10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended September 30, 2001

Commission file number: 0-16946

LabOne, Inc.

10101 Renner Blvd.

Lenexa, Kansas 66219

(913) 888-1770

Incorporated in Missouri

I.R.S. Employer Identification Number: 43-1039532

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /X/    No /  /

Number of shares outstanding of only class of Registrant's common stock, $.01 par value, as of October 31, 2001 - 10,803,310 net of 2,246,710 shares held as treasury stock.

LabOne, Inc.

Form 10-Q for the Third Quarter, 2001

Table of Contents

PART I.   FINANCIAL INFORMATION

ITEM 1.   Financial Statements:

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART II.   OTHER INFORMATION

PART I. FINANCIAL INFORMATION

ITEM 1 - Financial Statements

LabOne, Inc. and Subsidiaries
Consolidated Balance Sheets

	September 30,	December 31,
	2001	2000
ASSETS
Current assets:
Cash and cash equivalents	$    1,607,453	1,571,734
Accounts receivable - trade, net of allowance for doubtful       accounts of $3,035,095 in 2001 and $4,406,612 in 2000	46,796,172	33,916,445
Income taxes receivable	411,173	2,065,750
Inventories	5,794,368	3,276,794
Prepaid expenses and other current assets	4,775,745	3,948,390
Deferred income taxes	2,351,646	2,740,824
Total current assets	61,736,557	47,519,937
Property, plant and equipment	104,518,104	89,244,999
Less accumulated depreciation	57,115,208	43,936,028
Net property, plant and equipment	47,402,896	45,308,971
Other assets:
Goodwill, net of accumulated amortization	82,674,974	34,728,755
Bond issue costs, net of accumulated       amortization of $53,859 in 2001 and $40,758 in 2000	138,287	151,388
Deposits and other assets	97,739	270,124
Total assets	$ 192,050,453	127,979,175
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$   22,273,961	14,516,703
Accrued payroll and benefits	7,713,364	4,457,136
Other accrued expenses	3,034,302	1,714,033
Other current liabilities	480,886	279,228
Notes payable	50,000	81,250
Current portion of long-term debt	1,872,165	1,878,845
Total current liabilities	35,424,678	22,927,195
Long-term payable	1,016,915	1,274,415
Long-term debt	38,564,873	37,402,934
Series A subordinated debt	15,000,000	—
Series B-1 preferred stock dividend	93,333	—
Deferred income taxes - noncurrent	1,881,000	1,663,669
Series B-2 preferred stock	21,000,000	—
Stockholders' equity:
Preferred stock, $.01 par value per share; 3,000,000 shares authorized,       Series B-1 (Convertible), 14,000 shares issued	14,000,000	—
Common stock, $.01 par value per share; 40,000,000 shares       authorized, 13,050,020 shares issued	130,500	130,500
Additional paid-in capital	34,583,642	31,609,884
Equity adjustment from foreign currency translation	(850,913)	(832,280)
Retained earnings	65,088,758	69,234,884
	112,951,987	100,142,988
Less treasury stock of 2,246,710 shares in 2001          and 2,324,671 shares in 2000	33,882,333	35,432,026
Total stockholders' equity	79,069,654	64,710,962
Total liabilities and stockholders' equity	$ 192,050,453	127,979,175

See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.

LabOne, Inc. and Subsidiaries
Consolidated Statements of Operations

	Three months ended		Nine months ended
	September 30,		September 30,
	2001	2000	2001	2000
Sales	$58,234,380	43,626,533	164,294,335	123,368,602
Cost of sales
Cost of sales expenses	41,283,616	29,086,601	114,520,998	80,317,835
Depreciation expense	756,400	596,269	2,097,867	1,729,335
Total cost of sales	42,040,016	29,682,870	116,618,865	82,047,170
Gross profit	16,194,364	13,943,663	47,675,470	41,321,432
Selling, general and administrative
Selling, general and administrative expenses	13,063,679	9,953,722	36,118,137	30,005,574
Depreciation expense	1,267,074	1,093,831	3,659,123	3,031,637
Amortization expense	4,313,081	1,045,001	7,052,695	3,128,422
Total selling, general and administrative	18,643,834	12,092,554	46,829,955	36,165,633
Earnings (loss) from operations	(2,449,470)	1,851,109	845,515	5,155,799
Interest expense	(919,943)	(673,127)	(2,132,171)	(1,771,272)
Interest income and other	311,703	18,340	460,102	58,738
Earnings (loss) before income taxes	(3,057,710)	1,196,322	(826,554)	3,443,265
Income tax expense	431,199	838,795	1,661,335	2,304,500
Net earnings (loss)	(3,488,909)	357,527	(2,487,889)	1,138,765
Basic and diluted earnings (loss) per common share	(0.33)	0.03	(0.24)	0.10
Net Earnings (loss)	(3,488,909)	357,527	(2,487,889)	1,138,765
Preferred Dividend on B-1 preferred stock	(93,333)	—	(93,333)	—
Net earnings (loss) available to common shareholders	(3,582,242)	357,527	(2,581,222)	1,138,765
Basic weighted average common shares outstanding	10,893,256	10,715,349	10,789,660	10,918,612
Effect of dilutive securities:
Stock options	55,988	8,522	18,332	2,830
Convertible preferred stock	550,533	—	185,528	—
Diluted weighted average common shares outstanding	11,499,777	10,723,871	10,993,520	10,921,442

See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.

LabOne, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 2001

				Accumulated
			Additional	other			Total
	Common	Preferred	paid-in	comprehensive	Retained	Treasury	stockholders'	Comprehensive
	stock	stock	capital	income	earnings	stock	equity	income
Balance at December 31, 2000	$  130,500	—	31,609,884	(832,280)	69,234,884	(35,432,026)	64,710,962
Comprehensive income:
Net loss	—	—	—	—	(2,487,889)	—	(2,487,889)	(2,487,889)
Equity adjustment from foreign       currency translation	—	—	—	(18,633)	—	—	(18,633)	(18,633)
Comprehensive income (loss)								(2,506,522)
Financing costs	—	—	(1,112,759)	—	—	—	(1,112,759)
Preferred stock issued	—	14,000,000	—	—	—	—	14,000,000
Warrants issuance and beneficial conversion feature	—	—	4,798,904	—	(1,564,904)	—	3,234,000
Preferred stock dividend	—	—	—	—	(93,333)	—	(93,333)
Stock options exercised (27,961 shares)	—	—	(326,998)	—	—	555,803	228,805
Warrants exercised (50,000 shares)	—	—	(385,389)	—	—	993,890	608,501
Balance at September 30, 2001	$  130,500	14,000,000	34,583,642	(850,913)	65,088,758	(33,882,333)	79,069,654

See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.

LabOne, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

	Nine months ended September 30,
	2001	2000
Cash provided by (used for) operations:
Net earnings (loss)	$ (2,487,889)	1,138,765
Adjustments to reconcile net earnings to          net cash provided by operations:
Depreciation and amortization	12,827,729	7,909,315
Provision for loss on accounts receivable	2,191,108	1,802,789
Loss on disposal of property and equipment	54,770	2,364
Stock compensation	228,806	162,404
Provision for deferred taxes	606,087	175,514
Changes in (net of acquisition of Osborn):
Accounts receivable	(15,053,534)	(5,901,922)
Income taxes	1,654,577	82,577
Inventories	(1,000,727)	179,305
Prepaid expenses and other current assets	(540,601)	(2,958,972)
Accounts payable	5,786,171	93,064
Accrued payroll & benefits	3,256,228	1,874,921
Other accrued expenses	1,292,261	778,351
Other current liabilities	(412,372)	(353,881)
Other	173,085	—
Net cash provided by operations	8,575,699	4,984,594
Cash provided by (used for) investment transactions:
Property, plant and equipment, net	(6,126,461)	(7,009,599)
Acquisition of businesses	(52,328,815)	(642,604)
Other	—	10,040
Net cash used for investment transactions	(58,455,276)	(7,642,163)
Cash provided by (used for) financing transactions:
Purchase of treasury stock	—	(5,948,493)
Proceeds from the exercise of stock warrants	500	—
Proceeds from issuance of subordinated note	15,000,000	—
Proceeds from issuance of preferred stock	35,000,000	—
Financing costs	(1,112,759)	—
Line of credit, net	3,000,000	9,000,000
Payments on long-term debt	(1,873,150)	(1,849,183)
Notes Payable	(81,250)	81,250
Net cash provided by financing transactions	49,933,341	1,283,574
Effect of foreign currency translation	(18,045)	(3,853)
Net increase (decrease) in cash and cash equivalents	35,719	(1,377,848)
Cash and cash equivalents - beginning of period	1,571,734	2,983,644
Cash and cash equivalents - end of period	$  1,607,453	1,605,796
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$ 1,742,217	1,724,840
Income taxes	$    918,784	2,427,906

See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.

LabOne, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2001 and 2000

The accompanying consolidated financial statements include the accounts of LabOne, Inc. and its wholly- owned subsidiaries Osborn Group, Inc. (Osborn), Lab One Canada Inc., Systematic Business Services, Inc. (SBSI) and ExamOne World Wide, Inc. (ExamOne). All significant intercompany transactions have been eliminated in consolidation.

The financial information furnished herein as of September 30, 2001 and for the periods ended September 30, 2001 and 2000 is unaudited; however, in the opinion of management, it reflects all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state the Company's financial position, the results of its operations and cash flows. The balance sheet information as of December 31, 2000 has been derived from the audited financial statements as of that date. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States, appropriate in the circumstances, and included in the financial statements are certain amounts based on management's estimates and judgments.

The financial information herein is not necessarily representative of a full year's operations because of the September acquisition of Osborn and levels of sales, capital additions and other factors fluctuate throughout the year. These same considerations apply to all year-to-year comparisons. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted. These condensed, consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000.

Recent Accounting Pronouncements

In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Intangible Assets. Statement No. 141 is effective for business combinations initiated after June 30, 2001 and requires use of the purchase method of accounting. Under Statement No. 142, goodwill and intangible assets with an indefinite life will no longer be amortized; however, both goodwill and intangible assets will need to be tested annually for impairment. Statement No. 142 will be effective for fiscal years beginning after December 15, 2001. LabOne does not expect the adoption of these statements will result in any impairment of goodwill or intangible assets at this time. The cessation of amortization of goodwill will have a significant impact on LabOne.

Forward Looking Statements

This Quarterly report on Form 10-Q may contain "forward-looking statements," including, but not limited to: projections of revenues, income or loss, capital expenditures, statements of plans and objectives, statements of future economic performance and statements of assumptions underlying such statements. Forward-looking statements can often be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should," "could," "intends," "plans," "estimates" or "anticipates," or variations thereof or similar expressions. They involve risks, uncertainties and assumptions. The Company's future results of operations, financial condition and business operations may differ materially from those expressed in these forward-looking statements. Many factors could cause actual results to differ materially from those that may be expressed or implied in such forward-looking statements, including, but not limited to, the volume and pricing of laboratory tests performed by the Company, the extent of market acceptance of the Company's services in the healthcare and substance abuse testing industries, intense competition, labor costs, bad debts, the loss of one or more significant customers, changes in government regulations and attitude toward regulation of the Company's services, general economic conditions and other factors detailed from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission, including the Cautionary Statement filed as Exhibit 99 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Investors are cautioned not to put undue reliance on any forward-looking statement.

Purchase of Osborn Group, Inc.

Pursuant to a Stock Purchase Agreement dated August 31, 2001 (attached as Exhibit 2. to LabOne's Form 8-K/A Current Report filed September 14, 2001), LabOne purchased all of the outstanding capital stock of Osborn Group, Inc., (Osborn) a leading provider of laboratory testing and other risk assessment services to the life insurance industry. Intellisys, Inc., Applied BioConcepts Inc. and Osborn Laboratories (Canada) Inc. are wholly owned subsidiaries of Osborn Group and were included in the purchase. The purchase price was $49 million, which was paid in cash. As a result of the transaction, Osborn became a wholly owned subsidiary of LabOne. With this acquisition, LabOne will have a combined revenue base of $250 million and will annually perform laboratory testing for approximately 10 million individuals for its risk assessment, healthcare and substance abuse testing clients. Due to operational overlap, LabOne expects to generate $5 to $10 million of annual cost sav ings from the acquisition.

To fund the acquisition and related expenses of the transaction, Welsh, Carson, Anderson & Stowe (WCAS) invested a total of $50 million in preferred stock and subordinated debt in LabOne pursuant to a Securities Purchase Agreement dated August 31, 2001. The securities consisted of $14 million of Series B-1 convertible preferred stock, $21 million of Series B-2 preferred stock, and $15 million of subordinated debt. See Part II, Item 2 for further discussion of the issued securities.

Business Segment Information

The company operates three divisions: risk assessment services, healthcare and substance abuse testing (SAT). The following table presents selected financial information for each segment:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2001	2000	2001	2000
Sales:
Risk assessment services	$ 39,438,767	26,132,055	108,884,518	79,784,547
Healthcare	11,442,374	9,758,886	33,848,950	25,524,985
Substance abuse testing	7,353,239	7,735,592	21,560,867	18,059,070
Total Sales	$ 58,234,380	43,626,533	164,294,335	123,368,602
Operating income (loss):
Risk assessment services	$ 2,647,200	2,388,548	8,773,865	8,586,809
Healthcare	(390,484)	(184,122)	(1,476,336)	(1,457,692)
Substance abuse testing	(712,342)	441,702	(930,308)	345,153
General corporate expense	(3,993,844)	(795,019)	(5,521,706)	(2,318,471)
Total earnings (loss) from operations	(2,449,470)	1,851,109	845,515	5,155,799
Other expense	(608,240)	(654,787)	(1,672,069)	(1,712,534)
Earnings (loss) before income taxes	$(3,057,710)	1,196,322	(826,554)	3,443,265

The risk assessment services segment operating income for 2001 includes intersegment charges of $0.9 million for the quarter from the healthcare segment primarily for hepatitis and other miscellaneous medical testing and $0.3 million from the SAT segment for drug screening and confirmations. Indirect expenses are allocated to the operational segments based on the relative revenue of each segment on a monthly basis. General corporate expense represents unallocated expenses, principally the amortization of goodwill resulting from mergers and acquisitions. There were no material changes in assets or in the basis of segmentation or measurement of segment operating income or loss.

Contingencies

In the normal course of business, LabOne had certain lawsuits pending at September 30, 2001. During 2000 and 2001, LabOne became a co-defendant in several cases challenging toxicology results, including the processes and science underlying the determination of substituted or adulterated specimens submitted for toxicology testing. In July 2001, the Company announced that a jury awarded $400,000 in compensatory damages to a flight attendant based upon the drug testing results reported by LabOne. The Company believes that it has properly applied regulatory guidelines required for such testing and has appealed the verdict. The Company is insured for the loss and has reserved for any potential insurance deductibles related to these cases. Management believes that the resolution of these claims will have no material adverse impact on the Company's results of operations.

The Comptroller of the State of Texas conducted an audit of LabOne for sales and use tax compliance for the years 1991 through 1997 and contended that LabOne's insurance laboratory services are taxable under the Texas tax code. The original assessment of $1.9 million was reduced to only include sales of services for applicants who were residents of Texas. LabOne paid the revised assessment of $521,000 under protest in 2000 and is petitioning the Court for recovery of these amounts, including an additional $47,000 filed and paid in protest during 2001 for the period 1998 through August 1999.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

SELECTED FINANCIAL DATA

	Three Months Ended			Nine Months Ended
	September 30,		% Inc.	September 30,		% Inc.
	2001	2000	(%Dec.)	2001	2000	(%Dec.)
Sales	$  58,234,380	43,626,533	33%	164,294,335	123,368,602	33%
Net earnings (loss)	$ (3,488,909)	357,527	(1076%)	(2,487,889)	1,138,765	(318%)
Basic and diluted earnings (loss)    per common share	$ (0.33)	0.03		(0.24)	0.10

LabOne provides high-quality laboratory testing, investigative services and paramedical examinations for the insurance industry; laboratory testing services for the healthcare industry; and substance abuse testing services for employers.

LabOne and its Osborn subsidiary provide underwriting support services to the insurance industry. The laboratory tests performed by the Company are specifically designed to assist an insurance company in objectively evaluating the mortality and morbidity risks of policy applicants. The majority of the testing is performed on specimens of individual life insurance policy applicants. The Company also provides testing services on specimens of individuals applying for medical and disability policies. Through its subsidiaries, Intellisys, SBSI and ExamOne, the Company provides specimen collection, paramedical examinations, telephone inspections, motor vehicle reports, attending physician statements, and claims investigation services.

LabOne's laboratory testing services are provided to the healthcare industry as an aid in the diagnosis and treatment of patients. LabOne operates only one highly automated and centralized laboratory, which the Company believes has significant economic advantages over other conventional laboratory competitors. LabOne primarily markets its clinical testing services to the payers of healthcare costs (insurance companies and self-insured groups). The Company does this through exclusive arrangements with managed care organizations and through Lab Card®, a Laboratory Benefits Management program.

LabOne's substance abuse testing services are provided for employers who adhere to drug screening guidelines. LabOne is certified by the Substance Abuse and Mental Health Services Administration to perform substance abuse testing services for federally regulated employers and is currently marketing these services throughout the country to both regulated and non regulated employers. The Company's rapid turnaround times and multiple testing options help clients reduce downtime for affected employees and meet mandated drug screening guidelines.

THIRD QUARTER ANALYSIS

Net sales increased 33% in the third quarter 2001 to $58.2 million from $43.6 million in the third quarter 2000. The increase of $14.6 million is due to increases in risk assessment services revenue of $13.3 million and healthcare laboratory revenue of $1.7 million, partially offset by a decrease in substance abuse testing (SAT) revenue of $0.4 million.

The risk assessment services division revenue increased $13.3 million to $39.4 million primarily due to growth of ExamOne revenue and the acquisition of the Osborn Group effective September 1, 2001. The total number of insurance applicants tested in the third quarter 2001 increased by 22% as compared to the same quarter last year, and the average revenue per applicant increased 2%. Information services revenue increased 58% primarily due to growth in SBSI services and tele-underwriting services. Revenue from Osborn for the month was $2.6 million.

During the third quarter, healthcare revenue increased 17% to $11.4 million as compared to $9.8 million in the prior year due to a 10% increase in testing volumes and a 7% increase in average revenue per patient. SAT revenue decreased 5% to $7.4 million in 2001 from $7.7 million in 2000 due to a decrease in testing volumes, partially offset by a 3% increase in average revenue per specimen.

Cost of sales increased $12.4 million or 42% in the third quarter 2001 as compared to the prior year, due primarily to increases in outside services including paramed collections and physician statement fees, payroll, postage, and lab supplies expense. Paramedical services increased primarily due to continued growth of the ExamOne paramedical operations. Payroll, postage, and lab and kit supplies increased due to the additional specimen volume in the risk assessment and healthcare laboratory testing segments. Risk assessment cost of sales, including all of the above mentioned factors, increased to $28.5 million in 2001 from $17.8 million in the third quarter 2000. Healthcare cost of sales were $7.3 million as compared to $6.3 million in the third quarter 2000 due to the additional specimen volume. SAT cost of sales were $6.3 million as compared to $5.7 million in the third quarter 2000 due to higher payroll and postage expenses.

