock issued on the Original Date of Issue of
shares of such Subseries would have on the Approval Date.
(i) Unless the shares issuable on conversion pursuant to this
paragraph 5 are to be issued in the same name as the name in which such shares
of Series C-2 Preferred Stock are registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form reasonably
satisfactory to the Corporation, duly executed by the holder or the holder's
duly authorized attorney and an amount sufficient to pay any transfer or similar
tax.
(ii) As promptly as possible, but in any event within 5 business
days after the Approval Date and after surrender by the holder of the
certificates for shares of Series C-2 Preferred Stock, the Corporation shall
issue and shall deliver to such holder, or on the holder's written order (upon
compliance by such holder with subparagraph (b)(i) hereof and federal and state
securities laws applicable thereto which require the holder to take any action)
to the holder's transferee, a certificate or certificates for the whole number
of shares of Series C-1 Preferred Stock issuable upon the conversion of such
shares in accordance with the provisions of this paragraph 5.
6
(iii) All shares of Series C-1 Preferred Stock delivered upon
conversion of the Series C-2 Preferred Stock will upon delivery be duly and
validly issued and fully paid and non-assessable, free of all liens and charges
(other than caused by the holder) and not subject to any preemptive rights.
(b) The Corporation shall at all times reserve and keep available,
free from preemptive rights, such number of its authorized but unissued shares
of Series C-1 Preferred Stock (and shares of Common Stock into which such shares
of Series C-1 Preferred Stock may be converted) as shall be required for the
purpose of effecting conversion of the Series C-2 Preferred Stock (and the
underlying Series C-1 Preferred Stock).
(c) Prior to the delivery of any securities which the Corporation
shall be obligated to deliver upon conversion of the Series C-2 Preferred Stock,
the Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation.
(d) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Series C-1 Preferred Stock on conversion of the Series C-2 Preferred Stock
pursuant hereto; provided, that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of shares of Series C-1 Preferred Stock in a name other than that of
the holder of the Series C-2 Preferred Stock to be converted and no such issue
or delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(e) In connection with the conversion of any shares of Series C-2
Preferred Stock, no fractional shares of Series C-1 Preferred Stock shall be
issued, but in lieu thereof the Corporation shall pay to the holder thereof the
value of such Series C-2 Preferred share in cash as determined by reference to
the Accrued Value of such share on such date (treating such date as a Dividend
Accrual Date for purposes of calculating the Accrued Value on such date).
(f) Subdivision or Combination of Series C-1 Preferred Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Series C-1 Preferred
Stock into a greater number of shares or if the Corporation at any time combines
(by reverse stock split or otherwise) its outstanding shares of Series C-1
Preferred Stock into a smaller number of shares, then, in either such case, the
number of shares of Series C-1 Preferred Stock into which the Series C-2
Preferred Stock shall be convertible shall be proportionately adjusted.
(g) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Series C-1 Preferred Stock or Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in
7
exchange for Series C-1 Preferred Stock or Common Stock, is referred to herein
as an "Organic Change". Prior to the consummation of any Organic Change, the
Corporation shall make appropriate provisions (in form and substance reasonably
satisfactory to the holders of a majority of the Series C-2 Preferred Stock then
outstanding) to insure that each of the holders of Series C-2 Preferred Stock
shall thereafter have the right to acquire and receive, upon the obtaining of
Shareholder Approval, in lieu of or in addition to (as the case may be) the
shares of Series C-1 Preferred Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Series C-2 Preferred Stock, such
shares of stock, securities or assets as such holder would have received in
connection with such Organic Change if the Approval Date had occurred on such
date and such shares of Series C-2 Preferred Stock had been converted into
Series C-1 Preferred Stock immediately prior to such Organic Change. In each
such case, the Corporation shall also make appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of the Series C-2
Preferred Stock then outstanding) to insure that the provisions of paragraph 5
hereof shall thereafter be applicable to the Series C-2 Preferred Stock. The
Corporation shall not effect any such consolidation, merger or sale, unless
prior to the consummation thereof, the successor entity (if other than the
Corporation) resulting from the consolidation or merger or the entity purchasing
such assets assumes by written instrument (in form and substance reasonably
satisfactory to the holders of a majority of the Series C-2 Preferred Stock then
outstanding), the obligation to deliver to each holder of Series C-2 Preferred
Stock such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
(h) Notices.
(i) Immediately upon any adjustment to the number of shares of
Series C-1 Preferred Stock into which the Series C-2 Preferred Stock is
convertible, the Corporation shall give written notice thereof to all holders of
Series C-2 Preferred Stock, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(ii) The Corporation shall give written notice to all holders of
Series C-2 Preferred Stock at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution referred to in Section 3(b) or Section 3(c), (b) with respect to
any pro rata subscription offer to holders of Common Stock or Series C-1
Preferred Stock or (c) for determining rights to vote with respect to any
Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the
holders of Series C-2 Preferred Stock at least 20 days prior to the date on
which any Organic Change shall take place.
(i) Certain Mergers. In connection with any consolidation with or
merger with or into, any person in a transaction where the Common Stock and/or
Series C-1 Preferred Stock is converted into or exchanged for securities of such
person or an affiliate of such person, the Corporation covenants that as a
condition precedent to the consummation of any such
8
consolidation or merger it shall provide the holders of the Series C-2 Preferred
Stock with a certificate, in form and substance satisfactory to the holders of a
majority of the Series C-2 Preferred Stock signed by a duly authorized officer
of the Corporation indicating that the person issuing such securities will be
organized and existing under the laws of a jurisdiction which allows for the
issuance of preference stock and that the Series C-1 Preferred Stock and the
Series C-2 Preferred Stock shall be converted into or exchanged for and shall
become shares of such person having in respect of such person substantially the
same powers, preference and relative participating, optional or other special
rights and the qualifications, limitations or restrictions thereon that the
Series C-1 Preferred Stock and the Series C-2 Preferred Stock had immediately
prior to such transaction.
6. Change of Control Offer.
(a) Not less than 20 days prior to the consummation of any Consensual
Change of Control and promptly after the occurrence of any Non-Consensual Change
of Control (the date of any such Change of Control being the "Change of Control
Date"), the Corporation shall commence (or cause to be commenced) an offer to
purchase all outstanding shares of Series C-2 Preferred Stock pursuant to the
terms described in subparagraph (d) below (the "Change of Control Offer") at a
purchase price equal to the Change of Control Amount on the Change of Control
Payment Date, and shall purchase (or cause the purchase of) any shares of Series
C-2 Preferred Stock tendered in response to the Change of Control Offer pursuant
to the terms hereof; provided, that with respect to any Consensual Change of
Control, the Corporation may condition its offer to purchase on consummation of
the Consensual Change of Control.