As a result of the above factors, gross profit for the quarter increased $2.3 million or 16% from $13.9 million in 2000 to $16.2 million in 2001. Risk assessment gross profit increased $2.6 million on an increase in revenue of $13.3 million. Healthcare gross profit increased $0.6 million on an increase in revenue of $1.7 million. SAT gross profit decreased $1.0 million on a decrease in revenue of $0.4 million.

Selling, general and administrative expenses increased $6.6 million (54%) in the third quarter 2001 as compared to the prior year. A significant factor in this increase was the non-cash amortization expense of $3.2 million related to the warrants issued to Welsh Carson. One-time acquisition related expenses included in the period were approximately $0.7 million, primarily for severance expense. Other factors in the quarter included increased payroll expenses and an increase in bad debt expense in relation to the higher revenue levels. Risk assessment overhead expenditures, including allocations, increased to $8.3 million in 2001 from $6.0 million in the third quarter 2000 due to a larger overhead allocation and payroll base. Healthcare overhead expenditures, including allocated overhead, were $4.5 million as compared to $3.7 million in 2000 due primarily to an increase in payroll and bad debt expense. SAT overhead expenditures, including allocated overhead, increased to $1.8 million as compared to $ 1.6 million in 2000 primarily due to bad debt expense.

Operating income decreased from $1.9 million in the third quarter 2000 to a loss of $2.4 million in 2001. The risk assessment segment operating income on an allocated basis was $2.6 million in 2001 as compared to $2.4 million in the third quarter 2000. The healthcare segment operating loss was $0.4 million in 2001 as compared to an operating loss of $0.2 million in 2000 on an allocated basis. The SAT segment declined to an operating loss of $0.7 million in the third quarter 2001 from a gain of $0.4 million in 2000 on an allocated basis. Unallocated operating expenses, primarily amortization including the Welsh Carson warrant expense, increased to $4.0 million from $0.8 million in the third quarter 2000.

Non operating expense declined slightly due to increased interest income, offset by increased interest expense. The effective income tax rate was 70% in 2000 due to nondeductible amortization expense. In 2001, income tax expense was $0.4 million on a pretax loss of $3.1 million due to nondeductible amortization expense.

The combined effect of the above factors resulted in a net loss of $3.5 million or $0.33 per share in the third quarter 2001 as compared to net income of $0.4 million or $0.03 per share in 2000. The weighted average number of shares outstanding in the third quarter of 2001 and 2000 were 10,893,256 and 10,723,871, respectively.

YEAR-TO-DATE ANALYSIS

Revenue in the nine month period ended September 30, 2001 was $164.3 million as compared to $123.4 million in the same period last year. The increase of $40.9 million or 33% is due to increases in risk assessment revenue of $29.1 million, healthcare revenue of $8.3 million and SAT revenue of $3.5 million.

Risk assessment revenue increased from $79.8 million in the first nine months of 2000 to $108.9 million in the same period in 2001, primarily due to ExamOne revenue growth and an increase in laboratory revenue. The total number of laboratory tested insurance applicants increased by 11% as compared to the last year while the average revenue per applicant remained constant. Revenue from Osborn for the month was $2.6 million.

Healthcare laboratory revenue increased 33% from $25.5 million during the first nine months of 2000 to $33.8 million for the same period in 2001 due to 26% higher testing volumes and higher average revenue per patient. SAT revenue increased 19% from $18.1 million in 2000 to $21.6 million in 2001 primarily due to a 21% increase in testing volumes, partially offset by lower revenue per specimen.

Cost of sales increased $34.6 million year to date to $116.6 million as compared to $82.0 million in the prior year. This increase is due primarily to increases in paramedical services, payroll expenses, inbound freight, lab supplies and insurance information services due to the expansion of all lines of business. Risk assessment cost of sales increased to $77.2 million from $52.1 million in 2000. Healthcare cost of sales were $22.1 million as compared to $16.9 million during the first nine months of 2000, and SAT cost of sales were $17.3 million compared to $13.0 million in 2000.

Gross profit for the first nine months increased from $41.3 million in 2000 to $47.7 million in 2001. Risk assessment gross profit increased $4.0 million. Healthcare gross profit increased $3.1 million, and SAT gross profit decreased $0.8 million.

Selling, general and administrative expenses increased $10.7 million (29%) in the nine month period ended September 30, 2001 as compared to the prior year primarily due to the non cash Welsh Carson warrant amortization expense and increases in payroll, goodwill amortization expense and depreciation expense. Risk assessment overhead expenditures, including allocations, increased from $19.1 million to $22.9 million in 2001, primarily due to growth of ExamOne and the addition of the Osborn Group. Healthcare expenditures, including allocated overhead, were $13.2 million in 2001 as compared to $10.1 million in 2000 due to segment growth, and SAT expenses, including allocations, increased to $5.2 million in 2001 as compared to $4.7 million in 2000 due to amortization expense related to the termination of an exclusive product distribution agreement.

Operating income declined to $0.8 million in the first nine months of 2001 from $5.2 million in 2000. The risk assessment segment, including allocations, had operating income of $8.8 million as compared to $8.6 million in the first nine months last year. On an allocated basis, the healthcare segment had an operating loss of $1.5 million for the nine month period in both 2001 and 2000. The SAT segment, including allocations, had an operating loss of $0.9 million in 2001 as compared to operating income of $0.3 million in 2000. Unallocated operating expenses for the corporate segment related to corporate and merger expenses, including the Welsh Carson warrant amortization, were $5.5 million for the first nine months in 2001 as compared to $2.3 million in 2000.

Net interest expense remained constant during the first nine months of 2001 as compared to 2000 due to increased borrowings offset by lower interest rates. The effective income tax rate was 67% in 2000. In 2001, income tax expense was $1.7 million on a pretax loss of $0.8 million due to nondeductible amortization expense.

The combined effect of the above factors resulted in a net loss of $2.5 million or $0.24 per share in the nine month period ended September 30, 2001 as compared to net income of $1.1 million or $0.10 per share in the same period last year. The weighted average number of shares outstanding in the first nine months of 2001 and 2000 were 10,789,660 and 10,921,442, respectively.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

LabOne's working capital position increased by $1.7 million to $26.3 million at September 30, 2001 from $24.6 million at December 31, 2000. Accounts receivable increased from $33.9 million at December 31, 2000 to $46.8 million as of September 30, 2001, due primarily to the increase in revenue. The allowance for doubtful accounts declined from $4.4 million at year end to $3.0 million as of September 30. This decline is primarily due to implementing new third party collection procedures, which resulted in writing off old accounts receivable that were fully reserved in prior periods.

Net additions to property, plant and equipment in the first nine months of 2001 were $6.1 million primarily due to software and information systems development. Additions in 2000 were $7.0 million, primarily related to investment in information systems infrastructure.

On August 31, 2001, LabOne purchased all of the outstanding capital stock of Osborn for $49 million, which was paid in cash. Pursuant to the Securities Purchase Agreement with WCAS, the Company issued $14.0 million of series B-1 convertible preferred stock which accrues a payment in kind dividend at a rate of 8%. The Company issued $15.0 million of series A subordinated debt bearing a coupon of 11% and $21.0 million of series B-2 preferred stock which currently accrues a payment in kind dividend at a rate of 18%. The accrued payment in kind dividend for the quarterly period was $0.1 million.

Due to the issuance of the series A and series B-2 instruments, net long-term debt increased $37.0 million during the nine month period. Additionally, borrowings on the line of credit in the nine month period increased $3.0 million to $26 million. The total line of credit available is $28 million, which includes a $3 million bridge that expires November 30, 2001. The current interest rate, plus financing fees, on the line of credit is approximately 3.6% and is based on a 30 day LIBOR rate. The Company is currently negotiating additional debt facilities.

A principal payment of $1.85 million was made on the Company's industrial revenue bond on September 1, 2001. Interest on the bond is based on a taxable seven-day variable rate and is currently approximately 3.3%. The Company expects to repay the bond over the remaining eight years at approximately $1.85 million per year plus interest.

During the third quarter 2001, the Company did not repurchase any shares of common stock. The total number of shares of LabOne stock held in treasury at September 30, 2001 was approximately 2.2 million at a total cost of $33.9 million or $15.08 per share.

At September 30, 2001, LabOne had total cash and investments of $1.6 million as compared to $1.6 million at December 31, 2000. The Company expects to fund operations from a combination of cash flows from operations and short-term borrowings.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

An interest rate risk exposure exists due to LabOne's liability of $14.5 million in industrial revenue bonds and $26 million borrowing on its line of credit. The interest expense incurred on the bonds is based on a taxable seven-day variable rate which, including letter of credit and remarketing fees, is approximately 3.3% as of October 1, 2001. The interest expense on the line of credit is based on the 30-day LIBOR rate plus 0.75% and is currently approximately 3.6%. Any future increase in interest rates would result in additional interest expense which could be material and could result in a decision to enter into a long-term interest rate swap transaction.

PART II. OTHER INFORMATION

Item 2. - Changes in Securities and Use of Proceeds

Pursuant to a Securities Purchase Agreement dated August 31, 2001 (attached as Exhibit 4.1 to LabOne's Form 8-K/A Current Report filed October 5, 2001), Welsh, Carson, Anderson & Stowe and related purchasers (WCAS) invested a total of $50 million in preferred stock and subordinated debt in LabOne to fund the acquisition of Osborn and related expenses of the transaction. The equity securities consisted of $14 million of Series B-1 convertible preferred stock which, after shareholder approval, is fully convertible into LabOne common stock and $21 million of Series B-2 preferred stock which, after shareholder approval, is automatically convertible into Series B-1 convertible preferred stock. In connection with the issuance of the Series B-1 convertible preferred stock, LabOne issued to WCAS 350,000 warrants with a nominal strike price. The Series B-1 convertible preferred stock has a conversion price of $8.32, a coupon of 8.0%, payable in kind, and is subject to a limit on its convertibility pending shareholder approval of the termination of such limit. The Series B-2 preferred stock has a coupon of 18%, payable in kind, and upon receipt of shareholder approval, will automatically convert into Series B-1 convertible preferred stock. If shareholder approval of the conversion is obtained prior to February 28, 2002, the Series B-2 coupon will become 8%, retroactive to the date of issuance. WCAS maintains a right of first refusal to invest an additional $30 million in LabOne to fund future acquisitions. Exemption from registration is claimed under Rule 501 of Regulation D based on the representations that WCAS is acquiring the securities for its own account, for investment and not with a view toward resale or distribution; that WCAS understands the securities are not registered; that WCAS has the ability to bear the economic risks of the investment for an indefinite period of time; that WCAS has had access to information about LabOne; that WCAS is knowledgeable and expe rienced in financial and business matters; and that WCAS is an accredited investor.

For a further description of the terms of the Series B-1 convertible preferred stock, the Series B-2 preferred stock and the warrants, and the general effect of the issuance of such securities upon the rights of the holders of the registrant's common stock, see the excerpts from the registrants preliminary proxy statement filed on November 9, 2001, in connection with the special shareholders' meeting scheduled to be held in January 2002, entitled "Terms of Securities Purchase Agreement, Terms of Series B-1 Convertible Preferred Stock, Terms of Series B-2 Preferred Stock" and "Terms of Series B Warrants" and Exhibits 4.2, 4.3 and 4.4 to the registrant's current Form 8 -K/A filed with the Commission on October 9, 2001, copies of which are attached hereto.

Payment of cash dividends on LabOne common stock are currently prohibited by the Company's expanded line of credit agreement with Commerce Bank, N.A.

Item 6. - Exhibits and Reports on Form 8-K

(a) Exhibits

10.1   Severance Agreement between LabOne, Inc. and Thomas J. Hespe, dated September 1, 2001.

10.2   Consulting Agreement between LabOne, Inc. and James R. Seward, dated October 1, 2001.

99.1   Excerpts from LabOne's preliminary proxy statement filed on November 9, 2001.

99.2   Certificate of Designation for Series B-1 Preferred Stock.

99.3   Warrant Agreement dated as of August 31, 2001 by and among LabOne, Inc., Welsh, Carson, Anderson and Stowe IX, L.P. and the other purchasers named on Schedule I to the Securities Purchase Agreement.

99.4   Certificate of Designation for Series B-2 Preferred Stock.

99.5   Form of Series A Senior Subordinated Note.

(b) Reports on Form 8-K

A Form 8-K current report dated August 6, 2001 was filed with the Commission reporting under Item 9. Regulation FD Disclosure, the content of the second quarter conference call to investors.

A Form 8-K current report dated September 14, 2001 was filed with the Commission reporting under Item 2. Acquisition of assets, the acquisition of the Osborn Group, Inc. in conjunction with the investment in LabOne of $50 million by Welsh Carson Anderson and Stowe. Follow up amendments were filed to include exhibits associated with the acquisition and pro forma financial statements were filed as an amendment on November 13, 2001.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LabOne, Inc.

Date:  November 14, 2001	By /s/ John W. McCarty John W. McCarty Executive V.P. and Chief Financial Officer
Date:  November 14, 2001	By /s/ Joseph C. Benage Joseph C. Benage Secretary

EX-10

SEVERANCE AGREEMENT

This Severance Agreement ("Agreement") is made and entered into effective the 1^st day of September, 2001 by and between LABONE, INC. ("LabOne") and THOMAS J. HESPE ("Employee");

WITNESSETH:

WHEREAS, LabOne and Employee entered into an Employment Agreement, dated March 5, 2001 ("Employment Agreement"); and

WHEREAS, LabOne and Employee have agreed to the termination of Employee's employment; and

WHEREAS, LabOne and Employee desire to enter into agreements with respect to such termination and to their relationship prior to and after Employee's termination;

NOW, THEREFORE, in consideration of the promises herein contained, the parties hereto agree as follows:

1. Effective Date of Termination. The effective time and date of Employee's termination shall be midnight, August 31, 2002, or earlier in accordance with the provisions of paragraph 9 hereof ("Termination Date").

2. Resignation of Offices; Duties and Responsibilities. Employee resigns all offices held by Employee with LabOne and its affiliates effective immediately. From September 1, 2001 through December 2, 2001 ("Initial Term"), Employee shall use his best efforts to effect a smooth transition of his prior duties and responsibilities for LabOne to Jim Mussatto (and others designated by LabOne), to retain and preserve for LabOne its relationships with employees, customers, contractors and others having existing or prospective relationships with LabOne, and to protect and maintain the business and goodwill LabOne now enjoys. From December 3, 2001 through the Termination Date ("Final Term"), Employee shall be available at reasonable times, at the request of LabOne, to assist LabOne in the retention of its relationships with customers and others having existing relationships with LabOne. During both the Initial Term and the Final Term, Employee shall not engage in any behavior or act or omit to act in any manner which has or tends to have the effect of: (a) disparaging LabOne, its affiliates or their management to their employees or any third party, (b) promoting a negative image of management of LabOne or its affiliates or the prospects of LabOne or its affiliates, or (c) maligning the officers, directors, tactics or strategies of LabOne.

3. Extent of Continuation of Employment Agreement.

(a) In general. Except as otherwise provided herein, the Employment Agreement is hereby terminated and is of no further force or effect.

(b) Compensation. Employee's compensation as described in paragraph 4 of the Employment Agreement shall continue during the Initial Term. Thereafter, Employee shall be paid monthly compensation of $1,044.21 payable on the 15^th day of each month during the Final Term.

(c) Noncompetition and Nonsolicitation. Employee acknowledges his continuing obligations pursuant to paragraph 8 of the Employment Agreement and agrees to fulfill the requirements of said paragraph 8 of the Employment Agreement for a period of two (2) years following the Termination Date; provided, however, that Employee acknowledges that LabOne currently is engaged in performing substance abuse testing for employment purposes and that the restrictive covenants set forth in paragraph 8 of the Employment Agreement shall apply to that business in addition to the clinical and insurance laboratory testing businesses.

(d) Confidentiality, Developments and Property. Employee acknowledges his continuing obligations pursuant to paragraph 7 of the Employment Agreement and agrees to continue hereafter to fulfill the requirements of said paragraph 7 of the Employment Agreement. Employee hereby represents and warrants that he has fully complied with paragraph 6 of the Employment Agreement. To the extent Employee may have not already done so, he hereby: (i) assigns, transfers and conveys all of his right, title and interest in and to any and all Developments (as defined in paragraph 5 of the Employment Agreement) to LabOne, which Developments shall become and remain the sole and exclusive property of LabOne; and (ii) except the laptop computer and cell phone presently used by Employee (which he may keep as his own), immediately upon the request of LabOne shall return to LabOne all of its property in his possession, including (but not limited to) computers and other equipment, cr edit and debit cards, phones, files, correspondence, notes, recordings, marketing and other brochures, client information and other original materials and copies thereof, in whatever format, pertaining to any aspect of the business of LabOne. In addition, any information stored or contained in computers or computer equipment, or accessible thereby, which is owned by or pertains to LabOne or its affiliates shall be returned to LabOne and all disks, back-ups or copies thereof in the possession of Employee shall be returned to LabOne.

(e) Judicial Relief. LabOne and Employee agree that the provisions of paragraph 9 of the Employment Agreement continue in full force and effect and are not terminated by this Agreement.

4. Effect of Agreement on Rights Under Certain Plans. This Agreement shall not alter any right Employee has as of the Termination Date as a terminated employee under LabOne's Long-Term Incentive Plans, Profit Sharing 401(K) Plan, Employees' Money Purchase Pension Plan or Medical Benefits Plan. Payments made to Employee pursuant to paragraphs 7 and 8 hereof shall not be considered compensation for purposes of the Employees' Money Purchase Pension Plan and the Profit Sharing 401(K) Plan.

5. Communications. Employee agrees that he shall not hereafter voluntarily say, write or do anything inconsistent with the terms of this Agreement which has an adverse effect on the business, affairs, reputation or interests of LabOne or its affiliates. Employee acknowledges that he has been privy to attorney-client communications concerning LabOne's business and legal affairs. Employee agrees never to voluntarily disclose to anyone any advice, recommendation or work product of any of LabOne's attorneys without having first received a writing from LabOne authorizing any such disclosure. Employee further agrees to give LabOne prompt written notice in order to permit LabOne to seek injunctive relief to protect its interests in the event of any attempt by a third party to require any communication, disclosure or act by Employee which Employee is prohibited by the foregoing from making or doing voluntarily.

6. Release. Employee hereby releases and discharges LabOne, its parent and subsidiaries, and their respective officers, directors, agents, employees, representatives, successors and assigns, from and against any and all demands, claims, causes of actions, sums due (except for those provided herein), damages, costs and expenses, related to or arising out of the Employment Agreement, Employee's employment, and any act or omission of LabOne, its subsidiaries and other affiliates, or their respective officers, directors, agents, employees or representatives which has occurred as of the Termination Date, INCLUDING WITHOUT LIMITATION THOSE ARISING UNDER THE EMPLOYMENT RETIREMENT INCOME SECURITY ACT, AS AMENDED, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED, and all state statutes and regulations prohibiting discrimination, whether such demands, claims or causes of action are presently known or unknown.