(b) The Change of Control Amount payable to each holder of Series C-2
Preferred Stock shall be payable in cash.
(c) Prior to the mailing of the Change of Control Notice referred to
in subparagraph (d), the Corporation shall (A) promptly determine if the
purchase of the Series C-2 Preferred Stock for cash would violate or constitute
a default under the indebtedness of the Corporation and (B) either shall repay
to the extent necessary all such indebtedness that would prohibit the repurchase
of the Series C-2 Preferred Stock pursuant to a Change of Control Offer or
obtain any requisite consents or approvals under instruments governing any
indebtedness to permit the repurchase of the Series C-2 Preferred Stock for
cash. The Corporation shall first comply with this subparagraph (c) before it
shall repurchase for cash any Series C-2 Preferred Stock pursuant to this
paragraph 6.
(d) Not less than 20 days prior to the consummation of any Consensual
Change of Control or within 20 days following the date on which any
Non-Consensual Change of Control has occurred, the Corporation shall send, by
first-class mail, postage prepaid, a notice (a "Change of Control Notice") to
each holder of Series C-2 Preferred Stock. Such notice shall contain all
instructions and materials necessary to enable such holders to tender Series C-2
Preferred Stock pursuant to the Change of Control Offer. Such notice shall
state:
9
(i) that a Change of Control has occurred or will occur, as
applicable, that a Change of Control Offer is being made pursuant to this
paragraph 6 and that, subject in the case of a Consensual Change of Control to
the consummation of the Consensual Change of Control (if the Corporation has so
conditioned its Change of Control Offer), all Series C-2 Preferred Stock validly
tendered and not withdrawn will be accepted for payment;
(ii) the Change of Control Amount to be paid for shares tendered
in such offer (estimated as closely as possible in the case of a Consensual
Change of Control) and the purchase date (which shall be the Change of Control
Date in the case of a Consensual Change of Control and a date no earlier than 30
days nor later than 60 days from the date such notice is mailed in the case of a
Non-Consensual Change of Control) (the "Change of Control Payment Date");
(iii) that any shares of Series C-2 Preferred Stock not tendered
will continue to accrue dividends;
(iv) that, unless the Corporation defaults in making payment
therefor, any share of Series C-2 Preferred Stock accepted for payment pursuant
to the Change of Control Offer shall cease to accrue dividends after payment
therefor on the Change of Control Payment Date;
(v) that holders electing to have any shares of Series C-2
Preferred Stock purchased pursuant to a Change of Control Offer will be required
to surrender stock certificates representing such shares of Series C-2 Preferred
Stock, properly endorsed for transfer, together with such other customary
documents as the Corporation and the Transfer Agent may reasonably request to
the Transfer Agent at the address specified in the notice prior to the close of
business on the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their election if
the Corporation receives, not later than five business days prior to the Change
of Control Payment Date, a telegram, facsimile transmission or letter setting
forth the name of the holder, the number of shares of Series C-2 Preferred Stock
the holder delivered for purchase and a statement that such holder is
withdrawing its election to have such shares of Series C-2 Preferred Stock
purchased;
(vii) that holders who tender only a portion of the shares of
Series C-2 Preferred Stock represented by a certificate delivered will, upon
purchase of the shares tendered, be issued a new certificate representing the
unpurchased shares of Series C-2 Preferred Stock; and
10
(viii) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of Control).
(e) The Corporation will comply with any tender offer rules under the
Exchange Act which may then be applicable in connection with any offer made by
the Corporation to repurchase the shares of Series C-2 Preferred Stock as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with provisions hereof, the Corporation
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligation hereunder by virtue thereof.
(f) On the Change of Control Payment Date, subject in the case of a
Consensual Change of Control to the consummation of the Consensual Change of
Control (if the Corporation has so conditioned its Change of Control Offer), the
Corporation shall (A) accept for payment the shares of Series C-2 Preferred
Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the
holders of shares so accepted the Change of Control Amount in cash and (C)
cancel each surrendered certificate and retire the shares represented thereby.
Unless the Corporation defaults in the payment for the shares of Series C-2
Preferred Stock tendered pursuant to the Change of Control Offer, dividends will
cease to accrue with respect to the shares of Series C-2 Preferred Stock
tendered and all rights of holders of such tendered shares will terminate,
except for the right to receive payment therefor on the Change of Control
Payment Date.
(g) To accept the Change of Control Offer, the holder of a share of
Series C-2 Preferred Stock shall deliver, prior to the close of business on the
Change of Control Payment Date, written notice to the Corporation (or an agent
designated by the Corporation for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Series C-2 Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.
7. Redemption.
(i) If the Approval Date has not occurred prior to the third
anniversary of the Original Date of Issue of shares of a particular Subseries,
the holders of a majority of the shares of such Subseries then outstanding may
require the Corporation to redeem all of the outstanding shares of such
Subseries at a redemption price, payable in cash, equal to the Accrued Value of
such shares on the Redemption Payment Date for such shares (treating the
Redemption Payment Date for such shares as a Dividend Accrual Date for purposes
of calculating the Accrued Value on such date). In order to require such
redemption, the stockholders requesting such redemption (the "Requesting
Stockholders") shall deliver a notice of redemption (the "Redemption Notice") to
the Corporation no later than 30 days following the third anniversary of the
Original Date of Issue. If the Redemption Notice is delivered to the Corporation
in a timely manner, the shares of such Subseries shall be redeemed in two
installments, with 50% of the shares then outstanding to be redeemed (and the
redemption price for such shares paid) on the third business day following
delivery of the Redemption Notice and with all of the shares outstanding one
year following
11
delivery of the Redemption Notice to be redeemed (and the redemption price for
such shares paid) on such one-year anniversary (each such date of payment, as
applicable, a "Redemption Payment Date"), subject, in each case, to any
limitations on such redemption that may be contained in the terms of the senior
credit arrangements of the Corporation in effect at such time (the "Senior
Credit Arrangements"). If the Corporation is of the opinion that any such
redemption would be in violation of the terms of the Senior Credit Arrangements,
the Requesting Stockholders may require the Corporation to use its best efforts
to consummate the sale and issuance of subordinated debt securities as soon as
practicable after the third anniversary of the Original Date of Issue of shares
of such Subseries and to use the proceeds from such sale and issuance to redeem
all of the shares of such Subseries of Series C-2 Preferred Stock. The first
installment of the redemption shall be made on a pro rata basis among all the
holders of such Subseries of Series C-2 Preferred Stock based on the number of
shares of such Subseries of Series C-2 Preferred Stock then held of record by
such holders. For the avoidance of doubt, it is understood that if a redemption
occurs, the shares of such Subseries of Series C-2 Preferred Stock to be
redeemed in the second installment on the date that is one year from the
delivery of the Redemption Notice shall continue to accrue dividends in
accordance with Section 3 hereof until the Redemption Payment Date for such
shares.
(ii) At any time (a) following the third anniversary (but before
the fifth anniversary) of the Original Date of Issue of shares of a particular
Subseries of Series C-2 Preferred Stock, the Corporation may, at its option,
redeem all, but not less than all, of the outstanding shares of such Subseries
of Series C-2 Preferred Stock at a redemption price per share, payable in cash,
equal to 105% of the Accrued Value of such share on the date of payment therefor
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date), and (b) following the fifth anniversary (but before
the seventh anniversary) of the Original Date of Issue of shares of a particular
Subseries of Series C-2 Preferred Stock, the Corporation may, at its option,
redeem all, but not less than all, of the outstanding shares of such Subseries
of Series C-2 Preferred Stock at a redemption price per share, payable in cash,
equal to the Accrued Value of such share on the date of payment therefor
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date).
(iii) On the seventh anniversary of the Original Date of Issue of
shares of a particular Subseries of Series C-2 Preferred Stock, the Corporation
will be required to redeem, and the holders of shares of such Subseries of
Series C-2 Preferred Stock shall be required to deliver for redemption, all of
the outstanding shares of such Subseries of Series C-2 Preferred Stock at a
redemption price per share, payable in cash, equal to the Accrued Value of such
share on such date (treating such date as a Dividend Accrual Date for purposes
of calculating the Accrued Value on such date).
(b) In the case of subparagraphs (ii) and (iii) above, notice of any
redemption shall be given by the Corporation not less than 30 days nor more than
60 days prior to the redemption date, to each holder of record of the shares to
be redeemed; provided, that neither the failure to give such notice nor any
defect therein shall affect the validity of the giving of notice for the
redemption of any share of any Subseries of Series C-2 Preferred Stock to be
redeemed
12
except as to the holder to whom the Corporation has failed to give said notice
or except as to the holder whose notice was defective. Each such notice shall
state: (i) the redemption date (which, in the case of a redemption pursuant to
clause (iii), shall be such seventh anniversary; (ii) the redemption price;
(iii) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (iv) that dividends on the
shares to be redeemed will cease to accrue from and after such redemption date
(unless default shall be made by the Corporation in providing for the payment of
the redemption price for the shares called for redemption on such redemption
date).
(c) Notice having been given as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in providing
for the payment of the redemption price of the shares called for redemption),
dividends on the shares of such Subseries of Series C-2 Preferred Stock so
called for redemption shall cease to accrue, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such share of such Subseries shall be
redeemed by the Corporation at the redemption price.
8. Voting Rights.
(a) Except as required by law, each holder of Series C-2 Preferred
Stock shall not be entitled to vote on any matter subject to the vote of the
holders of the Corporation's Voting Securities.
(b) So long as any of the Series C-2 Preferred Stock is outstanding,
the affirmative vote of the holders of (x) 66 2/3% of the outstanding shares of
Series C-2 Preferred Stock, voting together as a single class, shall be
necessary to alter or change the preferences, rights or powers of the Series C-1
Preferred Stock or the Series C-2 Preferred Stock, and (y) a majority of the
outstanding shares of Series C-2 Preferred Stock, voting together as a single
class, shall be necessary to: (i) increase or decrease the authorized number of
shares of the Series C-1 Preferred Stock or the Series C-2 Preferred Stock, (ii)
amend, alter, repeal or waive any provision of the Corporation's articles of
incorporation (including any certificate of designation or articles of amendment
and whether by amendment, merger or otherwise) or by-laws so as to adversely
affect the preferences, rights or powers of the Series C-1 Preferred Stock or
the Series C-2 Preferred Stock, including, without limitation, the voting
powers, dividend rights and liquidation preference of the Series C-1 Preferred
Stock or the Series C-2 Preferred Stock, or change the Series C-1 Preferred
Stock or the Series C-2 Preferred Stock into any other securities, cash or other
property (other than the conversion of Series C-2 Preferred Stock into Series
C-1 Preferred Stock upon Shareholder Approval), or (iii) issue (other than,
prior to the Approval Date, pursuant to the terms of the Purchase Agreement (as
defined below)) any additional Series C-2 Preferred Stock or create, authorize
or issue any capital stock that ranks prior to or pari passu with (whether with
respect to dividends or upon liquidation, dissolution, winding up or otherwise)
the Series C-1 Preferred Stock or the Series C-2 Preferred Stock (other than
Series B-1 Preferred Stock or Series B-2 Preferred Stock).
13
(c) So long as any of the Series B-2 Preferred Stock or Series C-2
Preferred Stock is outstanding, unless such compliance is waived in writing by
the affirmative vote of the holders of a majority of the outstanding shares of
Series B-2 Preferred Stock and Series C-2 Preferred Stock, voting together as a
single class, the Corporation will comply with all provisions of Section 6.09 of
the Purchase Agreement, which provisions are incorporated by reference herein
with the same effect as if set forth in full herein. Any amendments to the
Purchase Agreement shall be ineffective with respect to the Series C-2 Preferred
Stock unless consented to by the holders of 66 2/3% of the outstanding shares of
Series C-2 Preferred Stock. Copies of the Purchase Agreement are available upon
request from the Secretary of the Corporation.
(d) If the Corporation shall fail to comply with any one or more of
the provisions in paragraphs 8(b) or 8(c), then upon and during the continuance
of any such default, the Dividend Rate shall be increased to 23%.
9. Miscellaneous.
(a) Notwithstanding anything to the contrary herein contained, if in
connection with any conversion of shares of Series C-2 Preferred Stock pursuant
to Section 5 hereof, the amount of Series C-1 Preferred Stock to be received by
one or more holders of the Series C-2 Preferred Stock would result in such
conversion being subject to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules promulgated thereunder, or any successor thereto
(the "HSR Act"), then compliance with the HSR Act shall be a condition precedent
to the consummation of such conversion. The provisions of this paragraph 9(a)
shall in no way limit the obligation of the Corporation to comply with the
provisions of Sections 6 and 7 hereof.