7. Payments to Employee. Subject to any applicable withholding, LabOne agrees to pay to Employee by check on the following dates the sums set forth below:

	Date	Payment
(a)	One payment on December 1, 2001	16,667
(b)	Eight payments commencing January 1, 2002,  and continuing monthly on the first day of each month thereafter ending August 1,   2002.	12,500
(c)	Four payments commencing September 1, 2002, and continuing monthly on the first day of each month thereafter ending December 1, 2002.	1,044

8. Contingent Additional Payment to Employee. In the events that Employee has performed all his obligations to be then performed by him as required by this Agreement and that the transition of customers and the retention of employees and the business and goodwill of LabOne have been, in the subjective opinion of the president of LabOne, smoothly and otherwise successfully completed, Employee shall be paid an additional $75,000.00 on June 1, 2002.

9. Termination of Employment; Effect. Employee's employment pursuant to this Agreement shall terminate prior to midnight, August 31, 2002, upon the occurrence of Employee's death or disability (as defined in paragraph 10(b) of the Employment Agreement), for cause which shall include any breach of this Agreement, or in the event that at any time the transition of customers and the retention of employees and the business and goodwill of LabOne are not, in the subjective opinion of the president of LabOne, proceeding smoothly and successfully. LabOne and Employee agree that (a) only the obligations of Employee contained in paragraphs 3(c)-(e), 5, 6, 10 and 13 hereof shall survive and continue after any termination of Employee's employment pursuant to this Agreement; and (b) only the obligations of LabOne contained in paragraphs 4, 7(a) and (b), 10 and 13 shall survive and continue after any termination of Employee's employment pursuant to this paragraph 9.

10. Miscellaneous.

(a) Injunctive Relief. LabOne and Employee agree that in the event Employee violates, or threatens to violate, paragraphs 3(c), 3(d) or 5 hereof, LabOne is reasonably likely to suffer irreparable damages which may be difficult or impossible to value in monetary damages and entitling LabOne to injunctive relief.

(b) Integrated Agreement. This Agreement sets forth the final and complete understanding of the parties with respect to the subject matter hereof. Any previous agreements or understandings between the parties regarding the subject matter hereof are merged into and are superseded by this Agreement. This Agreement may not be amended without the written consent of the parties hereto.

(c) Assignment. This Agreement is not assignable by Employee. This Agreement shall bind any successor of LabOne.

(d) Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Kansas. All remedies provided for herein are nonexclusive.

11. TWENTY ONE-DAY EVALUATION PERIOD. EMPLOYEE UNDERSTANDS THAT HE HAS TWENTY-ONE (21) DAYS IMMEDIATELY FOLLOWING THE DAY THAT HE RECEIVES THIS SEVERANCE AGREEMENT IN WHICH TO CONSIDER WHETHER OR NOT HE WANTS TO SIGN THIS SEVERANCE AGREEMENT.

12. CONSULTATION WITH ATTORNEY AND RIGHT TO REVOKE. EMPLOYEE ACKNOWLEDGES THAT HE HEREBY IS ADVISED TO CONSULT WITH AN ATTORNEY OF HIS CHOICE PRIOR TO SIGNING THIS AGREEMENT, AS IMPORTANT RIGHTS ARE AFFECTED BY THIS AGREEMENT. EMPLOYEE MAY REVOKE THIS AGREEMENT AT ANY TIME DURING THE SEVEN (7) DAYS IMMEDIATELY FOLLOWING ITS SIGNING BY GIVING LABONE WRITTEN NOTICE OF REVOCATION. THIS AGREEMENT WILL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL SUCH SEVEN-DAY REVOCATION PERIOD HAS EXPIRED.

13. Confidential Agreement. The parties agree not to disclose to any person or private or government entity (except their respective legal counsel, taxing authorities for the purpose of disputing or resolving tax controversies or as required by law) the facts or circumstances out of which this Agreement arises and not to disclose to any person or private or government entity (except their respective legal counsel, taxing authorities for the purpose of disputing or resolving tax controversies or as required by law) the terms and fact of this Agreement, except as may be necessary to enforce its terms.

IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written.

"Employer"	"Employee"
LabONE, Inc.
By: /s/ W. Thomas Grant II	/s/ Thomas J. Hespe
	Thomas J. Hespe

EX-10

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT ("Agreement") is entered into on this 1st day of October, 2001, by and between LabOne, Inc., a Missouri corporation (the "Company"), and JAMES R. SEWARD, an individual (the "Consultant");

W I T N E S S E T H:

WHEREAS, Consultant (i) currently is a Director of the Company, (ii) formerly served as a consultant to and as Senior Vice President and Chief Financial Officer of the Company, (iii) has substantial knowledge and experience regarding the financial and business affairs of the Company (the "Business"), and (iv) has substantial and valuable contacts in the financial community relating to the Business of the Company;

WHEREAS, the Company wishes to retain Consultant and Consultant is willing to serve the Company in accordance with the terms and conditions of this Consulting Agreement;

NOW, THEREFORE, the Company and Consultant hereby agree as follows:

1. Engagement of Consultant. The Company hereby engages Consultant to consult and assist the Company in the Business, and Consultant hereby accepts such engagement from the Company, upon the terms and conditions herein set forth. The Company shall have no control over the methods used by Consultant in performing services hereunder. Consultant shall be treated for all federal and state income and employment tax and other purposes as an independent contractor and not as an employee of the Company. To the extent that Consultant shall be treated as an employee of the Company, and as a consequence the Company incurs additional tax or other costs and liabilities, Consultant shall reimburse the Company for the amount of such additional taxes and other costs and liabilities.

2. Performance of Duties. During the Term (as hereinafter defined) of this Agreement, Consultant shall assist the Company in strategic and management planning. Consultant also shall assist the Company in identifying acquisition candidates and in performing the financial analysis by the Company of any pending business acquisitions during the Term of this Agreement. Consultant shall perform his duties under this Agreement faithfully, diligently and competently to the best of his ability, and shall devote an average of eight hours per week to the affairs of the Company and its affiliates, as reasonably requested by the Company, at times mutually agreed upon.

3. Term. The term ("Term") of this Agreement shall commence on the date hereof and shall continue until terminated at any time by either party upon written notice to the other party.

4. Compensation. In consideration for Consultant's performance of services under this Agreement, the Company shall pay Consultant $4,000.00 per month payable on the 15^th of each month during the term of this Agreement. In addition, effective not later than January 1, 2002 the Company shall purchase for Consultant, and the Company shall maintain in effect for five years after such effective date, a rate saver medical policy having a $5,000 annual deductible. Estimated costs for the policy are: Year 1 - $707; Year 2 - $794; Year 3 - $873; Year 4 - $961; and Year 5 - $1,057, but in no event shall the Company be obligated to pay more than $1,200 in premiums for any year. The Company's obligation to purchase and maintain such policy, subject to the cap on premium cost, shall survive termination of this Agreement.

5. Reimbursement of Expenses. The Company shall promptly reimburse Consultant for reasonable expenses incurred by him in connection with the performance of his consulting services under this Agreement, subject to the receipt by the Company of acceptable substantiation of such expenses.

6. Confidentiality. During the term of and at any time after the termination of this Agreement, Consultant will hold in trust and confidence and will not divulge, disclose or convey to any person, firm, corporation or other entity and will keep secret and confidential all trade secrets, proprietary information and confidential information heretofore or hereafter acquired by him concerning LabOne or its affiliates, and will not use the same for himself or others in any manner, except to the extent that such information is no longer a trade secret, proprietary or confidential through no fault of Consultant.

7. Successors and Assigns. The rights and obligations of the parties under this Agreement shall inure to the benefit of and be enforceable by and binding upon them and their respective successors and assigns, except that Consultant shall not delegate his duties under this Agreement.

8. Miscellaneous.

(a) Entire Agreement. This Agreement constitutes the full and complete agreement between the parties with respect to the subject matter hereof and shall not be modified or amended except in a writing executed by each of them.

(b) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Kansas.

(c) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall constitute one and the same Agreement, and each of which shall be deemed an original.

(d) Waiver. The provisions of this Agreement may be waived only in a writing signed by the party against whom such waiver is sought to be enforced. The failure of either party, at any time or times, to require performance of any provision hereof shall in no manner affect such party's right to enforce the same provision at a later time. No waiver by either party of any condition, or the breach of any term, agreement or covenant in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be construed as a further or continuing waiver of any such condition or breach or waiver of any other condition or breach of any other term, agreement or covenant of this Agreement.

(e) Attorney's Fees. In any action at law or in equity between the parties to enforce any of the provisions or rights under this Agreement, the unsuccessful party shall pay to the successful party all of his or its, as the case may be, costs, expenses and reasonable attorney's fees incurred therein.

IN WITNESS WHEREOF, the parties have duly executed this Agreement on the day and year first above written.

"Company"

LabOne, Inc.

By: /s/ W. Thomas Grant II

W. Thomas Grant II

Chairman, President and Chief Executive Officer

"Consultant"

/s/ James R. Seward

James R. Seward

EX-99

Exhibit 99.

Excerpts from LabOne's preliminary proxy statement filed on November 9, 2001

EX-99

                                                                        Ex. 4.2

                           CERTIFICATE OF DESIGNATION
                                       OF
                              SERIES B-1 CUMULATIVE
                           CONVERTIBLE PREFERRED STOCK
                                       OF
                                 LABONE, INC.

                       (Pursuant to Section 351.180 of the
                General and Business Corporation Law of Missouri)

                   -------------------------------------------

     LabOne, Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under the General and Business Corporation Law of
Missouri (the "GBCL"), hereby certifies that, pursuant to authority vested in
the Board of Directors of the Corporation by Article III of the Articles of
Incorporation of the Corporation, the following resolution was duly adopted at a
meeting of the Board of Directors of the Corporation duly called and held on
August 24, 2001 and August 29, 2001:

     "RESOLVED, that pursuant to authority vested in the Board of Directors of
the Corporation by Article III of the Articles of Incorporation of the
Corporation, there is hereby created a series of Preferred Stock designated as
"Series B-1 Cumulative Convertible Preferred Stock" (the "Series B-1 Preferred
Stock"), consisting of Forty Five Thousand (45,000) shares of the authorized but
unissued shares of preferred stock, $.01 par value per share, of the
Corporation;

     FURTHER RESOLVED, that the Series B-1 Preferred Stock shall have the
powers, preferences and rights, and qualifications, limitations and restrictions
thereof set forth in Appendix B-1 attached hereto."





     IN WITNESS WHEREOF, this Certificate of Designation has been executed by
the Corporation by its President and attested by its Secretary this 29 day of
August 2001.


                               LABONE, INC.


                               /s/ W. Thomas Grant II
                               --------------------------------
                               W. Thomas Grant II
                               President

Attest:


/s/ Joseph C. Benage
- -------------------------
Joseph C. Benage
Secretary


                                       2




STATE OF MISSOURI  )
                     ss:
COUNTY OF JACKSON  )


     I, Cheryl Duren, a Notary Public, do hereby certify that on the
29th day of August 2001, personally appeared before me W. Thomas Grant II who
being by me first duly sworn, declared that he is the President of LabOne, Inc.,
that he signed the foregoing document of the Corporation, and that the
statements therein contained are true.



                          /s/ Cheryl Duren
                          ----------------------------------------
                          Notary Public

                          My commission expires: August 14, 2002
                                                 -----------------



                                       3



                                  APPENDIX B-1

                        POWERS, RIGHTS AND PREFERENCES OF
                              SERIES B-1 CUMULATIVE
                           CONVERTIBLE PREFERRED STOCK
                                       OF
                                  LABONE, INC.


     1. Rank. The Series B-1 Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution and winding up, rank (i) pari
passu with (A) the Corporation's Series B-2 Cumulative Convertible Preferred
Stock (the "Series B-2 Preferred Stock") and (B) to the extent when these shares
are authorized and issued by the Board of Directors of the Corporation and the
related certificates of designation for such series are filed with the Office of
the Secretary of State of the State of Missouri, the Corporation's Series C-1
Cumulative Convertible Preferred Stock (the "Series C-1 Preferred Stock") and
Series C-2 Cumulative Convertible Preferred Stock (the "Series C-2 Preferred
Stock"; together with the Series B-1 Preferred Stock, the Series B-2 Preferred
Stock, and the Series C-1 Preferred Stock, the "Preferred Stock") and (ii)
senior to all classes of the Corporation's common stock, par value $.01 per
share ("Common Stock"), and to each other class of capital stock of the
Corporation now or hereafter established (collectively, the "Junior
Securities"). The definition of Junior Securities shall also include any rights
or options exercisable for or convertible into any of the Junior Securities.

     2. Dividends.

     (a) Each holder of record of Series B-1 Preferred Stock shall be entitled
to receive cumulative dividends in an amount per share equal to eight percent
(8%) per annum on the Accrued Value. Such dividends shall accrue from and after
the date of issue (except that dividends on any amounts added to the Accrued
Value shall accrue only from the date such amounts are added to the Accrued
Value) and shall be added to the Accrued Value semi-annually, whether or not
declared and whether or not there are any funds of the Corporation legally
available for the payment of dividends, on February 28th and August 31st of each
year (each such date being a "Dividend Accrual Date" and each such semi-annual
period being a "Dividend Period"), commencing with the first such date following
the date of issue. Dividends for any period shorter than a Dividend Period shall
be computed on the basis of the actual number of days elapsed over twelve 30-day
months and a 360-day year. Notwithstanding the foregoing, the Put/Call Date
shall be treated as a Dividend Accrual Date, and after the Put/Call Date,
accrued dividends shall be payable in the form of cash on each succeeding
Dividend Accrual Date, out of funds legally available for the payment of
dividends. If any dividends accrued after the Put/Call Date are not paid in cash
on any Dividend Accrual Date occurring after the Put/Call Date, the unpaid
amount thereof shall be added to the Accrued Value on each such Dividend Accrual
Date for purposes of calculating succeeding periods' dividends.

     (b) In case the Corporation shall make any dividend or distribution to
holders of Common Stock, whether payable in cash, securities or other property
(other than dividends or

                                       4



distributions payable solely in Common Stock), the holder of each share of
Series B-1 Preferred Stock on the record date for such dividend or distribution
shall be entitled to receive an equivalent dividend or distribution based on the
number of shares of Common Stock into which such share of Series B-1 Preferred
Stock is convertible on such record date (without regard to any Conversion Cap
then in effect).

     (c) So long as any shares of Series B-1 Preferred Stock are outstanding, no
Junior Securities shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Securities) or any
cash dividend made on any Junior Security other than (i) a dividend on the
Corporation's Common Stock as determined and declared by the Board of Directors
in which the holders of the Series B-1 Preferred Stock participate in accordance
with subparagraph (b) above or (ii) repurchases of shares from employees of the
Corporation and its subsidiaries upon termination of the holder's employment.

     (d) The date on which the Corporation initially issues any particular share
of Series B-1 Preferred Stock shall be deemed to be its "date of issue" for
purposes hereof regardless of the number of times transfer of such share is made
on the stock records maintained by or for the Corporation and regardless of the
number of certificates that may be issued to evidence such share. The date on
which the Corporation initially issues the first share of Series B-1 Preferred
Stock shall be referred to as the "Original Date of Issue".

     3. Liquidation Preference.

     (a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (each a "Liquidation Event"),
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holder of each share of Series B-1 Preferred Stock shall be
entitled to receive an amount per share equal to the Liquidation Value of such
share on the date of distribution, and such holders shall not be entitled to any
further payment. If, upon any Liquidation Event, the assets of the Corporation,
or proceeds thereof, distributable among the holders of the Preferred Stock
shall be insufficient to pay in full the preferential amount due on such shares,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares of Preferred Stock if all amounts
payable thereon were paid in full. Solely for the purposes of this paragraph 3,
a Change of Control shall not be deemed to be a Liquidation Event.

     (b) After payment shall have been made in full to the holders of the
Preferred Stock, as provided in this paragraph 3, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed to holders of capital stock of the
Corporation, and the holders of the Preferred Stock shall not be entitled to
share therein.


                                       5



     4. Conversion.

     (a) (i) Subject to the provisions of this paragraph 4, each holder of
shares of Series B-1 Preferred Stock shall have the right, at any time and from
time to time, at such holder's option, to convert its outstanding shares of
Series B-1 Preferred Stock, in whole or in part, into fully paid and
non-assessable shares of Common Stock. Subject to subparagraph 4(a)(ii) below,
the number of shares of Common Stock deliverable upon conversion of one share of
Series B-1 Preferred Stock shall be equal to (i) the Accrued Value of such share
on the date of conversion (treating such date as a Dividend Accrual Date for
purposes of calculating the Accrued Value on such date), divided by (ii) the
Conversion Price on such date. No notice delivered by the Corporation pursuant
to paragraph 5 or 6 will limit in any way any holder's rights to convert
pursuant to this paragraph 4(a). In order to exercise the conversion privilege
set forth in paragraph 4(a), the holder of the shares of Series B-1 Preferred
Stock to be converted shall surrender the certificate representing such shares
at the office of the Corporation, with a written notice of election to convert
completed and signed, specifying the number of shares to be converted. Each
conversion pursuant to paragraph 4(a) shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of Series B-1 Preferred Stock shall have been surrendered and such
notice received by the Corporation as aforesaid, and the person in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby at such time on such
date. Effective upon such conversion, the shares of Series B-1 Preferred Stock
so converted shall no longer be deemed to be outstanding, and all rights of a
holder with respect to such shares surrendered for conversion shall immediately
terminate except the right to receive the Common Stock and other amounts payable
pursuant to this paragraph 4.

          (ii) Unless Shareholder Approval is obtained, in no event shall any
conversion, series of conversions, or exchange (pursuant to paragraph 4, 5, or 6
or otherwise), of the Series B-1 Preferred Stock (together with the number of
shares of Common Stock then issued or issuable upon exercise of the Initial
Warrants (as defined in the Purchase Agreement) and the Additional Warrants (as
defined in the Purchase Agreement), if any) result in the issuance, in the
aggregate, of a number of shares of Common Stock in excess of 19.9% of the
shares of Common Stock outstanding immediately prior to the issuance of the
Series B-1 Preferred Stock on the Original Date of Issue (subject to
proportional adjustment for any stock split, stock dividend, recapitalization,
reverse stock split or other similar event with respect to the Common Stock)
(the resulting number, the "Conversion Cap Number" and the resulting limitation
the "Conversion Cap"). Any portion of the Accrued Value that at any time may not
be converted into or exchanged for Common Stock as a result of the Conversion
Cap (whether in connection with a conversion or exchange or otherwise) shall,
(x) at the option of the holder, be immediately paid in cash by the Corporation
or immediately converted into shares of Series B-2 Preferred Stock and (y)
following such payment or conversion be deducted from the Accrued Value. If
Shareholder Approval is obtained, this subparagraph 4(a)(ii) shall be of no
further force or effect.