(b) Each holder of Series C-2 Preferred Stock hereby agrees, by acceptance
of its shares of Series C-2 Preferred Stock, to use its commercially reasonable
efforts to make all filings required by the HSR Act and comply with all other
provisions of the HSR Act as promptly as practicable to the extent necessary in
connection with any conversion of Series C-2 Preferred Stock.
(c) Reacquired Shares. Any shares of Series C-2 Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of preferred
stock and may be reissued as part of a new series of preferred stock to be
created by an amendment or amendments of the Corporation's articles of
incorporation adopted by the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
(d) Notices. (i) All notices, requests, demands and other communications
to the Corporation hereunder shall be in writing and shall be delivered
personally, sent by facsimile or sent by certified mail (return receipt
requested) or by express mail or overnight courier, addressed to the President
of the Corporation at the Corporation's principal executive offices.
14
(ii) All notices, requests, demands and other communications to
the holders of Series C-2 Preferred Stock hereunder shall be in writing and
shall be delivered personally, sent by facsimile or sent by certified mail
(return receipt requested) or by express mail or overnight courier, addressed to
each holder of record at such holder's address appearing on the stock transfer
register of the Corporation.
(iii) Such notices, requests, demands and other communications
shall be deemed given or delivered (A) three business days following sending by
registered or certified mail, postage prepaid, (B) upon delivery by express mail
or overnight courier, (C) when sent, if sent by facsimile (but only if such
facsimile is actually received) or (D) when delivered, if delivered by hand.
10. Definitions. The following terms, as used herein, shall have the
following meanings:
"Accrued Value" equals, with respect to one share of a particular
Subseries of Series C-2 Preferred Stock on any date, $1,000 plus the amount of
all dividends added to the Accrued Value in accordance with paragraph 3(a)
(which aggregate amount shall be subject to adjustment whenever there shall
occur a stock split, combination, re-classification or other similar event
involving the Series C-2 Preferred Stock).
"Approval Date" means the date on which Shareholder Approval is obtained.
"Change of Control" means a Consensual Change of Control or a
Non-Consensual Change of Control.
"Consensual Change of Control" means: (i) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all the
assets of the Corporation and its subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act), other than to a
wholly-owned subsidiary of the Corporation or (ii) the consummation of any
transaction approved by the Board of Directors of the Corporation (including any
merger or consolidation) the result of which is that any "person" (as defined
above), becomes the beneficial owner (as determined in accordance with Rules
13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to
have beneficial ownership of all shares that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the Voting Securities of
the Corporation; provided, however, that "person" as used in clauses (i) and
(ii) shall not include any Purchaser (as defined in the Purchase Agreement).
"Change of Control Amount" means, with respect to one share of a
particular Subseries of Series C-2 Preferred Stock, 101% of the Accrued Value of
such share on the Change of Control Payment Date (treating such date as a
Dividend Accrual Date for purposes of calculating the Accrued Value on such
date); provided, that if the Change of Control occurs on a date prior to the
third anniversary of the Original Date of Issue of the Subseries of which such
share is a part, the Change of Control Amount shall be calculated assuming the
Change of Control had occurred on the third anniversary of the Original Date of
Issue of shares of such Subseries (and
15
assuming that no dividends had been paid in cash with respect to such share from
the actual date of the Change of Control through the third anniversary of the
Original Date of Issue of shares of such Subseries).
"Continuing Directors" means individuals who constituted the Board of
Directors of the Corporation on the Series B Original Date of Issue, after
giving effect to the issuance of the Series B-1 Preferred Stock (the "Incumbent
Directors"); provided, that any individual becoming a director during any year
shall be considered to be an Incumbent Director if such individual's election,
appointment or nomination was recommended or approved by at least two-thirds of
the other Incumbent Directors continuing in office following such election,
appointment or nomination present, in person or by telephone, at any meeting of
the Board of Directors of the Corporation, after the giving of a sufficient
notice to each Incumbent Director so as to provide a reasonable opportunity for
such Incumbent Directors to be present at such meeting or (ii) such individual
was nominated, appointed or selected by the holders of Series B-1 Preferred
Stock or nominated, appointed or selected in accordance with Section 6.02 of the
Purchase Agreement.
"Dividend Rate" means eighteen percent (18%), or if adjusted pursuant to
Section 8(d), twenty-three (23%) percent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Liquidation Value" on any date means, with respect to one share of Series
C-2 Preferred Stock, the greater of (i) the Accrued Value on such date (treating
such date as a Dividend Accrual Date for purposes of calculating the Accrued
Value on such date) and (ii) the amount that would have been payable in
connection with such Liquidation Event on the number of shares of Common Stock
into which the number of shares of Series C-1 Preferred Stock resulting from the
conversion of the Series C-2 Preferred Stock was convertible on such date (as if
the Approval Date had occurred on such date).
"Non-Consensual Change of Control" means: (i) the consummation of any
transaction the result of which is that any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), becomes the beneficial owner (as
determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act
except that a person will be deemed to have beneficial ownership of all shares
that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the Voting Securities of the Corporation without the approval of the
Board of Directors of the Corporation or (ii) the first day on which a majority
of the members of the Board of Directors are not Continuing Directors; provided,
however, that "person" as used in clause (i) shall not include any Purchaser (as
defined in the Purchase Agreement).
"Person" as used herein means any corporation, limited liability company,
partnership, trust, organization, association, other entity or individual.
"Purchase Agreement" means the Securities Purchase Agreement dated as of
the Series B Original Date of Issue among the Corporation, Welsh, Carson,
Anderson & Stowe IX, L.P. and the other purchasers named therein.
"Securities Act" means the Securities Act of 1933, as amended.
16
"Shareholder Approval" means the approval of requisite holders of the
Common Stock with respect to each of the following: (1) the removal of the
Conversion Cap contemplated in paragraph 5(a)(iii) of the certificate of
designations for the Series B-1 Preferred Stock, (2) the automatic conversion of
the Series C-2 Preferred Stock into Series C-1 Preferred Stock pursuant to the
terms hereof, (3) the automatic conversion of the Series B-2 Preferred Stock
into Series B-1 Preferred Stock pursuant to the certificate of designation for
the Series B-2 Preferred Stock, and (4) the rights of the holders of the Series
B-1 Preferred Stock to elect directors to the Board of Directors of the
Corporation as described in paragraphs 7(c)(ii) and 7(c)(iii) of the certificate
of designations for the Series B-1 Preferred Stock.
"Transfer Agent" means the transfer agent for the Series C-2 Preferred
Stock appointed by the Corporation, and if none is appointed, the Corporation.