     (b) (i) Unless the shares issuable on conversion pursuant to this paragraph
4 are to be issued in the same name as the name in which such shares of Series
B-1 Preferred Stock are registered, each share surrendered for conversion shall
be accompanied by instruments of

                                       6



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 B-1
Preferred Stock with a written notice of election to convert as aforesaid, the
Corporation shall issue and shall deliver to such holder, or on the holder's
written order (upon compliance with subparagraph (b)(i) hereof and federal and
state securities laws applicable thereto which require the holder to take any
action) to the holder's transferee, a certificate or certificates for the whole
number of shares of Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this paragraph 4.

          (iii) All shares of Common Stock delivered upon conversion of the
Series B-1 Preferred Stock will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges (other than caused
by the holder) and not subject to any preemptive rights.

     (c) (i) Upon receipt by the Corporation of the shares of Series B-1
Preferred Stock to be converted and a notice of election to convert pursuant to
paragraph 4(a) above, the right of the Corporation to purchase such shares of
Series B-1 Preferred Stock shall terminate, regardless of whether a Put/Call
Corporation Notice has been mailed pursuant to paragraph 6.

          (ii) From and after the effectiveness of conversion of Series B-1
Preferred Stock into Common Stock pursuant to paragraph 4(a) above, in lieu of
dividends on such Series B-1 Preferred Stock pursuant to paragraph 2, such
Series B-1 Preferred Stock shall participate equally and ratably with the
holders of shares of Common Stock in all dividends paid on the Common Stock.

     (d) (i) The Corporation shall at all times reserve and keep available, free
from preemptive rights, such number of its authorized but unissued shares of
Common Stock as shall be required for the purpose of effecting conversion of the
Series B-1 Preferred Stock.

          (ii) Prior to the delivery of any securities which the Corporation
shall be obligated to deliver upon conversion of the Series B-1 Preferred Stock,
the Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation.

     (e) The Corporation will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock on conversion of the Series B-1 Preferred Stock pursuant hereto;
provided, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock in a name other than that of the holder of the Series B-1
Preferred Stock to be converted and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.

                                       7




     (f) Conversion Price.

          (i) In order to prevent dilution of the conversion rights granted
under this paragraph 4, the Conversion Price shall be subject to adjustment from
time to time pursuant to this paragraph (f).

          (ii) If and whenever on or after the Original Date of Issue the
Corporation issues or sells, or in accordance with paragraph (g) is deemed to
have issued or sold, any shares of its Common Stock without consideration or at
a price per share less than the Conversion Price in effect immediately prior to
such issuance or sale (or deemed issuance or sale), then in each such case, the
Conversion Price, upon each such issuance or sale, except as hereinafter
provided, shall be lowered so as to be equal to an amount determined by
multiplying the Conversion Price in effect immediately prior to such issuance or
sale by the following fraction:

                                      P + N
                                   -----------
                                      P + F

     where

     P = the number of shares of Common Stock outstanding immediately prior to
such issuance or sale, assuming the exercise or conversion of all outstanding
securities exercisable for or convertible into Common Stock at any time on or
after the date of such calculation (without regard to any Conversion Cap then in
effect)

     N = the number of shares of Common Stock which the net aggregate
consideration, if any, received by the Corporation for the total number of such
additional shares of Common Stock so issued or sold would purchase at the
Conversion Price in effect immediately prior to such issuance or sale

     F = the number of additional shares of Common Stock so issued or sold.

          (iii) Notwithstanding the foregoing, there shall be no adjustment in
the Conversion Price under this paragraph 4 as a result of (A) any issue or sale
(or deemed issue or sale under paragraph (g)(i) below) of Common Stock to
employees, consultants, contractors, officers and directors of the Corporation
pursuant to (or upon exercise of Options issued pursuant to) compensation plans
or arrangements approved by the Corporation's Board of Directors so long as the
per share consideration determined in good faith by the Board of Directors to
have been received for such shares or the exercise price of any such Options is
not less than the fair market value (as determined in accordance with the
applicable compensation plan or arrangement) of a share of Common Stock on the
date such shares or Options are issued, (B) any issuance of shares of Common
Stock upon conversion of any Preferred Stock, (C) the issuance of any rights
("Rights") under the Corporation's Rights Agreement dated as of February 11,
2000, as amended (the "Rights Plan"), (D) with respect to any holder of Series
B-1 Preferred Stock, the issuance of securities as contemplated by the Rights
Plan as a result of such holder becoming an

                                       8



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.

     (g) Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under paragraph (f), the following
shall be applicable:

          (i) Issuance of Rights or Options. If the Corporation in any manner
grants or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Conversion Price in effect immediately prior to the time of the granting or
sale of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such
Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further adjustment of
the Conversion Price shall be made when Convertible Securities are actually
issued upon the exercise of such Options or when Common Stock is actually issued
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

          (ii) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
the Conversion Price in effect immediately prior to the time of such issue or
sale, then the maximum number of shares of Common Stock issuable upon conversion
or exchange of such Convertible Securities shall be deemed to be outstanding and
to have been issued and sold by the Corporation at the time of the issuance or
sale of such Convertible Securities for such price per share. For the purposes
of this paragraph, the "price per share for which Common Stock is issuable"
shall be determined by dividing (A) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or

                                       9



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 in
effect at the time of such change shall be immediately adjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of paragraph (g), if the
terms of any Option or Convertible Security which was outstanding as of the date
of issuance of the Series B-1 Preferred Stock are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change; provided, that no such change shall at any time cause the Conversion
Price hereunder to be increased.

          (iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise in full of any
such Option or right, the Conversion Price then in effect hereunder shall be
adjusted immediately to the Conversion Price which would have been in effect at
the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding and unexercised immediately prior to such
expiration or termination, never been issued. For purposes of paragraph (g), the
expiration or termination of any Option or Convertible Security which was
outstanding as of the date of issuance of the Series B-1 Preferred Stock shall
not cause the Conversion Price hereunder to be adjusted unless, and only to the
extent that, a change in the terms of such Option or Convertible Security caused
it to be deemed to have been issued after the date of issuance of the Series B-1
Preferred Stock.

          (v) Calculation of Consideration Received. If any Common Stock, Option
or Convertible Security is issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor. If any Common Stock, Option or Convertible
Security is issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving Corporation, the amount of consideration


                                       10



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 B-1
Preferred Stock. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration shall be
determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Corporation and the holders of a majority
of the outstanding Series B-1 Preferred Stock. The determination of such
appraiser shall be final and binding upon the parties, and the fees and expenses
of such appraiser shall be borne by the Corporation.

          (vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.

          (vii) Record Date. If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (a) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (b) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
payment of such dividend or upon the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

     (h) Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased, it being understood that in either such case, no
further adjustment to the Conversion Price shall be made by virtue of any
adjustments made to any other securities of the Corporation that were
outstanding on the Original Date of Issue due to such subdivision or
combination.

     (i) Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Corporation's assets or other transaction, in
each case which is effected in such a manner that the holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, is
referred to herein as an "Organic Change". Prior to the consummation of any
Organic Change, the Corporation shall make appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of the Series B-1
Preferred Stock then outstanding) to insure that each of the holders of Series
B-1 Preferred Stock shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series B-

                                       11



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 B-1 Preferred Stock immediately prior to such Organic
Change. In each such case, the Corporation shall also make appropriate
provisions (in form and substance reasonably satisfactory to the holders of a
majority of the Series B-1 Preferred Stock then outstanding) to insure that the
provisions of paragraph 4 hereof shall thereafter be applicable to the Series
B-1 Preferred Stock (including, in the case of any such consolidation, merger or
sale in which the successor entity or purchasing entity is other than the
Corporation, an immediate adjustment of the Conversion Price pursuant to the
provisions of this paragraph 4 to give effect to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series B-1 Preferred Stock, if the
value so reflected is less than the Conversion Price in effect immediately prior
to such consolidation, merger or sale). The Corporation shall not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance reasonably satisfactory to the holders of a
majority of the Series B-1 Preferred Stock then outstanding), the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.

     (j) Certain Events. If any event occurs of the type contemplated by the
provisions of paragraph 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of Series B-1
Preferred Stock; provided, that no such adjustment shall increase the Conversion
Price as otherwise determined pursuant to paragraph 4 or decrease the number of
shares of Common Stock issuable upon conversion of each share of Series B-1
Preferred Stock.

     (k) Notices.

          (i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series B-1
Preferred Stock, setting forth in reasonable detail and certifying the
calculation of such adjustment.

          (ii) The Corporation shall give written notice to all holders of
Series B-1 Preferred Stock at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.

          (iii) The Corporation shall also give written notice to the holders of
Series B-1 Preferred Stock at least 20 days prior to the date on which any
Organic Change shall take place.

     (l) Certain Mergers. In connection with any consolidation with or merger
with or into, any person in a transaction where the Common Stock is converted
into or exchanged for

                                       12



securities of such person or an affiliate of such person, the Corporation
covenants that as a condition precedent to the consummation of any such
consolidation or merger it shall provide the holders of the Series B-1 Preferred
Stock with a certificate, in form and substance satisfactory to the holders of a
majority of the Series B-1 Preferred Stock signed by a duly authorized officer
of the Corporation indicating that the person issuing such securities will be
organized and existing under the laws of a jurisdiction which allows for the
issuance of preference stock and that the Series B-1 Preferred Stock shall be
converted into or exchanged for and shall become shares of such person having in
respect of such person substantially the same powers, preference and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon that the Series B-1 Preferred Stock had
immediately prior to such transaction.

     (m) Conversion at the Option of the Corporation. If on any date after the
third anniversary of the Original Date of Issue but before the Put/Call Date,
the Daily Price has been at least $16.64 (as adjusted for any stock splits,
stock dividends, reverse stock splits, share consolidations or other similar
transactions) during any 30 trading days out of any consecutive 45 trading day
period, the Corporation may elect, by written notice delivered to the Transfer
Agent (with a copy to each holder of Series B-1 Preferred Stock), no later than
five business days after such date, to cause all outstanding shares of Series
B-1 Preferred Stock to be converted into fully paid and nonassessable shares of
Common Stock. Any such conversion shall be deemed to have been effected, without
further action by any party, immediately prior to the close of business on the
date such notice is received by the Transfer Agent; provided, however, that the
Corporation shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series B-1 Preferred Stock are (or an affidavit of loss in form
reasonably acceptable to the Corporation is) delivered to the Transfer Agent.
The number of shares of Common Stock deliverable upon conversion of one share of
Series B-1 Preferred Stock shall be equal to (i) the Accrued Value of such share
on the date of conversion (treating such date as a Dividend Accrual Date for
purposes of calculating the Accrued Value on such date), divided by (ii) the
Conversion Price on such date.

     5. Change of Control Offer.

     (a) Not less than 20 days prior to the consummation of any Consensual
Change of Control and promptly after the occurrence of any Non-Consensual Change
of Control (the date of any such Change of Control being the "Change of Control
Date"), the Corporation shall commence (or cause to be commenced) an offer to
purchase all outstanding shares of Series B-1 Preferred Stock pursuant to the
terms described in subparagraph (e) below (the "Change of Control Offer") at a
purchase price to be determined in accordance with subparagraph (b) below, and
shall purchase (or cause the purchase of) any shares of Series B-1 Preferred
Stock tendered in response to the Change of Control Offer pursuant to the terms
hereof; provided, that with respect to any Consensual Change of Control, the
Corporation may condition its offer to purchase on consummation of the
Consensual Change of Control.

     (b) At the option of the Corporation, the per share purchase price payable
to each tendering holder shall be payable (A) in cash in an amount equal to the
Change of Control Amount or (B) in a number of shares of Acceptable Stock
determined by dividing the Change of


                                       13



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 (taking into consideration the applicable exchange ratio, if Acceptable
Stock other than Common Stock is to be issued in such Change of Control
transaction), then such per share purchase price shall be equal to a number of
such shares equal to (1) the Accrued Value as of the Change of Control Payment
Date (treating such date as a Dividend Accrual Date for purposes of calculating
the Accrued Value on such date) divided by (2) the Market Price per share of
such shares of Acceptable Stock as of the Change of Control Payment Date divided
by (3) 0.95; provided, further, that, if the number of shares of Common Stock to
be issued as Acceptable Stock would otherwise exceed the Conversation Cap
Number, the Conversion Cap shall apply to such issuance to the same extent that
it would apply to a conversation of Series B-1 Preferred Stock and in lieu of
any shares which may not be issued due to the application of the Conversion Cap,
the Corporation shall pay the corresponding portion of the purchase price in
cash, and each participating holder shall receive cash and shares ratably in
accordance with the number of shares of Series B-1 Preferred Stock held by such
holder.

     (c) Notwithstanding anything to the contrary contained in subparagraph (b)
above, the Corporation shall not have the option of paying the purchase price
required by subparagraph (b) above in Acceptable Stock (and shall pay such
amount in cash) if (i) the holders of the Series B-1 Preferred Stock would be
required to recognize gain or loss for federal or state income tax purposes in
connection with such transaction, (ii) the holders of the Common Stock would
receive any consideration other than Acceptable Stock for their shares of Common
Stock in connection with such transaction, (iii) the average weekly trading
volume of the class of stock to be received for the six month period preceding
such Change of Control Date or market capitalization (excluding shares held by
officers, directors and affiliates thereof) of the issuer of such Acceptable
Stock (with respect to such class of stock) is less than that of the Corporation
for such six month period or as of such date, in each case, prior to giving
effect to such Change of Control transaction.

     (d) If the Corporation elects to pay the Change of Control Amount in cash,
prior to the mailing of the Change of Control Notice referred to in paragraph
(5)(e), the Corporation shall (A) promptly determine if the purchase of the
Series B-1 Preferred Stock for cash would violate or constitute a default under
the indebtedness of the Corporation and (B) either shall repay to the extent
necessary all such indebtedness that would prohibit the repurchase of the Series
B-1 Preferred Stock pursuant to a Change of Control Offer or obtain any
requisite consents or approvals under instruments governing any indebtedness to
permit the repurchase of the Series B-1 Preferred Stock for cash. The
Corporation shall first comply with this subparagraph (5)(d) before it shall
repurchase for cash any Series B-1 Preferred Stock pursuant to this paragraph
(5).

     (e) Not less than 20 days prior to the consummation of any Consensual
Change of Control or within 20 days following the date on which any
Non-Consensual Change of Control

                                       14



has occurred, the Corporation shall send, by first-class mail, postage prepaid,
a notice (a "Change of Control Notice") to each holder of Series B-1 Preferred
Stock. Such notice shall contain all instructions and materials necessary to
enable such holders to tender Series B-1 Preferred Stock pursuant to the Change
of Control Offer. Such notice shall state:

          (i) that a Change of Control has occurred or will occur, as
applicable, that a Change of Control Offer is being made pursuant to this
paragraph 5 and that, subject in the case of a Consensual Change of Control to
the consummation of the Consensual Change of Control (if the Corporation has so
conditioned its Change of Control Offer), all Series B-1 Preferred Stock validly
tendered and not withdrawn will be accepted for payment;

          (ii) the purchase price to be paid for shares tendered in such offer
(estimated as closely as possible in the case of a Consensual Change of
Control), the form of consideration to be paid for tendered shares, and the
purchase date (which shall be the Change of Control Date in the case of a
Consensual Change of Control and a date no earlier than 30 days nor later than
60 days from the date such notice is mailed in the case of a Non-Consensual
Change of Control) (the "Change of Control Payment Date");

          (iii) that any shares of Series B-1 Preferred Stock not tendered will
continue to accrue dividends;

          (iv) that, unless the Corporation defaults in making payment therefor,
any share of Series B-1 Preferred Stock accepted for payment pursuant to the
Change of Control Offer shall cease to accrue dividends after payment therefor
on the Change of Control Payment Date;

          (v) that holders electing to have any shares of Series B-1 Preferred
Stock purchased pursuant to a Change of Control Offer will be required to
surrender stock certificates representing such shares of Series B-1 Preferred
Stock, properly endorsed for transfer, together with such other customary
documents as the Corporation and the Transfer Agent may reasonably request to
the Transfer Agent at the address specified in the notice prior to the close of
business on the Change of Control Payment Date;

          (vi) that holders will be entitled to withdraw their election if the
Corporation receives, not later than five business days prior to the Change of
Control Payment Date, a telegram, facsimile transmission or letter setting forth
the name of the holder, the number of shares of Series B-1 Preferred Stock the
holder delivered for purchase and a statement that such holder is withdrawing
its election to have such shares of Series B-1 Preferred Stock purchased;

          (vii) that holders who tender only a portion of the shares of Series
B-1 Preferred Stock represented by a certificate delivered will, upon purchase
of the shares tendered, be issued a new certificate representing the unpurchased
shares of Series B-1 Preferred Stock; and


                                       15



          (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 B-1 Preferred Stock as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with provisions hereof, the Corporation
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligation hereunder by virtue thereof.

     (g) On the Change of Control Payment Date, subject in the case of a
Consensual Change of Control to the consummation of the Consensual Change of
Control (if the Corporation has so conditioned its Change of Control Offer), the
Corporation shall (A) accept for payment the shares of Series B-1 Preferred
Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the
holders of shares so accepted the purchase price therefor, at the option of the
Corporation, in cash or Acceptable Stock as provided in paragraph (b) above and
(C) cancel each surrendered certificate and retire the shares represented
thereby. Unless the Corporation defaults in the payment for the shares of Series
B-1 Preferred Stock tendered pursuant to the Change of Control Offer, dividends
will cease to accrue with respect to the shares of Series B-1 Preferred Stock
tendered and all rights of holders of such tendered shares will terminate,
except for the right to receive payment therefor on the Change of Control
Payment Date.

     (h) To accept the Change of Control Offer, the holder of a share of Series
B-1 Preferred Stock shall deliver, prior to the close of business on the Change
of Control Payment Date, written notice to the Corporation (or an agent
designated by the Corporation for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Series B-1 Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.

     6. Put/Call.

     (a) At any time on or after the seventh anniversary of the Original Date of
Issue (the "Put/Call Date"), (x) the holders of a majority of the shares of
Series B-1 Preferred Stock then outstanding may, by written notice to the
Corporation (the "Put Notice"), require the Corporation to purchase all of the
outstanding shares of Series B-1 Preferred Stock (the "Put Right") and (y) the
Corporation may, by written notice to each holder of Series B-1 Preferred Stock,
elect to purchase all of the outstanding shares of Series B-1 Preferred Stock
(the "Call Right"). If either the Put Right or the Call Right is exercised, the
consideration per share payable by the Corporation for the shares of Series B-1
Preferred Stock (the "Put/Call Consideration") shall be, at the option of the
Corporation, either:

          (i)  payable in cash in an amount equal to the Accrued Value as of the
               Put/Call Purchase Date (treating such date as a Dividend Accrual
               Date for purposes of calculating the Accrued Value on such date);
               or


                                       16



          (ii) payable through the issuance of the number of shares of Common
               Stock equal to (A) if the Market Price per share for the Common
               Stock as of the Put/Call Purchase Date is at or above the
               Conversion Price, (x) the Accrued Value as of the Put/Call
               Purchase Date (treating such date as a Dividend Accrual Date for
               purposes of calculating the Accrued Value on such date) divided
               by (y) the Market Price per share of the Common Stock as of the
               Put/Call Purchase Date or (B) if the Market Price per share for
               the Common Stock as of the Put/Call Purchase Date is below the
               Conversion Price, (x) the Accrued Value as of the Put/Call
               Purchase Date (treating such date as a Dividend Accrual Date for
               purposes of calculating the Accrued Value on such date), divided
               by (y) the Market Price per share of the Common Stock as of the
               Put/Call Purchase Date, divided by (z) 0.95.