"Voting Securities" means securities of the Corporation ordinarily having
the power to vote for the election of directors of the Corporation; provided,
that when the term "Voting Securities" is used with respect to any other Person
it means the capital stock or other equity interests of any class or kind
ordinarily having the power to vote for the election of directors or other
members of the governing body of such Person.
17
EXHIBIT G
---------
AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT
(Attached as Exhibit 4.6 to the Form 8-K/A Amendment No. 2 dated August 31,
2001)
EXHIBIT H
---------
MORRISON & HECKER L.L.P.
Attorneys at Law
2600 Grand Avenue
Kansas City,
Missouri 64108-4606
Telephone (816) 691-2600
Telefax (816) 474-4208
www.moheck.com
August 31, 2001
Welsh, Carson, Anderson and Stowe IX, L.P.
320 Park Avenue, Suite 2500
New York, NY 10022-6815
Re: Securities Purchase Agreement dated as of August 31, 2001, together
with the schedules and exhibits attached thereto (the "Securities Purchase
Agreement"), by and among the Company, Welsh, Carson, Anderson and Stowe IX,
L.P., a Delaware limited partnership, and the other purchasers named on Schedule
I to the Securities Purchase Agreement
Ladies and Gentlemen:
We have acted as counsel to LabOne, Inc. (the "Company") in connection with
the transactions contemplated in that certain Securities Purchase Agreement. Our
opinion is being delivered at the request of the Company pursuant to Section
5.2(h) of the Securities Purchase Agreement. All capitalized terms used herein
and not otherwise defined herein shall have the meanings set forth in the
Securities Purchase Agreement.
In our capacity as counsel to the Company and for purposes of this letter,
we have examined:
A. The following transaction documents referred to throughout as the
"Transaction Documents":
(i) the Securities Purchase Agreement;
(ii) Series B-1 Preferred Certificate of Designation;
(iii) Series B-2 Preferred Certificate of Designation;
(iv) The Warrant Agreement;
(v) The Registration Rights Agreement;
(vi) The Rights Plan Amendment;
Welsh, Carson, Anderson and Stowe IX, L.P.
August 31, 2001
Page 2
(vii) Each Series A Note;
(viii) Each Warrant Certificate;
(ix) Commerce Bank Waiver dated August 30, 2001; and
B. The following corporate documents referred to throughout as the
"Corporate Documents":
(i) copies of the Articles of Incorporation of the Company certified
by the Secretary of State of the State of Missouri;
(ii) copies of the Bylaws of the Company;
(iii) Resolutions duly adopted by the Board of Directors and the
Executive Committee of the Company at meetings duly convened and held on
August 24, 2001 and August 29, 2001 (collectively, the "Board
Resolutions");
(iv) Secretary's Certificate of the Company dated August 31, 2001
(v) Officer's Certificate of Company dated August 31, 2001;
(vi) Certificate of Corporate Good Standing dated August 23, 2001
issued by the Secretary of State of the State of Missouri to the effect
that the Company was incorporated under the laws of the State of Missouri,
and is in good standing, having fully complied with all the requirements of
the office of the Secretary of State of the State of Missouri (the
"Missouri Good Standing Certificate");
(vii) Certificate of Corporate Good Standing dated August 28, 2001
issued by the Secretary of State of the State of Kansas to the effect that
the Company is in good standing according to the records now on file in the
office of the Secretary of State of the State of Kansas (the "Kansas Good
Standing Certificate"; together with Missouri Good Standing Certificate,
the "Good Standing Certificates"); and
(viii) such other certificates, documents and matters as we have
deemed necessary and appropriate to render the opinions set forth in this
Letter.
In rendering the opinions set forth herein, we have assumed, without
independent investigation on our part, the following:
1. State substantive and procedural laws, including but not limited to
rules regarding conflicts of laws, applicable to the Transaction Documents, are
identical to Missouri substantive and procedural law, and any state or federal
court interpreting or enforcing the Transaction Documents would apply and
enforce the Transaction Documents identically to a state or federal court
located in Missouri.
Welsh, Carson, Anderson and Stowe IX, L.P.
August 31, 2001
Page 3
2. We have assumed (i) the genuineness and authenticity of all documents
examined by us and all signatures thereon, and the conformity to originals of
all copies of all documents examined by us; (ii) that the execution, delivery
and/or acceptance of the Transaction Documents have been duly authorized by all
action, corporate or otherwise, necessary by the parties to the Transaction
Documents other than the Company, (iii) the legal capacity of all natural
persons executing the Transaction Documents and the Company Documents; (iv) the
payment by the Purchasers of the consideration specified in Schedule I to the
Securities Purchase Agreement and (v) that the Transaction Documents accurately
describe and contain the mutual understandings of the parties, and that there
are no oral or written statements or agreements or usages of trade or courses of
prior dealings among the parties that would modify, amend or vary any of the
terms of the Transaction Documents.
As to questions of fact material to the opinions stated herein we have
relied upon the representations and warranties set forth in the Securities
Purchase Agreement and other Transaction Documents, the statements made in the
Officer's Certificate, the Secretary's Certificate, the Good Standing
Certificates and certificates of other representatives of the Company and
factual information we have obtained from such other sources as we have deemed
reasonable, which we have assumed, without independent investigation on our
part, to be true and correct as of the date hereof. In addition, we have
obtained and relied upon those certificates of public officials as we considered
appropriate. We have assumed without investigation that there has been no
relevant change or development between the dates as of which the information
cited in the preceding sentence was given and the date of this Letter. We have
not independently verified the accuracy of the matters set forth in the written
statements or certificates upon which we have relied, nor have we undertaken any
lien, suit or judgment searches or searches of court dockets in any
jurisdiction. For purposes of the opinion in paragraph 1 as to the Company being
validly existing and in good standing under the laws of the State of Missouri
and in good standing under the laws of the State of Kansas, we have relied
exclusively upon certificates issued by governmental authorities in the relevant
jurisdictions, and such opinions are not intended to provide any conclusion or
assurance beyond that conveyed by those certificates.
Based on the foregoing and subject to the assumptions and qualifications
set forth in this Letter and such other information and documents as we have
considered necessary for the purposes hereof, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing under
the laws of the State of Missouri and in good standing under the laws of the
State of Missouri and in good standing as a foreign corporation under the laws
of the State of Kansas. The Company has all requisite corporate power and
corporate authority necessary to (i) own or lease and operate its properties and
assets, and to carry on its business as it is now being conducted and presently
proposed to be conducted, (ii) execute and deliver each of the Transaction
Documents, and (iii) issue, sell and deliver the Initial Securities.
2. Each of (i) the execution and delivery by the Company of the Transaction
Documents, (ii) the performance by the Company of the transactions contemplated
thereby and of its respective obligations thereunder and under each of the
Series B-1 Preferred Certificate of
Welsh, Carson, Anderson and Stowe IX, L.P.
August 31, 2001
Page 4
Designation and the Series B-2 Preferred Certificate of Designation (together,
the "Preferred Certificates of Designation"), (iii) the issuance, sale and
delivery by the Company of the Initial Securities and the Conversion Shares, and
(iv) the amendment of the Company's Rights Plan in accordance with the Rights
Plan Amendment (a) have been duly authorized by all requisite corporate action
(except to the extent that such transactions or issuances are expressly made
subject to shareholder approval in the Transaction Documents) and (b) will not
(i) to our knowledge, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or its properties or assets (but
excluding the anti-fraud rules under federal and state securities laws or the
rules and regulations of National Association of Securities Dealers, Inc.,
(collectively, "Applicable Laws")), (ii) conflict with the Articles of
Incorporation or Bylaws of the Company, (iii) conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
provision of any indenture, agreement or other instrument set forth in Section
6.09(a)(i)(C) and (D) of the Securities Purchase Agreement ("6.09(a)(i)(C) and
(D) Documents") or (iv) other than a Permitted Lien or as set forth on Item
2.04(c), result in the creation or imposition of any Lien upon any of the
material properties or assets of the Company or any Subsidiary.
3. Each Transaction Document has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that (a)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other Laws, now or hereafter in effect,
relating to or limiting creditors rights generally, (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought and (c) the indemnification provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.
4. The Series B-1 Preferred Shares and the Series B-2 Preferred Shares
issued pursuant to the Securities Purchase Agreement have been duly authorized
by the Company and have been duly and validly issued and are fully paid and
non-assessable shares of capital stock of the Company. The Conversion Shares to
be issued, pursuant to the Series B-1 Preferred Certificate of Designation, the
Series B-2 Preferred Certificate of Designation and the Warrant Agreement, as
applicable, have been duly authorized by the Company and upon issuance will be
duly and validly issued, fully paid and non-assessable shares of Common Stock or
Series B-1 Preferred Shares, as the case may be.
5. The issuance, sale and delivery of the Series B-1 Preferred Shares, the
Series B-2 Preferred Shares, the Conversion Shares, the Initial Warrants, and
the Series A Notes is not subject to any statutory or, to our knowledge, any
contractual right of first refusal or other similar right in favor of any
person, or any provision of the Company's Articles of Incorporation or Bylaws
which grants preemptive rights to stockholders of the Company. Based in part on
(a) the investment representations of each Purchaser contained in Article III of
the Securities Purchase Agreement, (b) the information governing states of
residence of the Purchasers provided to us, and (c) subject to filing of any
other required notice filings under federal or state Laws, the offer, sale and
issuance of the Initial Securities under the Securities Purchase Agreement does
not
Welsh, Carson, Anderson and Stowe IX, L.P.
August 31, 2001
Page 5
require registration under the Securities Act or qualification or registration
under any applicable state securities laws.
6. The authorized capital stock of the Company consists of 40,000,000
shares of Common Stock, par value $0.01 per share, and 3,000,000 shares of
Preferred Stock, par value $.01 per share, of which (A) as of the Closing Date
(after the filing of the Series B-1 Preferred Certificate of Designation and the
Series B-2 Preferred Certificate of Designation), 300,000, 45,000, and 30,000
shares will have been designated as Series A Preferred Stock, Series B-1
Cumulative Convertible Preferred Stock and Series B-2 Cumulative Convertible
Preferred Stock, respectively. 8,000,000 shares of Common Stock have been duly
reserved for issuance upon exercise of the Initial Warrants and upon conversion
of Series B-1 Preferred Shares (including on an as-converted basis (assuming
Company Stockholder Approval is obtained) the Series B-2 Preferred Shares)
pursuant to the Series B-1 Preferred Certificate of Designation. 21,000 shares
of Series B-1 Preferred Shares have been duly reserved for issuance upon the
conversion of the Series B-2 Preferred Shares pursuant to the Series B-2
Preferred Certificate of Designation. As of the close of business on August 30,
2001, 10,778,310 shares of Common Stock were issued and outstanding, and no
Series B-1 Preferred Shares or Series B-2 Preferred Shares were issued or
outstanding.
7. To our knowledge and except as contemplated by or disclosed under the
Securities Purchase Agreement, the Company does not have outstanding any stock
or securities convertible or exchangeable for any shares of its capital stock
nor does it have outstanding any warrants, rights or options to subscribe for or
to purchase its capital stock or any stock or securities convertible into or
exchangeable for its capital stock or any stock appreciation rights or phantom
stock plans. To our knowledge, the Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any warrants, options or other rights to acquire
its capital stock, except as disclosed in or pursuant to the Securities Purchase
Agreement.
8. To our knowledge, there are no actions, suits, proceedings or
investigations pending or overtly threatened in connection with or against the
Company or its properties before any court or governmental agency questioning
the validity of the Transaction Documents or any action taken or to be taken in
connection therewith.
9. In accordance with the provisions of the Transaction Documents, the
approval of the Transaction Documents and the transactions contemplated thereby
pursuant to the Board Resolutions is sufficient to render inapplicable to (A)
the issuance and delivery of the Initial Securities and the Conversion Shares,
and the Purchaser's ownership and voting of such securities, the provisions of
Section 351.459 of the General and Business Corporation Law of the State of
Missouri (the "Missouri Code") and (B) the issuance and delivery of the Initial
Securities and the Conversion Shares, the provisions of Article X of the
Articles of Incorporation of the Company. Pursuant to the Rights Plan Amendment,
the provisions of the Rights Agreement dated as of February 11, 2000 between the
Company and American Stock Transfer & Trust Company will be rendered
inapplicable to the issuance and delivery of the Initial Securities, the
Conversion Shares, the Additional Securities, and any securities issuable upon
conversion or exercise of the Additional Securities to the Purchasers. Section
351.407 of the
Welsh, Carson, Anderson and Stowe IX, L.P.
August 31, 2001
Page 6
Missouri Code is not applicable to the issuance and delivery of the Initial
Securities, the Conversion Shares, the Additional Securities, and any securities
issuable upon conversion or exercise of the Additional Securities, and the
Purchasers' ownership and voting of such securities.