     (b) If the Corporation shall elect to exercise its Call Right, or if the
Corporation shall receive a Put Notice, the Corporation shall promptly give
notice to each holder of record of Series B-1 Preferred Stock; provided, that
neither the failure to give such notice nor any defect therein shall affect the
validity of the giving of notice for the purchase of any share of Series B-1
Preferred Stock to be purchased except as to the holder to whom the Corporation
has failed to give said notice or except as to the holder whose notice was
defective. Each such notice (the "Put/Call Corporation Notice") shall state: (i)
the date of purchase (the "Put/Call Purchase Date"), which shall be no earlier
than 30 days from the date of the Put/Call Corporation Notice and no later than
45 days from the date of the Put Notice, if one has been given; (ii) the form
and amount of the Put/Call Consideration; (iii) the place or places where
certificates for such shares are to be surrendered for payment of the Put/Call
Consideration; and (iv) that dividends on the shares to be purchased will cease
to accrue on the Put/Call Purchase Date.

     (c) The Put/Call Corporation Notice having been mailed as aforesaid, from
and after the Put/Call Purchase Date (unless default shall be made by the
Corporation in providing for the payment of the Put/Call Consideration on such
date), dividends on the shares of Series B-1 Preferred Stock shall cease to
accrue, and all rights of the holders thereof as stockholders of the Corporation
(except the right to receive from the Corporation the Put/Call Consideration)
shall cease. Upon surrender in accordance with said notice of the certificates
for any shares so purchased (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice shall so
state), such shares shall be purchased by the Corporation for the Put/Call
Consideration.

     (d) Notwithstanding the foregoing, if any or all of the Put/Call
Consideration is to be in the form of Common Stock and the Conversion Cap
prohibits the issuance of the number of shares of Common Stock otherwise
required by paragraph 6(a)(ii) above, then, in lieu of any such shares of Common
Stock which may not be issued due to the Conversion Cap, the Corporation shall
pay the corresponding portion of the Put/Call Consideration in cash. If, as a
result of the foregoing, the Corporation is required to include both cash and
Common Stock in the Put/Call Consideration, then each holder of Series B-1
Preferred Stock shall receive shares and cash ratably in accordance with the
number of shares of Series B-1 Preferred Stock held by such holder.


                                       17



     (e) For the avoidance of doubt, nothing in this paragraph 6 shall restrict
the right of the holders of Series B-1 Preferred Stock to convert their shares
of Series B-1 Preferred Stock into shares of Common Stock prior to such holder's
acceptance of the Put/Call Consideration on the Put/Call Purchase Date.

     7. Voting Rights.

     (a) Each holder of Series B-1 Preferred Stock shall be entitled to vote on
or give or withhold consent with respect to all matters submitted to the
stockholders of the Corporation for a vote or action by written consent and
shall be entitled to that number of votes equal to the lesser of (i) the number
of shares of Common Stock into which such holder's shares of Series B-1
Preferred Stock could be converted pursuant to the provisions of paragraph 4
hereof or (ii) the product of (A) the number of shares of Common Stock into
which all outstanding shares of Series B-1 Preferred Stock could be converted
pursuant to the provisions of paragraph 4 hereof if the Conversion Price on the
Original Date of Issue were equal to the Daily Price on the day immediately
prior to the Original Date of Issue and (B) a fraction, the numerator of which
is equal to the number of shares of Series B-1 Preferred Stock held by such
holder, and the denominator of which is equal to the number of shares of Series
B-1 Preferred Stock then outstanding, in each case on the record date for the
determination of shareholders entitled to vote on such matter or, if no such
record date is established, on the date such vote is taken or any written
consent of shareholders is solicited; provided, that nothing contained herein
shall in any way affect or restrict the rights of any holder to vote shares of
any other series of capital stock of the Corporation held by such holder;
provided, further, that the holders of the Series B-1 Preferred Stock will not
be entitled to vote or give or withhold consent in writing pursuant to this
subparagraph (a) in connection with the election or removal of directors to the
extent the holders of the Series B-1 Preferred Stock are then represented by one
or more Series B Directors elected in accordance with subparagraph (c) below.
Except as otherwise expressly provided herein or as required by law, the holders
of shares of Series B-1 Preferred Stock and Common Stock shall vote together as
a single class on all matters.

     (b) In addition, so long as any of the Series B-1 Preferred Stock is
outstanding, the affirmative vote of the holders of (x) 66 2/3% of the
outstanding shares of Series B-1 Preferred Stock, voting together as a single
class, shall be necessary to alter or change the preferences, rights or powers
of the Series B-1 Preferred Stock, and (y) a majority of the outstanding shares
of Series B-1 Preferred Stock, voting together as a single class, shall be
necessary to: (i) increase or decrease the authorized number of shares of Series
B-1 Preferred Stock, (ii) amend, alter, repeal or waive any provision of the
Corporation's articles of incorporation (including any certificate of
designation or articles of amendment and whether by amendment, merger or
otherwise) or by-laws so as to adversely affect the preferences, rights or
powers of the Series B-1 Preferred Stock, including, without limitation, the
voting powers, dividend rights and liquidation preference of the Series B-1
Preferred Stock, or change the Series B-1 Preferred Stock into any other
securities (other than as required by paragraph 4(i)), cash or other property,
or (iii) issue any additional Series B-1 Preferred Stock (other than upon
conversion of Series B-2 Preferred Stock) or create, authorize or issue any
capital stock that ranks prior to or pari passu with (whether with respect to
dividends or upon liquidation, dissolution, winding up or otherwise) the Series
B-1 Preferred

                                       18



Stock (other than Series B-2 Preferred Stock, Series C-1 Preferred Stock and
Series C-2 Preferred Stock).

     (c) In addition, the holders of the Series B-1 Preferred Stock, voting or
consenting, as the case may be, separately as a single class to the exclusion of
all other classes of the Corporation's capital stock and with each share of
Series B-1 Preferred Stock entitled to one vote, shall by majority vote be
entitled to elect directors to the Corporation's Board of Directors (each a
"Series B Director") as follows:

          (i) Until Shareholder Approval is obtained, from and after the
          Original Date of Issue and so long as the Series B-1 Voting Power
          equals or exceeds the Pre-Shareholder Approval Minimum, the holders of
          the Series B-1 Preferred Stock shall be entitled to elect one director
          to serve on the Corporation's Board of Directors until such director's
          successor is duly elected by the holders of the Series B-1 Preferred
          Stock or such director is removed from office by the holders of the
          Series B-1 Preferred Stock.

          (ii) If Shareholder Approval is obtained, for so long as the Series
          B-1 Voting Power equals or exceeds the Post-Shareholder Approval Two
          Director Minimum, the holders of the Series B-1 Preferred Stock shall
          be entitled to elect two directors to serve on the Corporation's Board
          of Directors until such directors' successors are duly elected by the
          holders of the Series B-1 Preferred Stock or such directors are
          removed from office by the holders of the Series B-1 Preferred Stock.

          (iii) If Shareholder Approval is obtained, for so long as the Series
          B-1 Voting Power equals or exceeds the Post-Shareholder Approval One
          Director Minimum but is less than the Post-Shareholder Approval Two
          Director Minimum, the holders of the Series B-1 Preferred Stock shall
          be entitled to elect one director to serve on the Corporation's Board
          of Directors until such director's successor is duly elected by the
          holders of the Series B-1 Preferred Stock or such director is removed
          from office by the holders of the Series B-1 Preferred Stock.

So long as the holders of the Series B-1 Preferred Stock are entitled to elect
any directors under this paragraph 7(c):

               (A) the Board of Directors of the Corporation shall at all times
          consist of seven directors;

               (B) the holders of the Series B-1 Preferred Stock shall be
          entitled to elect the number of directors indicated in subsections (i)
          through (iii) above, as applicable, at any annual meeting of
          stockholders (or special meeting held in place thereof);

               (C) if the holders of the Series B-1 Preferred Stock for any
          reason fail to elect a person to fill any directorship to which they
          are otherwise entitled under this paragraph 7(c), such directorship
          shall remain vacant until such time as the holders of the Series B-1
          Preferred Stock elect a director to fill such directorship and such
          directorship shall not be

                                       19



          filled by resolution or vote of the Corporation's Board of Directors
          or the Corporation's other stockholders; and

               (D) any vacancy occurring because of the death, disability,
          resignation or removal of a director elected by the holders of the
          Series B-1 Preferred Stock shall be filled by the vote or consent of
          the holders of the Series B-1 Preferred Stock.

     8. Miscellaneous.

     (a) Upon any conversion or exchange of shares of Series B-1 Preferred Stock
pursuant to Section 4, 5 or 6 hereof (each such conversion or exchange, a
"Series B-1 Conversion or Exchange") into or for shares of Common Stock or
Acceptable Stock ("Conversion or Exchange Securities"), prior to the delivery of
such Conversion or Exchange Securities, the Corporation and/or any other Person
issuing such Conversion or Exchange Securities shall (i) comply with all
statutes, rules and regulations applicable thereto at that time, including any
and all regulations of the principal trading market on which such Conversion or
Exchange Securities are then trading, including, if necessary, any shareholder
approval requirement under NASD Rule 4350(i), as it may be amended from time to
time, taking into account the Conversion Cap provided in Section 4, 5 and 6,
(ii) take all necessary action to assure that any such Conversion or Exchange
Securities will, upon delivery, be duly and validly issued, fully paid and
non-assessable, free of all liens, pledges and other security interests (other
than caused by the holder), and not subject to any preemptive rights, and (iii)
pay any and all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of such Conversion or Exchange Securities,
provided, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or deliver of such
Conversion or Exchange Securities in a name other than that of the holder of the
Series B-1 Preferred Stock.

     (b) Any fractional share interests payable upon any Series B-1 Conversion
or Exchange shall not be paid in Conversion or Exchange Securities but shall
instead be paid in cash in an amount equal to such fractional interest
multiplied by the Market Price per share of the Conversion or Exchange
Securities to be delivered as of the date of such Series B-1 Conversion or
Exchange.

     (c) Notwithstanding anything to the contrary herein contained, if in
connection with any Series B-1 Conversion or Exchange, the amount of Conversion
or Exchange Securities to be received by one or more holders of the Series B-1
Preferred Stock (each, an "Affected Holder") would result in such Series B-1
Conversion or Exchange being subject to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder, or
any successor thereto (the "HSR Act"), then compliance with the HSR Act shall be
a condition precedent to the consummation of such Series B-1 Conversion or
Exchange. The provisions of this paragraph 8(c) shall in no way limit the
obligation of the Corporation to otherwise comply with the provisions of
Sections 5 and 6 hereof.

     (d) Each holder of Series B-1 Preferred Stock hereby agrees, by acceptance
of its shares of Series B-1 Preferred Stock, to use its commercially reasonable
efforts to make all

                                       20



filings required by the HSR Act and comply with all other provisions of the HSR
Act as promptly as practicable to the extent necessary in connection with any
Series B-1 Conversion or Exchange or as provided in subparagraph (e).

     (e) If the Corporation shall have received notice from one or more holders
of Series B-1 Preferred Stock within 10 business days after receipt by the
holders of the Series B-1 Preferred Stock of any Change of Control Notice
relating to a Consensual Change of Control to the effect that (A) such holder
would be an Affected Holder if such holder were to elect to either (x) convert
its shares of Series B-1 Preferred Stock into Common Stock pursuant to Section
4(a) at such time or (y) accept the Change of Control Offer to which such Change
of Control Notice relates and (B) such holder reasonably expects to either
convert its shares of Series B-1 Preferred Stock in connection with such Change
of Control or accept Conversion or Exchange Securities in connection with its
acceptance of such Change of Control Offer, the Corporation shall not consummate
such Consensual Change of Control unless there shall have occurred the
expiration or earlier termination of the waiting period under the HSR Act with
respect to the acquisition of such Conversion or Exchange Securities by each
such Affected Holder.

     (f) Notwithstanding anything to the contrary contained above, the
provisions of Section 8(e) shall not prevent or delay any Consensual Change of
Control (A) for a period of more than 60 days from the date that the Change of
Control Notice related thereto is received by the holders of the Series B-1
Preferred Stock or (B) if, prior to such Consensual Change of Control, adequate
provision shall have been made (pursuant to an amendment to the certificate or
articles of incorporation of the issuer of the Conversion or Exchange
Securities) to prevent (to the extent necessary to allow each Affected Holder to
acquire the Conversion or Exchange Securities it proposes to acquire without a
resulting violation of the HSR Act) each Affected Holder from voting the
Conversion or Exchange Securities to be issued to it in connection with such
Consensual Change of Control at all times prior to such Affected Holder's
compliance with the requirements of the HSR Act (the adequacy of such provision
to be determined by mutual agreement of the Corporation and each Affected
Holder).

     (g) Reacquired Shares. Any shares of Series B-1 Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of preferred
stock and may be reissued as part of a new series of preferred stock to be
created by an amendment or amendments of the Corporation's articles of
incorporation adopted by the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.

     (h) Notices. (i) All notices, requests, demands and other communications to
the Corporation hereunder shall be in writing and shall be delivered personally,
sent by facsimile or sent by certified mail (return receipt requested) or by
express mail or overnight courier, addressed to the President of the Corporation
at the Corporation's principal executive offices.

          (ii) All notices, requests, demands and other communications to the
holders of Series B-1 Preferred Stock hereunder shall be in writing and shall be
delivered personally, sent by facsimile or sent by certified mail (return
receipt requested) or by express mail or overnight

                                       21



courier, addressed to each holder of record at such holder's address appearing
on the stock transfer register of the Corporation.

          (iii) Such notices, requests, demands and other communications shall
     be deemed given or delivered (A) three business days following sending by
     registered or certified mail, postage prepaid, (B) upon delivery by express
     mail or overnight courier, (C) when sent, if sent by facsimile (but only if
     such facsimile is actually received) or (D) when delivered, if delivered by
     hand.

     9. Definitions. The following terms, as used herein, shall have the
following meanings:

     "Acceptable Stock" means the Common Stock or, in connection with a
Consensual Change of Control, the common stock of another publicly-traded
corporation so long as (x) such common stock is listed on the New York Stock
Exchange or American Stock Exchange or quoted on the Nasdaq National Market and
(y) the issuance of such stock or the transfer or exchange thereof is pursuant
to an effective registration statement in accordance with the Securities Act.

     "Accrued Value" equals, with respect to one share of Series B-1 Preferred
Stock on any date, $1,000 (or, in the case of any share issued upon conversion
of any Series B-2 Preferred Stock, the amount determined in accordance with 4(a)
of the Certificate of Designation for the Series B-2 Preferred Stock) plus the
amount of all dividends added to the Accrued Value in accordance with paragraph
2(a) or subtracted from the Accrued Value in accordance with paragraph 4(a)(ii)
(which aggregate amount shall be subject to adjustment whenever there shall
occur a stock split, combination, re-classification or other similar event
involving the Series B-1 Preferred Stock).

     "Change of Control" means a Consensual Change of Control or a
Non-Consensual Change of Control.

     "Common Stock Voting Power" means the aggregate number of votes to which
the holders of Common Stock outstanding on the date immediately prior to the
Original Date of Issue are entitled with respect to all matters submitted to the
stockholders of the Corporation for vote or action (subject to proportional
adjustment for any stock split, stock dividend, recapitalization, reverse stock
split or other similar event with respect to the Common Stock).

     "Consensual Change of Control" means: (i) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all the
assets of the Corporation and its subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act) other than to a
wholly-owned subsidiary of the Corporation or (ii) the consummation of any
transaction approved by the Board of Directors of the Corporation (including any
merger or consolidation) the result of which is that any "person" (as defined
above), becomes the beneficial owner (as determined in accordance with Rules
13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to
have beneficial ownership of all shares that such person has the right to


                                       22



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 Series B-1
Preferred Stock, 101% of the Accrued Value on the Change of Control Payment Date
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date); provided, that if the Change of Control occurs
prior to the third anniversary of the Original Date of Issue, the Change of
Control Amount shall be calculated assuming the Change of Control had occurred
on the third anniversary of the Original Date of Issue (and assuming that no
dividends had been paid in cash or converted into Series B-2 Preferred Stock
with respect to such share from the actual date of the Change of Control through
the third anniversary of the Original Date of Issue).

     "Continuing Directors" means individuals who constituted the Board of
Directors of the Corporation on the Original Date of Issue after giving effect
to the issuance of the Series B-1 Preferred Stock (the "Incumbent Directors");
provided, that any individual becoming a director during any year shall be
considered to be an Incumbent Director if (i) such individual's election,
appointment or nomination was recommended or approved by at least two-thirds of
the other Incumbent Directors continuing in office following such election,
appointment or nomination present, in person or by telephone, at any meeting of
the Board of Directors of the Corporation, after the giving of a sufficient
notice to each Incumbent Director so as to provide a reasonable opportunity for
such Incumbent Directors to be present at such meeting or (ii) such individual
was nominated, appointed or selected by the holders of Series B-1 Preferred
Stock or nominated, appointed or selected in accordance with Section 6.02 of the
Purchase Agreement.

     "Conversion Price" means $8.32, subject to adjustment from time to time as
provided in paragraph 4.

     "Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Liquidation Value" on any date means, with respect to one share of Series
B-1 Preferred Stock, the greater of (i) the Accrued Value on such date (treating
such date as a Dividend Accrual Date for purposes of calculating the Accrued
Value on such date) and (ii) the amount that would have been payable in
connection with such Liquidation Event on the number of shares of Common Stock
into which a share of Series B-1 Preferred Stock was convertible on such date
(without regard to any Conversion Cap then in effect).

     "Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the closing price on the NASDAQ System, or, if on any day such security
is not quoted

                                       23



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 B-1 Preferred Stock. If such parties are
unable to reach agreement within a reasonable period of time, such fair value
shall be determined by an independent appraiser experienced in valuing
securities jointly selected by the Corporation and the holders of a majority of
the Series B-1 Preferred Stock. The determination of such appraiser shall be
final and binding upon the parties, and the Corporation shall pay the fees and
expenses of such appraiser.

     "Non-Consensual Change of Control" means: (i) the consummation of any
transaction the result of which is that any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), becomes the beneficial owner (as
determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act
except that a person will be deemed to have beneficial ownership of all shares
that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the Voting Securities of the Corporation without the approval of the
Board of Directors of the Corporation or (ii) the first day on which a majority
of the members of the Board of Directors are not Continuing Directors; provided,
however, that "person" as used in clause (i) shall not include any Purchaser (as
defined in the Purchase Agreement).

     "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

     "Person" as used herein means any corporation, limited liability company,
partnership, trust, organization, association, other entity or individual.

     "Pre-Shareholder Approval Minimum" means the number that equals 1/7th of
the Series B-1 Preferred Voting Power plus the Common Stock Voting Power.

     "Post-Shareholder Approval One Director Minimum" means the number that
equals 1/7th of the Series B-1 Preferred Voting Power plus the Common Stock
Voting Power.

     "Post-Shareholder Approval Two Director Minimum" means the number that
equals 2/7ths of the Series B-1 Preferred Voting Power plus the Common Stock
Voting Power.

     "Purchase Agreement" means the Securities Purchase Agreement dated as of
the Original Date of Issue among the Corporation, Welsh, Carson, Anderson &
Stowe IX, L.P. and the other purchasers named therein.

     "Securities Act" means the Securities Act of 1933, as amended.


                                       24



     "Series B-1 Preferred Voting Power" means the aggregate number of votes to
which the holders of the outstanding Series B-1 Preferred Stock are entitled
pursuant to paragraph 7(a).

     "Shareholder Approval" means the approval of requisite holders of the
Common Stock with respect to each of the following: (1) the removal of the
Conversion Cap contemplated in paragraph 4(a)(ii) hereof, (2) the automatic
conversion of the Series B-2 Preferred Stock into Series B-1 Preferred Stock
pursuant to the certificate of designation for the Series B-2 Preferred Stock,
(3) the automatic conversion of the Series C-2 Preferred Stock, if any, into
Series C-1 Preferred Stock pursuant to the certificate of designation for the
Series C-2 Preferred Stock, and (4) the rights of the holders of the Series B-1
Preferred Stock to elect directors to the Board of Directors of the Corporation
as described in paragraphs 7(c)(ii) and 7(c)(iii).

     "Transfer Agent" means the transfer agent for the Series B-1 Preferred
Stock appointed by the Corporation, and if none is appointed, the Corporation.

     "Voting Securities" means securities of the Corporation ordinarily having
the power to vote for the election of directors of the Corporation; provided,
that when the term "Voting Securities" is used with respect to any other Person
it means the capital stock or other equity interests of any class or kind
ordinarily having the power to vote for the election of directors or other
members of the governing body of such Person.

     "Warrant Shares" means the shares of Common Stock from time to time issued
upon the exercise of the Initial Warrants (as defined in the Purchase
Agreement).



                                       25

EX-99

                                                                     Exhibit 4.3

______________________________________________________________________________






                                WARRANT AGREEMENT


                                      Among


                                  LABONE, INC.,


                    WELSH, CARSON, ANDERSON & STOWE IX, L.P.


                                       and


                             THE OTHER HOLDERS NAMED
                          ON THE SIGNATURE PAGES HERETO


                           Dated as of August 31, 2001





______________________________________________________________________________








                           TABLE OF CONTENTS
                           -----------------


                                                                   Page

      SECTION 1.  Warrant Certificates................................1
      SECTION 2.  Execution of Warrant Certificates...................1
      SECTION 3.  Registration........................................2
      SECTION 4.  Registration of Transfers and Exchanges.............2
      SECTION 5.  Warrants; Exercise of Warrants......................3
      SECTION 6.  Payment of Taxes....................................4
      SECTION 7.  Mutilated or Missing Warrant Certificates...........5
      SECTION 8.  Reservation of Warrant Shares.......................5
      SECTION 9.  Obtaining Stock Exchange Listings...................6
      SECTION 10. Adjustment of Number of Warrant Shares Issuable.....6
      SECTION 11. Fractional Interests...............................14
      SECTION 12. Notices to Warrant Holders.........................14
      SECTION 13. Notices to Company and Warrant Holder..............15
      SECTION 14. Supplements and Amendments.........................15
      SECTION 15. Successors.........................................15
      SECTION 16. Termination........................................15
      SECTION 17. Governing Law......................................15
      SECTION 18. Benefits of This Agreement.........................15
      SECTION 19. Counterparts.......................................15


                                       i







           WARRANT AGREEMENT (the "Warrant Agreement" or this "Agreement") dated
as of August 31, 2001 (the "Original Issue Date") among LABONE, INC., a Missouri
corporation (the "Company"), WELSH, CARSON, ANDERSON & STOWE IX, L.P., a
Delaware limited partnership ("WCAS"), and the other parties named on the
signature pages hereto (such other parties, together with WCAS and their
respective successors and assigns, the "Holders"). Terms defined in the
Securities Purchase Agreement (the "Securities Purchase Agreement") dated as of
August 31, 2001 among the Company, WCAS and the other purchasers named therein,
unless otherwise defined herein, are used herein as therein defined.

                              W I T N E S S E T H:
                              - - - - - - - - - -

           WHEREAS, the Company proposes to issue (i) on the Original Issue
Date, in connection with the issuance of the Series B-1 Preferred Shares and the
Series B-2 Preferred Shares on the Original Issue Date pursuant to the
Securities Purchase Agreement, warrants to purchase 350,000 shares (the "Initial
Warrants") of Common Stock, par value $.01 per share, of the Company ("Common
Stock") and (ii) from time to time after the Original Issue Date, in connection
with the issuance of Series B Notes in accordance with the provisions of Section
6.05 of the Securities Purchase Agreement, certain additional warrants to
purchase Common Stock (the "Additional Warrants" and, together with the Initial
Warrants, the "Warrants"); and

           WHEREAS, subject to adjustment as set forth herein, each Warrant
shall initially entitle the Holder thereof to purchase one share of Common Stock
(the shares of Common Stock issuable upon exercise of the Warrants being
referred to herein as the "Warrant Shares");

           NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:

           SECTION 1.  Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") shall be in registered form only and shall
be substantially in the form of Exhibit A attached hereto.

           SECTION 2.  Execution of Warrant Certificates. (a) Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board or its Chief Executive Officer or its President or its Chief Financial
Officer and by its Secretary or an Assistant Secretary under its corporate seal.
Each such signature upon the Warrant Certificates may be in the form of a
facsimile signature of the present or any future Chairman of the Board, Chief
Executive Officer, President, Chief Financial Officer, Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, Chief
Executive Officer, President, Chief Financial Officer, Secretary or Assistant
Secretary, notwithstanding the fact that at the time the Warrant Certificates
shall be delivered or disposed of





such person shall have ceased to hold such office. The seal of the Company may
be in the form of a facsimile thereof and may be impressed, affixed, imprinted
or otherwise reproduced on the Warrant Certificates.

           (b) In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Agreement any such person was not such an officer.

           SECTION 3.  Registration. The Company shall number and register the
Warrant Certificates in a register as they are issued. The Company may deem and
treat the registered Holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, and shall not be affected by any
notice to the contrary or bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person or entity. The Company
shall act as the registrar for the Warrants.

           SECTION 4.  Registration of Transfers and Exchanges. (a) The Company
shall from time to time register the transfer of any outstanding Warrant
Certificates in a Warrant register to be maintained by the Company at its office
designated for such purposes (the address of which is set forth in Section 13
hereof), upon surrender thereof accompanied by the assignment form on the
reverse of the Warrant Certificate (the "Assignment Form"), duly executed by the
registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be canceled and
disposed of by the Company. No transfer or exchange of any Warrant shall be
valid unless (x) made in the foregoing manner at such office and (y) registered
under the Securities Act of 1933, as amended, or any applicable state securities
laws or unless an exemption from registration is available.

           (b) The Holders agree that each Warrant Certificate and any
certificate representing the Warrant Shares will bear the following legend:

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
     AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
     REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH OTHER SECURITIES LAWS OR
     UNLESS EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE APPLICABLE WITH
     RESPECT TO SUCH DISPOSITION."


                                       2





           (c) Warrant Certificates may be exchanged at the option of the
Holder(s) thereof, when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Upon any sale or transfer of any
Warrant Certificate or Warrant Shares pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act") or
in a transaction meeting the requirements of Rule 144 under the Securities Act,
the Company shall permit the Holder thereof to exchange such Warrant Certificate
or such Warrant Shares for another Warrant Certificate or certificate evidencing
Warrant Shares, as applicable, that does not bear the legend set forth in
Section 4(b) above. Warrant Certificates surrendered for exchange shall be
canceled and disposed of by the Company.

           SECTION 5.  Warrants; Exercise of Warrants. (a) Subject to the terms
of this Agreement, each Holder shall have the right, which may be exercised at
any time prior to 5:00 p.m. (EST) on August 31, 2008, to receive from the
Company the number of fully paid and nonassessable Warrant Shares and any other
capital stock of the Company issuable upon exercise of the Warrant as provided
for in Section 10(a) ("Additional Warrant Shares") which the Holder may at the
time be entitled to receive on exercise of such Warrants and payment of the
Exercise Price (as hereinafter defined) then in effect for such Warrant Shares
(if such exercise is not a Cash-Less Exercise (as hereinafter defined). Each
Warrant not exercised prior to 5:00 p.m. (EST) on August 31, 2008 shall become
void and all rights thereunder and all rights in respect thereof under this
Agreement shall cease as of such time.

           (b) A Warrant may be exercised upon surrender to the Company at its
office designated for such purpose (the address of which is set forth in Section
13 hereof) of the Warrant Certificate or Certificates evidencing the Warrants to
be exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, and upon payment to the Company of the exercise price (the
"Exercise Price") which is set forth in the form of Warrant Certificate attached
hereto as Exhibit A as adjusted as herein provided, for the number of Warrant
Shares and Additional Warrant Shares, if any, in respect of which such Warrants
are then exercised. Payment of the aggregate Exercise Price shall be made in
cash or by certified or official bank check to the order of the Company. In lieu
of exercising a Warrant by paying in full the Exercise Price, the Holder may,
from time to time, convert a Warrant, in whole or in part, into a number of
shares of Common Stock determined by dividing (i) the aggregate current market
price of the number of shares of Common Stock represented by the Warrants
converted, minus the aggregate Exercise Price for such shares of Common Stock by
(ii) the current market price of one share of Common Stock (a "Cash-Less
Exercise"). The current market price shall be determined pursuant to Section
10(f).

           (c) Subject to the provisions of Section 6 hereof, upon such
surrender of Warrant Certificates and payment of the Exercise Price (if such
exercise is not a Cash-Less Exercise) the Company shall issue and cause to be
delivered with all reasonable dispatch (and in any event within five business
days after such receipt) to or upon the written order of the Holder and, subject
to compliance with all applicable securities laws, in such name or names as the
Holder may designate, a certificate or certificates for the number of full
Warrant Shares and Additional Warrant Shares, if any, issuable upon the exercise
of such Warrants together with cash as provided


                                       3





in Section 11. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a Holder of record of such Warrant Shares and Additional Warrant Shares,
if any, as of the date of the surrender of such Warrant Certificates and payment
of the Exercise Price (if such exercise is not a Cash-Less Exercise).

           (d) Prior to the exercise of the Warrants, except as may be
specifically provided for herein, (i) no Holder of a Warrant Certificate, as
such, shall be entitled to any of the rights of a holder of Common Stock of the
Company, including, without limitation, the right to vote at or to receive any
notice of any meetings of stockholders; (ii) the consent of any such Holder
shall not be required with respect to any action or proceeding of the Company;
(iii) except as provided in Section 10(i), no such Holder, by reason of the
ownership or possession of a Warrant or the Warrant Certificate representing the
same, shall have any right to receive any cash dividends, stock dividends,
allotments or rights or other distributions paid, allotted or distributed or
distributable to the stockholders of the Company prior to, or for which the
relevant record date preceded, the date of the exercise of such Warrant; and
(iv) no such Holder shall have any right not expressly conferred by the Warrant
or Warrant Certificate held by such Holder.

           (e) The holders of the Warrant Shares issuable upon exercise of the
Warrants will not be entitled to vote or give or withhold consent with respect
to any matter submitted to the stockholders of the Company for a vote or action
at any time that the Series B-1 Preferred Shares are outstanding and each
Warrant Share shall bear a legend to such effect.

           (f) The Warrants shall be exercisable, at the election of the Holders
thereof, either in full or from time to time in part (but not for fractional
shares unless the Warrant is exercised in full) and, in the event that a Warrant
Certificate is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the date of expiration of the
Warrants, a new Warrant Certificate evidencing the remaining Warrant or Warrants
will be issued and delivered pursuant to the provisions of this Section 5 and of
Section 2 hereof.

           (g) All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled and disposed of by the Company. The Company shall keep copies
of this Agreement and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its office.

           SECTION 6.  Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares and
Additional Warrant Shares, if any, upon the exercise of Warrants; provided, that
the Company shall not be required to pay any tax or taxes which may be payable
in respect of any transfer involved in the issue of any Warrant Certificates or
any certificates for Warrant Shares or Additional Warrant Shares, if any, in a
name other than that of the registered Holder of a Warrant Certificate
surrendered for registration of transfer or upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid.


                                       4





           SECTION 7.  Mutilated or Missing Warrant Certificates. In case any
of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also reasonably satisfactory to it. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.

           SECTION 8.  Reservation of Warrant Shares. (a) The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or other capital stock of
the class with respect to Additional Warrant Shares, if any, or its authorized
and issued Common Stock or other capital stock of the class with respect to
Additional Warrant Shares, if any, held in its treasury, for the purpose of
enabling it to satisfy any obligation to issue Warrant Shares and Additional
Warrant Shares, if any, upon exercise of Warrants, the maximum number of shares
of Common Stock and other capital stock with respect to Additional Warrant
Shares, if any, which may then be deliverable upon the exercise of all
outstanding Warrants.

           (b) The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will furnish such Transfer Agent a copy
of all notices of adjustments and certificates related thereto, transmitted to
each Holder pursuant to Section 12 hereof.

           (c) Before taking any action which would cause an adjustment pursuant
to Section 10 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.

           (d) The Company represents and warrants that the initial Warrant
Shares issuable upon conversion of Warrants have been duly authorized and
covenants that all Warrant Shares and Additional Warrant Shares, if any, which
may be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights and, subject to Section 6, free from
all taxes, liens, charges and security interests (other than caused by the
holder) with respect to the issue thereof.


                                       5




           (e) If at any time after conversion of the Series B-1 Preferred
Shares into Common Stock and prior to Company Shareholder Approval, the
aggregate number of Warrant Shares that are issuable upon exercise of the
Warrants would, together with the number of shares of Common Stock issued upon
such conversion of the Series B-1 Preferred Shares (the "Aggregate Conversion
Shares"), exceed the Conversion Cap Number (as defined in the Series B-1
Preferred Certificate of Designation), then the Company shall, at the option of
the majority in interest of the Holders, redeem a number of Warrant Shares
(following exercise by the Holders of the appropriate portion of the Warrants)
equal to the excess of the Aggregate Conversion Shares over the Conversion Cap
Number (the "Excess Shares") and, on a pro rata basis, pay the Holders in cash
the fair market value of such Excess Shares or exchange such Excess Shares for a
number of Series B-2 Preferred Shares equal to the fair market value of the such
Excess Shares divided by $1,000.

           SECTION 9.  Obtaining Stock Exchange Listings. The Company will from
time to time take all action which may be necessary so that the Warrant Shares
and the Additional Warrant Shares, if any, immediately upon their issuance upon
the exercise of Warrants, will be listed on the Nasdaq Stock Market and/or any
other principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock or the Additional Warrant
Shares, if any, as the case may be, are then listed.

           SECTION 10.  Adjustment of Number of Warrant Shares Issuable. The
number of Warrant Shares issuable upon the exercise of each Warrant is subject
to adjustment from time to time upon the occurrence of the events enumerated in
this Section 10. For purposes of this Section 10, "Common Stock" means shares
now or hereafter authorized of any class of common stock of the Company and any
other stock of the Company, however designated, that has the right (subject to
any prior rights of any class or series of preferred stock) to participate in
any distribution of the assets or earnings of the Company without limit as to
per share amount (other than the Series B-1 Preferred Shares, Series B-2
Preferred Shares, Series C-1 Preferred Shares and Series C-2 Preferred Shares).

     (a)  Adjustment for Change in Capital Stock. If the Company, after the
Original Issue Date:

                (1)  pays a dividend or makes a distribution on its Common
           Stock in shares of its Common Stock;

                (2)  subdivides its outstanding shares of Common Stock
           into a greater number of shares;

                (3)  combines its outstanding shares of Common Stock
           into a smaller number of shares;

                (4)  makes a distribution on its Common Stock in
           shares of its capital stock other than Common Stock; or


                                       6






                (5)  issues by reclassification of its Common Stock
           any shares of its capital stock;

then the number and kind of shares of its capital stock issuable upon exercise
of any Warrant in effect immediately prior to such action shall be
proportionately adjusted so that the Holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he or she would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action. The adjustment
shall become effective immediately after the record date in the case of a
dividend or distribution and immediately after the effective date in the case of
a subdivision, combination or reclassification. If, after an adjustment, a
Holder of a Warrant upon exercise of it may receive shares of two or more
classes of capital stock of the Company, the exercise privilege of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Section 10. Such adjustment shall be
made successively whenever any event listed above shall occur.

           (b) Adjustment for Rights Issue. If after the Original Issue Date the
Company distributes any rights, options or warrants to all holders of its Common
Stock entitling them to purchase shares of Common Stock or securities directly
or indirectly convertible into or exchangeable for Common Stock (or options or
rights with respect to such securities) at a price per share less than the
current market price per share on the record date for the determination of
stockholders entitled to receive the rights, options or warrants, the number of
Warrant Shares issuable upon exercise of one Warrant shall be adjusted in
accordance with the formula:


                N' = N x    (O + A)
                         -----------------
                            (O + (A x P))
                                      -
                                      M

where:

      N' =  the adjusted number of Warrant Shares issuable upon exercise of
            one Warrant.

      N  =  the current number of Warrant Shares issuable upon exercise of
            one Warrant.

      O  =  the number of shares of Common Stock outstanding on the
            record date.

      A  =  the number of additional shares of Common Stock offered pursuant to
            such rights issuance.

      P  =  the offering price per share of the additional shares.

      M  =  the current market price per share of Common Stock on the record
            date.


                                       7






The adjustment shall be made successively whenever any such rights, options or
warrants are issued and shall become effective immediately after the record date
for the determination of stockholders entitled to receive the rights, options or
warrants. If at the end of the period during which such rights, options or
warrants are exercisable, not all rights, options or warrants shall have been
exercised, the number of Warrant Shares issuable upon exercise of the Warrants
shall be immediately readjusted to what it would have been if the shares
represented by "A" in the above formula had been the number of shares actually
issued.

           (c) Adjustment for Other Distributions. If after the Original Issue
Date the Company distributes to all holders of its Common Stock any of its
assets (including but not limited to cash), debt securities, or any rights or
warrants to purchase debt securities, assets or other securities of the Company
(other than Common Stock), the number of Warrant Shares issuable upon exercise
of one Warrant shall be adjusted in accordance with the formula:

                N' = N x M
                         ---
                         M-F

where:

      N' =  the adjusted number of Warrant Shares issuable upon exercise
            of one Warrant.

      N  =  the current number of Warrant Shares issuable upon exercise of
            one Warrant.

      M  =  the current market price per share of Common Stock on the
            record date mentioned below.

      F  =  the fair market value on the record date of the assets,
            securities, rights or warrants applicable to one share of Common
            Stock. The Board of Directors shall determine the fair market
            value thereof in good faith.