The opinions set forth in this Letter are expressly subject to the
following qualifications:
A. As used in this opinion with respect to any matter, the qualifying
phrase to the extent of "our knowledge" or "our actual knowledge" or such
similar phrase means only to the extent of the conscious awareness of facts or
other information by: (i) the lawyer signing this opinion; and (ii) any lawyer
who has had active involvement in negotiating or preparing the Transaction
Documents or preparing this opinion.
B. With respect to our opinion number 2, we express no opinion as to
whether or not the actions described in opinion number 2 conflict with or result
in a breach of, or constitute a default under any financial covenant or other
covenant, restriction or provision in the 6.09(a)(i)(C) and (D) Documents
requiring the Company to satisfy certain financial ratios or tests. Section
302(b) of the Trust Indenture dated September 1, 1998 between the City of
Lenexa, Kansas and Intrust Bank, N.A. (the "Trust Indenture"), provides in part
that the Bonds (as defined in the Trust Indenture) are subject to redemption
upon any transaction that places "unreasonable burdens or excessive liabilities"
on the Company. We express no opinion as to whether the Transaction places
"unreasonable burdens or excessive liabilities" on the Company.
C. The enforceability of the Transaction Documents is subject to the effect
of generally applicable rules of Law that limit or deny the enforceability of
provisions purporting to require indemnification of a party against liability
for its own action or inaction to the extent the action or inaction involves
negligence, recklessness, willful misconduct or unlawful conduct.
D. We express no opinion as to the validity, enforceability or binding
effect of (i) any provision which requires that modifications of an agreement or
waivers be in writing, (ii) any provision relating to choice of governing law,
consent to jurisdiction, jury waiver or forum selection, (iii) any provision to
the effect that any action or failure to act does not constitute a waiver, (iv)
any provision relating to the exclusivity or non-exclusivity of any remedy or
remedies or providing that remedies are cumulative, (v) govern and afford
judicial discretion regarding the determination of damages and entitlement to
attorneys' fees and other costs, (vi) any provision which purports to establish
evidentiary standards or to make determinations conclusive, and (vii) any
provision that purports to waive any statutes of limitations or that otherwise
directly or indirectly purports to limit the time in which any action may be
instituted in connection with enforcement of rights and obligations under an
agreement.
E. We are authorized and licensed to practice law in the State of Missouri
and we do not purport to express any opinion concerning any law other than the
law of the State of Missouri, applicable federal law, and the applicable law of
any other jurisdiction to the extent such law is identical, as applied, to
Missouri law. Our opinions are given as of the date hereof, and therefore, are
issued only with respect to the present status of such laws, and we assume no
Welsh, Carson, Anderson and Stowe IX, L.P.
August 31, 2001
Page 7
obligation to update or supplement our opinions in response to subsequent
changes in the law or future events or circumstances affecting the Transaction.
This Letter may be relied upon only by the addressee hereof in connection
with the Transaction and may not be used, disclosed or relied upon by any other
person for any purpose whatsoever without in each instance our prior written
consent, other than in connection with regulatory requirements or in response to
a court order.
Sincerely,
EXHIBIT I
---------
REGISTRATION RIGHTS AGREEMENT
(Attached as Exhibit 4.7 to the Form 8-K/A Amendment No. 2 dated August 31,
2001)
EXHIBIT J
---------
[RMHM&K Letterhead]
August 31, 2001
LabOne, Inc.
10101 Renner Blvd.
Lenexa, KS 66129
Ladies and Gentlemen:
We have acted as counsel to Welsh, Carson, Anderson & Stowe IX, L.P.,
a Delaware limited partnership ("WCAS") in connection with the Securities
Purchase Agreement, dated as of August 31, 2001 (the "Purchase Agreement"),
among WCAS, the other persons named on the schedules attached thereto (together
with WCAS, each individually a "Purchaser" and collectively the "Purchasers")
and LabOne, Inc., a Missouri corporation (the "Company"). Pursuant to the
Purchase Agreement, WCAS has entered into the Warrant Agreement, dated the date
hereof (the "Warrant Agreement"), the Registration Rights Agreement, dated the
date hereof (the "Registration Rights Agreement", and collectively with the
Purchase Agreement and the Warrant Agreement, the "Transaction Documents"), with
the Company and the other persons named therein. This opinion is hereby
delivered to you as required by the provision of Section 5.03(c) of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined have the
meanings ascribed to them in the Purchase Agreement.
In furnishing this opinion, we have made such legal and factual
examinations and inquiries, as we have deemed advisable or necessary for the
purpose of rendering this opinion. In addition, we have examined executed
counterparts of the Transaction Documents. We have also examined (i) such
records of WCAS as we considered appropriate, including the certificate of
limited partnership and the limited partnership agreement of WCAS, (ii)
certified copies of official records of various state authorities with respect
to the organization, qualification and good standing of WCAS and (iii) originals
or copies satisfactory to us of all such agreements, certificates, governmental
orders, permits, authorizations and other documents as we have deemed relevant
and necessary as a basis for the opinions hereinafter expressed. In making such
examinations, we have assumed the genuineness of all signatures on original and
certified documents, the legal capacity of natural persons, the authenticity of
all documents submitted to us as originals, the conformity to executed documents
of all unexecuted copies submitted to us and the conformity to the original
documents of all documents submitted to us as copies. As to various questions of
fact material to our opinions, we have, to the extent that such facts were not
independently established by us, relied upon the representations and warranties
of WCAS set forth in the Purchase Agreement and oral statements, written
information and certificates of public officials and officers or other
representatives of WCAS. Whenever our opinion herein with respect to the
existence or absence of facts is indicated to be based on our knowledge or
belief, it is intended to signify that in the course of our representation of
WCAS in connection
with the transactions referred to in the first paragraph hereof, no information
has come to our attention that would give us actual knowledge of the existence
or absence of such facts.
Based upon the foregoing and subject to the assumptions, exceptions
and qualifications set forth in this letter, we are of the opinion as follows:
1. WCAS is a limited partnership validly existing and in good
standing under the laws of the State of Delaware.
2. WCAS has all requisite power and authority to execute and deliver
the Transaction Documents and to perform its obligations thereunder. The
execution and delivery by WCAS of the Transaction Documents and the consummation
by WCAS of the transactions contemplated thereby have been duly authorized by
all necessary action on the part of WCAS. Each of the Transaction Documents has
been duly and validly executed and delivered by WCAS and constitutes the valid
and binding obligation of WCAS, enforceable in accordance with its terms, except
as the indemnity obligations under Section 3(b) of the Registration Rights
Agreement may be limited by applicable laws and subject, as to the enforcement
of remedies, to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally and to general principles of
equity.