The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. No
adjustment shall be made pursuant to this Section 10(c) if the fair market value
on the applicable record date of the assets, securities, rights or warrants
applicable to one share of Common Stock is equal to or greater than the current
market price per share of Common Stock on such record date.

     This subsection (c) does not apply to regular quarterly cash dividends or
cash distributions paid out of consolidated current or retained earnings as
shown on the books of the Company prepared in accordance with generally accepted
accounting principles consistently applied. Also this subsection does not apply
to rights, options or warrants referred to in subsection (b) of this Section 10.
If any adjustment is made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which any rights, options or warrants


                                       8





are exercisable, not all such rights, options or warrants shall have been
exercised, the Warrant shall be immediately readjusted as if "F" in the above
formula was the fair market value on the record date of the indebtedness or
assets actually distributed upon exercise of such rights, options or warrants
divided by the number of shares of Common Stock outstanding on the record date.

           (d) Adjustment for Common Stock Issue. If after the Original Issue
Date the Company issues shares of Common Stock for a consideration per share
less than the current market price per share on the date the Company fixes the
offering price of such additional shares, the number of Warrant Shares issuable
upon exercise of one Warrant shall be adjusted in accordance with the formula:

                N' = N x  A
                        ---
                        O + P
                            -
                            M

where:

      N' =  the adjusted number of Warrant Shares issuable upon exercise of
            one Warrant.

      N  =  the then current number of Warrant Shares issuable upon exercise of
            one Warrant.

      O  =  the number of shares outstanding immediately prior to the issuance
            of such additional shares.

      P  =  the aggregate consideration received for the issuance of such
            additional shares.

      M  =  the current market price per share on the date of sale of such
            additional shares.

      A  =  the number of shares outstanding immediately after the issuance of
            such additional shares.

The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. This Section 10(d)
does not apply to the issuance of shares of Common Stock:

                (1)  in connection with any transaction of the type described
          in Section 10(a) above, upon exercise of any securities of the type
          referred to in Section 10(b) above, or upon the conversion or exchange
          of any securities of the type referred to in Section 10(e) below,

                (2)  upon the exercise of any Warrants,

                (3)  upon the conversion of any Series B-1 Preferred Shares
          or Series C-1 Preferred Shares,


                                       9






                (4)  upon the exercise of any option or warrant outstanding on
          the Original Issue Date and disclosed in Item 6.04(b) of the
          Disclosure Schedule delivered in connection with the Securities
          Purchase Agreement,

                (5)  upon the exercise of warrants or other rights issued to
          banks or institutional lenders in connection with debt financings,
          equipment financings or similar transactions or to strategic partners
          in primarily non-financing transactions, in all such cases as approved
          by the Board of Directors of the Company so long as the aggregate
          number of such shares of Common Stock does not exceed 400,000 in the
          aggregate (as hereinafter adjusted for stock dividends, stock splits,
          subdivisions and combinations of shares and like transactions),

                (6)  issued as a dividend on any Series B-1 Preferred Shares,
          Series B-2 Preferred Shares, Series C-1 Preferred Shares or Series C-2
          Preferred Shares,

                (7)  issued pursuant to the Company's Rights Agreement, dated
          as of February 11, 2000, as amended (the "Rights Plan") as a result of
          a Holder becoming an Acquiring Person within the meaning of the Rights
          Plan, or

                (8) issued to WCAS, and/or any of its partners or Affiliates (as
          such terms are defined in the Securities Purchase Agreement).

           (e) Adjustment for Convertible Securities Issue. If after the
Original Issue Date the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in Section 10(b) above) for a consideration per share of Common Stock
initially deliverable upon conversion or exchange of such securities less than
the current market price per share on the date of issuance of such securities,
the number of Warrant Shares issuable upon exercise of one Warrant shall be
adjusted in accordance with this formula:

                N' = N  x  O + D
                           -----
                           O + P
                               -
                               M

where:

      N' =  the adjusted number of Warrant Shares issuable upon exercise of
            one Warrant.

      N  =  the then current number of Warrant Shares issuable upon exercise of
            one Warrant.

      O  =  the number of shares outstanding immediately prior to the issuance
            of such securities.

      P  =  the aggregate consideration received for the issuance of such
            securities.

      M  =  the current market price per share on the date of sale of such
            securities.


                                       10






      D  =  the maximum number of shares deliverable upon conversion or in
            exchange for such securities at the initial conversion or exchange
            rate.

The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. If all of the Common
Stock deliverable upon conversion or exchange of such securities have not been
issued when such securities are no longer outstanding, then the number of
Warrant Shares issuable upon exercise of one Warrant shall promptly be
readjusted to the number of Warrant Shares issuable upon exercise of one Warrant
which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion or exchange of such securities. This Section 10(e) does
not apply to:

                (1)  convertible or exchangeable securities issued in a
          transaction described in Section 10(a) or (c) above or upon exercise
          of any securities of the type referred to in Section 10(b) above,

                (2)  the issuance of options, rights, warrants and other
          securities that are exercisable for Common Stock (it being understood
          that adjustment shall be made upon the exercise of such securities to
          the extent required by Section 10(d) above),

                (3)  Series B-1 Preferred Shares, Series B-2 Preferred Shares,
          Series C-1 Preferred Shares or Series C-2 Preferred Shares,

                (4)  convertible or exchangeable securities issued as a
          dividend on any Series B-1 Preferred Shares, Series B-2 Preferred
          Shares, Series C-1 Preferred Shares, or Series C-2 Preferred Shares in
          accordance with the stated terms of such preferred stock,

                (5)  convertible or exchangeable securities issued pursuant to
          the Rights Plan as a result of a Holder becoming an Acquiring Person
          within the meaning of the Rights Plan, or

                (6)  convertible or exchangeable securities issued to WCAS,
          and/or any of its partners or Affiliates (as such terms are defined in
          the Securities Purchase Agreement).

           (f) Current Market Price. In Sections 5 and 11 and in Sections 10(b),
(c), (d) and (e) the current market price per share of Common Stock on any date
is the average of the Quoted Prices of the Common Stock for 30 consecutive
trading days commencing 45 trading days before the date in question. The "Quoted
Price" of the Common Stock is the last reported sales price of the Common Stock
as reported by NASDAQ Stock Market, or if the Common Stock is listed on a
securities exchange, the last reported sales price of the Common Stock on such
exchange which shall be for consolidated trading if applicable to such exchange,
or if neither so reported or listed, the last reported bid price of the Common
Stock. In the absence of such quotations, the value of the security shall be
determined in good faith by the Board of Directors of the Company, which


                                       11





determination shall be described in a Board resolution or, if requested by the
holder, by an independent nationally recognized investment banking firm or
appraisal firm.

           (g)  Consideration Received.  For purposes of any computation
respecting consideration received pursuant to Sections 10(d) and (e), the
following shall apply:

                (1)  in the case of the issuance of shares of Common Stock for
          cash, the consideration shall be the amount of such cash, provided
          that in no case shall any deduction be made for any commissions,
          discounts or other expenses incurred by the Company for any
          underwriting of the issue or otherwise in connection therewith;

                (2)  in the case of the issuance of shares of Common Stock for
          a consideration in whole or in part other than cash, the consideration
          other than cash shall be deemed to be the fair market value thereof as
          determined in good faith by the Board of Directors (irrespective of
          the accounting treatment thereof), whose determination shall be
          described in a Board resolution;

                (3)  in the case of the issuance of securities convertible into
          or exchangeable for shares, the aggregate consideration received
          therefor shall be deemed to be the consideration received by the
          Company for the issuance of such securities plus the additional
          minimum consideration, if any, to be received by the Company upon the
          conversion or exchange thereof (the consideration in each case to be
          determined in the same manner as provided in clauses (1) and (2) of
          this subsection).

           (h) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Warrant Shares issuable upon exercise of one Warrant need be made
unless the adjustment would require an increase or decrease of at least 1% in
the number of Warrant Shares issuable upon exercise of one Warrant. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section shall be made to
the nearest 1/100th of a share.

           (i) When No Adjustment Required. No adjustment need be made for a
transaction referred to in Section 10(a), (b), (c), (d) or (e), if the holders
hereof is to participate (without being required to exercise their Warrants) in
the transaction on a basis and with notice that the Board of Directors of the
Company determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction. No adjustment
need be made for rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest. No adjustment need be made for a change
in the par value or no par value of the Common Stock. To the extent the Warrants
become convertible into cash, no adjustment need be made thereafter as to the
cash. Interest will not accrue on the cash.

           (j) Notice of Adjustment. Whenever the number of Warrant Shares
issuable upon exercise of one Warrant is adjusted, the Company shall provide the
notices required by Section 12 hereof.


                                       12






           (k) Reorganization of Company. If the Company consolidates or merges
with or into, or transfers or leases all or substantially all its assets to, any
person, upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the Holder of a Warrant would have owned immediately after the
consolidation, merger, transfer or lease if the Holder had exercised the Warrant
immediately before the effective date of the transaction. If, in connection with
any such merger, consolidation or sale, holders of Common Stock are entitled to
elect to receive either securities, cash, or other property upon completion of
such transaction, the Company shall provide or cause to be provided to each
holder of Warrants the right to elect the securities, cash, or other property
into which the Warrants shall be convertible, subject to the same conditions
applicable to holders of shares of Common Stock (including, without limitation,
notice of the right to elect, limitations on the period in which such election
shall be made, and the effect of failing to exercise the election). Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
person to which such sale or conveyance shall have been made, shall enter into a
supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section. The successor company shall mail to
Holders a notice describing the supplemental Warrant Agreement as soon as
reasonably practicable after the execution of any such supplemental Warrant
Agreement. If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement. If this Section 10(k) applies, the provisions of
Sections 10(a), (b), (c), (d) and (e) do not apply.

           (l) When Issuance or Payment May Be Deferred. In any case in which
this Section 10 shall require that an adjustment in the number of Warrant Shares
issuable upon exercise of one Warrant be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the Holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the current number
of Warrant Shares issuable upon exercise of one Warrant and (ii) paying to such
Holder any amount in cash in lieu of a fractional share pursuant to Section 11;
provided, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
Warrant Shares, other capital stock and cash upon the occurrence of the event
requiring such adjustment.

           (m) Adjustment in Exercise Price. Upon each adjustment of the number
of Warrant Shares pursuant to this Section 10, the Exercise Price for each
Warrant outstanding prior to the making of the adjustment in the number of
Warrant Shares shall thereafter be adjusted to the Exercise Price (calculated to
the nearest hundredth of one cent) obtained from the following formula:

                E'= E x N
                        -
                        N'


                                       13





where:

      E' =  the adjusted Exercise Price.

      E  =  the Exercise Price prior to adjustment.

      N' =  the adjusted number of Warrant Shares issuable upon exercise of a
            Warrant.

      N  =  the number or Warrant Shares previously issuable upon exercise of a
            Warrant prior to adjustment.

           (n) Form of Warrants. Irrespective of any adjustments in the number
or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.

           SECTION 11.  Fractional Interests. The Company shall not be required
to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise at the same time by the same Holder, the
number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so requested to be exercised. If any
fraction of a Warrant Share would, except for the provisions of this Section 11,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the product of (i) such fraction of
a Warrant Share and (ii) the difference between the current market price of a
share of Common Stock and the Exercise Price.

           SECTION 12.  Notices to Warrant Holders. (a) Upon any adjustment of
the Exercise Price or the number of Warrant Shares issuable upon exercise of one
Warrant pursuant to Section 10, the Company shall promptly thereafter (i) cause
to be filed with the Company a certificate which includes the report of a firm
of independent public accountants of recognized standing selected by the Board
of Directors of the Company (who may be the regular auditors of the Company)
setting forth the Exercise Price and the number of Warrant Shares issuable upon
exercise of one Warrant after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon which such calculations are
based and (ii) cause to be given to each of the registered Holders of the
Warrant Certificates at his or her address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 12.

          (b)  In case:

                (i)   of any consolidation or merger to which the Company is a
          party and for which approval of any shareholders of the Company is
          required, or of the conveyance or transfer of the properties and
          assets of the Company substantially as


                                       14





          an entirety, or of any reclassification or change of Common Stock
          issuable upon exercise of the Warrants (other than a change in par
          value, or from par value to no par value, or from no par value to par
          value, or as a result of a subdivision or combination), or a tender
          offer or exchange offer for shares of Common Stock; or

                (ii)  of the voluntary or involuntary dissolution, liquidation
          or winding up of the Company; or

                (iii) the Company proposes to take any action which would
          require an adjustment of the number of Warrant Shares issuable upon
          exercise of one Warrant pursuant to Section 10;

then the Company shall cause to be given to each of the registered Holders of
the Warrant Certificates at his or her address appearing on the Warrant
register, at least 20 days (or 10 days in any case specified in clauses (b)(i)
or (b)(iii) above) prior to the applicable record date hereafter specified, or
promptly in the case of events for which there is no record date, by first class
mail, postage prepaid, a written notice stating (A) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to be determined, (B) the initial
expiration date set forth in any tender offer or exchange offer for shares of
Common Stock, or (C) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 12 or any defect therein shall not affect the legality or validity of
any distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.

           (c) Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.

           SECTION 13.  Notices to Company and Warrant Holder. (a) Any notice or
demand authorized by this Agreement to be given or made by the registered Holder
of any Warrant Certificate to or on the Company shall be sufficiently given or
made when and if deposited in the mail, first class, certified or registered,
postage prepaid, addressed to the office of the Company expressly designated by
the Company at its office for purposes of this Agreement (until the Holders are
otherwise notified in accordance with this Section by the Company), as follows:

                LabOne, Inc.
                10101 Renner Boulevard
                Lenexa, KS 66219
                Attention: General Counsel


                                       15






           (b) Any notice pursuant to this Agreement to be given by the Company
to the registered Holder(s) of any Warrant Certificate shall be sufficiently
given when and if deposited in the mail, first class, certified or registered,
postage prepaid, addressed (until the Company is otherwise notified in
accordance with this Section by such Holder) to such Holder at the address
appearing on the Warrant register of the Company.

           (c) Such notices, requests, instructions and other documents shall be
deemed given or delivered (i) five business days following sending by registered
or certified mail, postage prepaid, (ii) one business day following sending by
national overnight courier service, (iii) when sent, if sent by facsimile (but
only if such facsimile is actually received) or (iv) when delivered, if
delivered by hand.

           SECTION 14.  Supplements and Amendments. Any amendment or supplement
to this Agreement shall require the written consent of the Company and the
registered Holders of a majority of the then outstanding Warrant Shares issued
or issuable upon exercise of the Warrants (excluding Warrant Shares held by the
Company or any of its Affiliates). The consent of each Holder of a Warrant
affected shall be required for any amendment pursuant to which the number of
Warrant Shares purchasable upon exercise of Warrants would be decreased or the
Exercise Price increased (other than in accordance with Section 10 or 11
hereof).

           SECTION 15.  Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.

           SECTION 16.  Termination.  This Agreement shall terminate at
5:00 p.m. (EST) on August 31, 2008.

           SECTION 17.  Governing Law. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.

           SECTION 18.  Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the registered Holders of the Warrant Certificates or Warrant Shares any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company and the
registered Holders of the Warrant Certificates and the Warrant Shares.

           SECTION 19.  Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.


                                       16







           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

                                LABONE, INC.



                                By:   /s/ W. Thomas Grant II
                                      --------------------------------------
                                Name:  W. Thomas Grant II
                                Title: 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
                                      Russel Carson
                                      Bruce K. Anderson
                                      Thomas E. McInerney
                                      Robert A. Minicucci
                                      Lawrence B. Sorrel
                                      Anthony J. De Nicola
                                      Paul B. Queally
                                      IRA FBO Jonathan M. Rather
                                      D. Scott Mackesy
                                      Sanjay Swani
                                      John D. Clark
                                      IRA FBO James R. Mathews
                                      Sean Traynor
                                      John Almeida
                                      Eric J. Lee


                                By:   /s/ Jonathan M. Rather
                                      --------------------------------------
                                      Jonathan M. Rather
                                      as Attorney-in-Fact





                                                                  EXHIBIT A


                          [Form of Warrant Certificate]
                                     [Face]


     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
     AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
     REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH OTHER SECURITIES LAWS OR
     UNLESS EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE APPLICABLE WITH
     RESPECT TO SUCH DISPOSITION.

     EXERCISABLE ON OR BEFORE 5:00 P.M. (EST) TIME ON AUGUST 31, 2008.

No.[__]
[____] Warrants


                               Warrant Certificate
                                  LabOne, Inc.

           This Warrant Certificate certifies that [_____________], or
registered assigns, is the registered holder of [______] Warrants expiring
August 31, 2008 (the "Warrants") to purchase Common Stock, par value $.01 per
share, of LabOne, Inc., a Missouri corporation (the "Company"). Each Warrant
entitles the holder upon exercise to receive from the Company on or before 5:00
p.m. (EST) on August 31, 2008, one fully paid and nonassessable share of Common
Stock (a "Warrant Share") at the exercise price (the "Exercise Price") of $.01
for each Warrant Share payable in lawful money of the United States of America
upon surrender of this Warrant Certificate and payment of the Exercise Price at
the office of the Company designated for such purpose, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. In lieu of exercising this Warrant by paying in full the
Exercise Price, the Warrant holder may, from time to time, convert this Warrant,
in whole or in part, into a number of Warrant Shares determined by dividing (a)
the aggregate current market price of the number of shares of Common Stock
represented by the Warrants converted, minus the aggregate Exercise Price for
such shares of Common Stock by (b) the current market price of one share of
Common Stock. The current market price shall be determined pursuant to Section
10(f) of the Warrant Agreement.

           The number of Warrant Shares and Additional Warrant Shares, if any,
issuable upon exercise of the Warrants is subject to adjustment upon the
occurrence of certain events set






forth in the Warrant Agreement.

           No Warrant may be exercised after 5:00 p.m. (EST) on August 31, 2008,
and to the extent not exercised by such time such Warrants shall become void.

           Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.

           IN WITNESS WHEREOF, LabOne, Inc. has caused this Warrant Certificate
to be signed by the appropriate officers, each by a facsimile of his signature,
and has caused a facsimile of its corporate seal to be affixed hereunto or
imprinted hereon.

Dated: August 31, 2001


                                LABONE, INC.



                                By:
                                       -------------------------------
                                Name:  W. Thomas Grant II
                                Title: President



ATTEST:
         -----------------------
         Joseph C. Benage
         Secretary






                          [Form of Warrant Certificate]
                                    [Reverse]


           The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring August 31, 2008, entitling the holder on
exercise to receive shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement dated as of August 31, 2001 (the "Warrant Agreement"), duly
executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.

           Subject to the terms of the Warrant Agreement, Warrants may be
exercised from time to time until 5:00 p.m. (EST) on August 31, 2008. The holder
of Warrants evidenced by this Warrant Certificate may exercise them by
surrendering this Warrant Certificate, with the form of election to purchase set
forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of the Company designated for such purpose.
In lieu of exercising this Warrant by paying in full the Exercise Price, the
Warrant holder may, from time to time, convert this Warrant, in whole or in
part, into a number of shares of Common Stock determined by dividing (a) the
aggregate current market price of the number of Warrant Shares represented by
the Warrants converted, minus the aggregate Exercise Price for such shares of
Common Stock by (b) the current market price of one share of Common Stock. The
current market price shall be determined pursuant to Section 10(f) of the
Warrant Agreement. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.