3. The execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby will not
(i) conflict with any provision of the certificate of limited partnership or
agreement of limited partnership of WCAS, and (ii) to our knowledge, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to WCAS
or its properties or assets, other than, in the case of clause (ii), any such
conflict, breach, default, acceleration, termination or violation that would not
materially adversely affect the ability of WCAS to consummate the transactions
contemplated by and perform its obligations under the Transaction Documents and
which would not otherwise have a material adverse effect on the assets,
liabilities, or financial condition of WCAS.
We are attorneys admitted to practice in the State of New York, and
the opinions expressed above are limited to the laws of the State of New York,
the Delaware General Corporate Laws and the Federal laws of the United States
and we do not express any opinion herein concerning any other laws.
The opinions expressed herein have been rendered at your request, are
solely for your benefit in connection with the transactions contemplated by the
Purchase Agreement and may not be relied upon by you in any manner or by any
other person in any manner or for any purpose and may not be communicated or
published by you to any other person for any purpose without our prior written
consent. Very truly yours,
[Reboul, MacMurray, Hewitt, Maynard & Kristol]
EXHIBIT K
---------
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
LABONE, INC.
----------------------------------
Pursuant to the provisions of the General and Business Corporation Law of
Missouri, the undersigned Corporation certifies the following:
(1) The name of the corporation is LabOne, Inc. (the
"Corporation").
(2) The amendment to the Corporation's Articles of Incorporation set
forth below was adopted by the shareholders of the Corporation on
[___________] [___], [20__].
(3) Article X of the Company's Articles of Incorporation is hereby
amended by deleting in its entirety Section B(2) and replacing it
with the following:
"2. The term "Related Person" shall mean any individual, corporation,
partnership or other person or entity which, as of the record date
for the determination of shareholders entitled to notice of and to
vote on any Business Combination, or immediately prior to the
consummation of any such Business Combination, is a "Beneficial
Owner" (as defined in Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934 as in effect at the date of
the adoption of this Article X by the shareholders of the
Corporation) (collectively and as so in effect, the "Exchange Act")
of shares of any class or series of capital stock of the Corporation
which, when combined with the shares of such class or series of stock
of which any "Affiliates" or "Associates" (as defined in Rule 12b-2
of the Exchange Act) of such individual, corporation, partnership or
other person or entity are Beneficial Owners, amount to ten percent
(10%) or more of the outstanding shares of such class or series of
stock, and any Affiliate or Associate of such Related Person;
provided, however, that neither Welsh, Carson, Anderson & Stowe IX,
L.P. ("WCAS") nor any of its general partners or Controlled Entities
("WCAS Parties") shall be considered a Related Person. "Controlled
Entities" shall mean entities in which any one or more of the WCAS
Parties owns a majority of the voting shares or securities or has the
ability (whether through the ownership of voting securities,
contracts or otherwise) to elect a majority of the board of directors
or similar governing body or of which any one or more of the WCAS
Parties has the authority to control or direct investment decisions."
(4) Article X of the Company's Articles of Incorporation is hereby
amended by deleting in its entirety Section B(3) and replacing it
with the following:
"3. The term "Continuing Directors" shall mean the individuals who
constituted the Board of Directors of the Corporation on the date of
this amendment to Article X (the "Incumbent Directors"); provided,
that any individual becoming a director during any year shall be
considered to be an Incumbent Director if (i) such individual's
election, appointment or nomination was recommended or approved by at
least two-thirds of the other Incumbent Directors continuing in
office following such election, appointment or nomination present, in
person or by telephone, at any meeting of the Board of Directors of
the Corporation, after the giving of a sufficient notice to each
Incumbent Director so as to provide a reasonable opportunity for such
Incumbent Directors to be present at such meeting or (ii) such
individual was nominated, appointed or selected by the holders of
Series B-1 Preferred Stock or nominated, appointed or selected in
accordance with Section 6.02 of that certain Securities Purchase
Agreement dated August 31, 2001 among the Company, WCAS and the other
purchasers named on Schedule I thereto."
(5) On the record date for the shareholders meeting held on
[_____________] [___], [20__], the Corporation had [____________]
shares outstanding. All [____________] shares were entitled to vote
on the amendment.
IN WITNESS WHEREOF, the President of LabOne, Inc. has executed
this instrument and the Secretary of LabOne, Inc. has affixed its
corporate seal hereto and attested said seal on the [____] day of
[__________], [20__].
LABONE, INC.
By:
----------------------
W. T. Grant II
President
ATTEST:
---------------------
Joseph C. Benage
Secretary
STATE OF KANSAS )
) ss.
COUNTY OF JOHNSON )
I, _______________________, a Notary Public do hereby certify that on
this ____ day of _____________, 20__, personally appeared before me
________________, who being by me first sworn, declared that he is the
President of LabOne, Inc., that he signed the foregoing document as
President of the corporation, and that the statements therein contained
are true.
-------------------------
Notary Public
My commission expires:
---------------------
SCHEDULE I
Purchasers/Initial Securities
-----------------------------
Principal
Amount
Number of Number of Number of of Total
Series B-1 Series B-2 Initial Series A Purchase
Purchasers Preferred Shares Preferred Shares Warrants Notes Price
---------- ---------------- ---------------- -------- ----- -----
Welsh, 13,592 20,388 339,801 $14,562,900 $48,543,000
Carson,
Anderson
&Stowe IX,
L.P.
WCAS 7 10 147 6,300 21,000
Management
Corporation
Patrick J. 51 78 1,302 55,809 186,027
Welsh
Rusell Carson 51 78 1,302 55,808 186,027
Bruce K. 51 77 1,303 55,808 186,027
Anderson
Thomas E. 52 78 1,302 55,808 186,027
McInerney
Robert A. 52 78 1,302 55,808 186,028
Minicucci
Lawrence B. 52 78 1,302 55,808 186,028
Sorrel
Anthony J. 38 56 938 40,196 133,986
DeNicola
Paul B. 28 42 703 30,147 100,490
Queally
IRA FBO 8 13 209 8,958 29,860
Jonathan M.
Rather
D. Scott 7 11 175 7,500 25,000
Mackesy
Sanjay Swani 1 1 14 600 2,000
John D. Clark 1 1 14 600 2,000
IRA FBO James 1 1 14 600 2,000
R. Matthews
Sean Traynor 6 8 140 6,000 20,000
John Almeida 1 1 18 750 2,500
Eric J. Lee 1 1 14 600 2,000
---------------------------------------------------------------
Totals 14,000 21,000 350,000 $15,000,000 $50,000,000
===============================================================