           The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrant Shares issuable upon exercise of one Warrant set
forth on the face hereof and the Exercise Price of a Warrant may, subject to
certain conditions, be adjusted. No fractions of a share of Common Stock will be
issued upon the exercise of any Warrant, but the Company will pay the cash value
thereof determined as provided in the Warrant Agreement.

           Warrant Certificates, when surrendered at the office of the Company
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

           Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in






exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.

           The Company may deem and treat the registered holder(s) thereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entities any holder hereof to
any rights of a stockholder of the Company.






                                 ASSIGNMENT FORM


           If you the Holder want to assign this Warrant, fill in and execute
the form below:

I or we assign and transfer this Warrant to:

______________________________________________________________

______________________________________________________________

______________________________________________________________
         (Print or type name, address and zip code and
         social security or tax ID number of assignee)

and irrevocably appoint _____________________________________________________,
agent to transfer this Warrant on the books of the Company.  The agent may
substitute another to act for him.


Date:________________           Signed:____________________________________
                                (Signed exactly as your name appears on the
                                other side of this Warrant)







                         [Form of Election to Purchase]

                    (To Be Executed Upon Exercise Of Warrant)


               The undersigned hereby irrevocably elects to exercise the
Warrant, represented by this Warrant Certificate, to receive [ ] shares of
Common Stock and herewith (check item)

               (i)   tenders payment for such shares to the order of LabOne,
          Inc. in the amount of $[_______] in accordance with the terms hereof;
          or

               (ii)  converts this Warrant, in whole or in part, into a number
          of shares of Common Stock determined by dividing (a) the aggregate
          current market price of the number of shares of Common Stock
          represented by this Warrant, minus the aggregate Exercise Price for
          such shares of Common Stock by (b) the current market price of one
          share of Common Stock.

               The undersigned requests that a certificate for such shares be
registered in the name of [______________], whose address is [___________], and
that such shares be delivered to [____________], whose address is [__________].

               If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of [__________],whose address is [_________] and that such Warrant
Certificate be delivered to [_________] whose address is [_________].


                                Signature:________________________________

                                Date:_____________________________________

EX-99

                                                                     Exhibit 4.4

                           CERTIFICATE OF DESIGNATION
                                       OF
                              SERIES B-2 CUMULATIVE
                           CONVERTIBLE PREFERRED STOCK
                                       OF
                                  LABONE, INC.


                       (Pursuant to Section 351.180 of the
                General and Business Corporation Law of Missouri)

                   -------------------------------------------


     LabOne, Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under the General and Business Corporation Law of
Missouri (the "GBCL"), hereby certifies that, pursuant to authority vested in
the Board of Directors of the Corporation by Article III of the Articles of
Incorporation of the Corporation, the following resolution was duly adopted at a
meeting of the Board of Directors of the Corporation duly called and held on
August 24, 2001 and August 29, 2001:

     "RESOLVED, that pursuant to authority vested in the Board of Directors of
the Corporation by Article III of the Articles of Incorporation of the
Corporation, there is hereby created a series of Preferred Stock designated as
"Series B-2 Cumulative Convertible Preferred Stock" (the "Series B-2 Preferred
Stock"), consisting of Thirty Thousand (30,000) shares of the authorized but
unissued shares of preferred stock, $.01 par value per share, of the
Corporation;

     FURTHER RESOLVED, that the Series B-2 Preferred Stock shall have the
powers, preferences and rights, and qualifications, limitations and restrictions
thereof set forth in Appendix B-2 attached hereto;"






     IN WITNESS WHEREOF, this Certificate of Designation has been executed by
the Corporation by its President and attested by its Secretary this 29 day of
August 2001.


                               LABONE, INC.


                               /s/ W. Thomas Grant II
                               --------------------------------
                               W. Thomas Grant II
                               President

Attest:


/s/ Joseph C. Benage
- -------------------------
    Joseph C. Benage
       Secretary


                                       2




STATE OF MISSOURI  )
                    ss:
COUNTY OF JACKSON  )


     I, Cheryl Duren, a Notary Public, do hereby certify that on the
29th day of August 2001, personally appeared before me W. Thomas Grant II who
being by me first duly sworn, declared that he is the President of LabOne, Inc.,
that he signed the foregoing document of the Corporation, and that the
statements therein contained are true.



                          /s/ Cheryl Duren
                          ----------------------------------------
                          Notary Public

                          My commission expires: August 14, 2002





                                       3



                                  APPENDIX B-2

                        POWERS, RIGHTS AND PREFERENCES OF
                              SERIES B-2 CUMULATIVE
                           CONVERTIBLE PREFERRED STOCK
                                       OF
                                  LABONE, INC.

     1. Rank. The Series B-2 Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution and winding up, rank (i) pari
passu with the Corporation's (A) Series B-1 Cumulative Convertible Preferred
Stock (the "Series B-1 Preferred Stock"), and (B) to the extent when these
shares are authorized and issued by the Board of Directors of the Corporation
and the related certificates of designation for such series are filed with the
Office of the Secretary of State of the State of Missouri, the Corporation's
Series C-1 Cumulative Convertible Preferred Stock (the "Series C-1 Preferred
Stock"), and Series C-2 Cumulative Convertible Preferred Stock (the "Series C-2
Preferred Stock", and together with the Series B-1 Preferred Stock, the Series
B-2 Preferred Stock, and the Series C-1 Preferred Stock, the "Preferred Stock")
and (ii) senior to all classes of the Corporation's common stock, par value $.01
per share ("Common Stock"), and to each other class of capital stock of the
Corporation now or hereafter established (collectively, the "Junior
Securities"). The definition of Junior Securities shall also include any rights
or options exercisable for or convertible into any of the Junior Securities.

     2. Dividends.

          (a) Each holder of record of Series B-2 Preferred Stock shall be
entitled to receive cumulative dividends in an amount per share equal to the
Dividend Rate per annum on the Accrued Value. Such dividends shall accrue from
and after the date of issue (except that dividends on any amounts added to the
Accrued Value shall accrue only from the date such amounts are added to the
Accrued Value) and shall be added to the Accrued Value semi-annually, whether or
not declared and whether or not there are any funds of the Corporation legally
available for the payment of dividends, on February 28th and August 31st of each
year (each such date being a "Dividend Accrual Date" and each such semi-annual
period being a "Dividend Period"), commencing with the first such date following
the date of issue. Dividends for any period shorter than a Dividend Period shall
be computed on the basis of the actual number of days elapsed over twelve 30-day
months and a 360-day year.

          (b) In case the Corporation shall make any dividend or distribution to
holders of Common Stock, whether payable in cash, securities or other property
(other than dividends or distributions payable solely in Common Stock), the
holder of each share of Series B-2 Preferred Stock on the record date for such
dividend or distribution shall be entitled to receive an equivalent dividend or
distribution based on the number of shares of Common Stock underlying such
Series B-2 Preferred Stock (after conversion of such Series B-2 Preferred Stock
into Series B-1 Preferred Stock and assuming the Approval Date had occurred on
such record date).


                                       4




          (c) In case the Corporation shall make any dividend or distribution to
holders of Series B-1 Preferred Stock, whether payable in cash, securities or
other property (other than dividends or distributions referred to in subsection
(b), dividends or distributions payable solely in Series B-1 Preferred Stock, or
regular accrued dividends on such Series B-1 Preferred Stock), the holder of
each share of Series B-2 Preferred Stock on the record date for such dividend or
distribution shall be entitled to receive an equivalent dividend or distribution
based on the number of shares of Series B-1 Preferred Stock into which such
Series B-2 Preferred Stock would be convertible on such record date if the
Approval Date had occurred on such record date.

          (d) So long as any shares of Series B-2 Preferred Stock are
outstanding, no Junior Securities shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly (except by conversion into or exchange for
Junior Securities) or any cash dividend made on any Junior Security other than
(i) a dividend on the Corporation's Common Stock as determined and declared by
the Board of Directors in which the holders of the Series B-2 Preferred Stock
participate in accordance with subparagraph (b) above or (ii) repurchases of
shares from employees of the Corporation and its subsidiaries upon termination
of the holder's employment.

          (e) The date on which the Corporation initially issues any particular
share of Series B-2 Preferred Stock shall be deemed to be its "date of issue"
for purposes hereof regardless of the number of times transfer of such share is
made on the stock records maintained by or for the Corporation and regardless of
the number of certificates that may be issued to evidence such share. The date
on which the Corporation initially issues the first share of Series B-2
Preferred Stock shall be referred to as the "Original Date of Issue".

     3. Liquidation Preference.

          (a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (each a "Liquidation Event"),
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holder of each share of Series B-2 Preferred Stock shall be
entitled to receive an amount per share equal to the Liquidation Value of such
share on the date of distribution, and such holders shall not be entitled to any
further payment. If, upon any Liquidation Event, the assets of the Corporation,
or proceeds thereof, distributable among the holders of the Preferred Stock
shall be insufficient to pay in full the preferential amount due on such shares,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares of Preferred Stock if all amounts
payable thereon were paid in full. Solely for the purposes of this paragraph 3,
a Change of Control shall not be deemed to be a Liquidation Event.

          (b) After payment shall have been made in full to the holders of the
Preferred Stock, as provided in this paragraph 3, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to


                                       5




receive any and all assets remaining to be paid or distributed to holders of
capital stock of the Corporation, and the holders of the Preferred Stock shall
not be entitled to share therein.

     4. Conversion.

          (a) Subject to the provisions of this paragraph 4, each share of
Series B-2 Preferred Stock shall be automatically converted into one share of
Series B-1 Preferred Stock on the Approval Date without any further action
required by the Corporation or the holder of such share. The Accrued Value of
the share of Series B-1 Preferred Stock into which such share of Series B-2
Preferred Stock shall convert on the Approval Date shall be: (i) if the Approval
Date occurs prior to the date which is six months from the Original Date of
Issue, equal to the Accrued Value which a share of Series B-1 Preferred Stock
issued on the Original Date of Issue would have had on the Approval Date, or
(ii) if the Approval Date occurs on or after the date which is six months from
the Original Date of Issue, equal to the Accrued Value of such share of Series
B-2 Preferred Stock on such date (treating such date as a Dividend Accrual Date
for purposes of calculating the Accrued Value on such date). For the avoidance
of doubt, the "Conversion Price" (as defined in the certificate of designation
for the Series B-1 Preferred Stock) of the share of Series B-1 Preferred Stock
into which such share of Series B-2 Preferred Stock shall convert on the
Approval Date shall be equal to the Conversion Price which a share of Series B-1
Preferred Stock issued on the Original Date of Issue would have on the Approval
Date.

          (b)(i) Unless the shares issuable on conversion pursuant to this
paragraph 4 are to be issued in the same name as the name in which such shares
of Series B-2 Preferred Stock are registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form reasonably
satisfactory to the Corporation, duly executed by the holder or the holder's
duly authorized attorney and an amount sufficient to pay any transfer or similar
tax.

             (ii) As promptly as possible, but in any event within 5 business
days after the Approval Date and after surrender by the holder of the
certificates for shares of Series B-2 Preferred Stock, the Corporation shall
issue and shall deliver to such holder, or on the holder's written order (upon
compliance by such holder with subparagraph (b)(i) hereof and federal and state
securities laws applicable thereto which require the holder to take any action)
to the holder's transferee, a certificate or certificates for the whole number
of shares of Series B-1 Preferred Stock issuable upon the conversion of such
shares in accordance with the provisions of this paragraph 4.

             (iii) All shares of Series B-1 Preferred Stock delivered upon
conversion of the Series B-2 Preferred Stock will upon delivery be duly and
validly issued and fully paid and non-assessable, free of all liens and charges
(other than caused by the holder) and not subject to any preemptive rights.

          (c) The Corporation shall at all times reserve and keep available,
free from preemptive rights, such number of its authorized but unissued shares
of Series B-1 Preferred


                                       6




Stock (and shares of Common Stock into which such shares of Series B-1 Preferred
Stock may be converted) as shall be required for the purpose of effecting
conversion of the Series B-2 Preferred Stock (and the underlying Series B-1
Preferred Stock).

          (d) Prior to the delivery of any securities which the Corporation
shall be obligated to deliver upon conversion of the Series B-2 Preferred Stock,
the Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation.


          (e) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Series B-1 Preferred Stock on conversion of the Series B-2 Preferred Stock
pursuant hereto; provided, that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of shares of Series B-1 Preferred Stock in a name other than that of
the holder of the Series B-2 Preferred Stock to be converted and no such issue
or delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.

          (f) In connection with the conversion of any shares of Series B-2
Preferred Stock, no fractional shares of Series B-1 Preferred Stock shall be
issued, but in lieu thereof the Corporation shall pay to the holder thereof the
value of such Series B-2 Preferred share in cash as determined by reference to
the Accrued Value of such share on such date (treating such date as a Dividend
Accrual Date for purposes of calculating the Accrued Value on such date).

          (g) Subdivision or Combination of Series B-1 Preferred Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Series B-1 Preferred
Stock into a greater number of shares or if the Corporation at any time combines
(by reverse stock split or otherwise) its outstanding shares of Series B-1
Preferred Stock into a smaller number of shares, then, in either such case, the
number of shares of Series B-1 Preferred Stock into which the Series B-2
Preferred Stock shall be convertible shall be proportionately adjusted.

          (h) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Series B-1 Preferred Stock or Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Series B-1 Preferred Stock or Common Stock, is
referred to herein as an "Organic Change". Prior to the consummation of any
Organic Change, the Corporation shall make appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of the Series B-2
Preferred Stock then outstanding) to insure that each of the holders of Series
B-2 Preferred Stock shall thereafter have the right to acquire and receive, upon
the obtaining of Shareholder Approval, in lieu of or in addition to (as the case
may be) the shares of Series B-1 Preferred Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Series B-2
Preferred Stock, such shares of stock, securities or assets as such holder


                                       7




would have received in connection with such Organic Change if the Approval Date
had occurred on such date and such shares of Series B-2 Preferred Stock had been
converted into Series B-1 Preferred Stock immediately prior to such Organic
Change. In each such case, the Corporation shall also make appropriate
provisions (in form and substance reasonably satisfactory to the holders of a
majority of the Series B-2 Preferred Stock then outstanding) to insure that the
provisions of paragraph 4 hereof shall thereafter be applicable to the Series
B-2 Preferred Stock. The Corporation shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor entity
(if other than the Corporation) resulting from the consolidation or merger or
the entity purchasing such assets assumes by written instrument (in form and
substance reasonably satisfactory to the holders of a majority of the Series B-2
Preferred Stock then outstanding), the obligation to deliver to each holder of
Series B-2 Preferred Stock such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.

          (i) Notices.

               (i) Immediately upon any adjustment to the number of shares of
Series B-1 Preferred Stock into which the Series B-2 Preferred Stock is
convertible, the Corporation shall give written notice thereof to all holders of
Series B-2 Preferred Stock, setting forth in reasonable detail and certifying
the calculation of such adjustment.

               (ii) The Corporation shall give written notice to all holders of
Series B-2 Preferred Stock at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution referred to in Section 2(b) or Section 2(c), (b) with respect to
any pro rata subscription offer to holders of Common Stock or Series B-1
Preferred Stock or (c) for determining rights to vote with respect to any
Organic Change, dissolution or liquidation.

               (iii) The Corporation shall also give written notice to the
holders of Series B-2 Preferred Stock at least 20 days prior to the date on
which any Organic Change shall take place.

          (j) Certain Mergers. In connection with any consolidation with or
merger with or into, any person in a transaction where the Common Stock and/or
Series B-1 Preferred Stock is converted into or exchanged for securities of such
person or an affiliate of such person, the Corporation covenants that as a
condition precedent to the consummation of any such consolidation or merger it
shall provide the holders of the Series B-2 Preferred Stock with a certificate,
in form and substance satisfactory to the holders of a majority of the Series
B-2 Preferred Stock signed by a duly authorized officer of the Corporation
indicating that the person issuing such securities will be organized and
existing under the laws of a jurisdiction which allows for the issuance of
preference stock and that the Series B-1 Preferred Stock and the Series B-2
Preferred Stock shall be converted into or exchanged for and shall become shares
of such person having in respect of such person substantially the same powers,
preference and relative participating, optional or other special rights and the
qualifications, limitations or restrictions


                                       8




thereon that the Series B-1 Preferred Stock and the Series B-2 Preferred Stock
had immediately prior to such transaction.

     5. Change of Control Offer.

          (a) Not less than 20 days prior to the consummation of any Consensual
Change of Control and promptly after the occurrence of any Non-Consensual Change
of Control (the date of any such Change of Control being the "Change of Control
Date"), the Corporation shall commence (or cause to be commenced) an offer to
purchase all outstanding shares of Series B-2 Preferred Stock pursuant to the
terms described in subparagraph (d) below (the "Change of Control Offer") at a
purchase price equal to the Change of Control Amount on the Change of Control
Payment Date, and shall purchase (or cause the purchase of) any shares of Series
B-2 Preferred Stock tendered in response to the Change of Control Offer pursuant
to the terms hereof; provided, that with respect to any Consensual Change of
Control, the Corporation may condition its offer to purchase on consummation of
the Consensual Change of Control.

          (b) The Change of Control Amount payable to each holder of Series B-2
Preferred Stock shall be payable in cash.

          (c) Prior to the mailing of the Change of Control Notice referred to
in subparagraph (d), the Corporation shall (A) promptly determine if the
purchase of the Series B-2 Preferred Stock for cash would violate or constitute
a default under the indebtedness of the Corporation and (B) either shall repay
to the extent necessary all such indebtedness that would prohibit the repurchase
of the Series B-2 Preferred Stock pursuant to a Change of Control Offer or
obtain any requisite consents or approvals under instruments governing any
indebtedness to permit the repurchase of the Series B-2 Preferred Stock for
cash. The Corporation shall first comply with this subparagraph (c) before it
shall repurchase for cash any Series B-2 Preferred Stock pursuant to this
paragraph 5.

          (d) Not less than 20 days prior to the consummation of any Consensual
Change of Control or within 20 days following the date on which any
Non-Consensual Change of Control has occurred, the Corporation shall send, by
first-class mail, postage prepaid, a notice (a "Change of Control Notice") to
each holder of Series B-2 Preferred Stock. Such notice shall contain all
instructions and materials necessary to enable such holders to tender Series B-2
Preferred Stock pursuant to the Change of Control Offer. Such notice shall
state:

               (i) that a Change of Control has occurred or will occur, as
applicable, that a Change of Control Offer is being made pursuant to this
paragraph 5 and that, subject in the case of a Consensual Change of Control to
the consummation of the Consensual Change of Control (if the Corporation has so
conditioned its Change of Control Offer), all Series B-2 Preferred Stock validly
tendered and not withdrawn will be accepted for payment;

               (ii) the Change of Control Amount to be paid for shares tendered
in such offer (estimated as closely as possible in the case of a Consensual
Change of Control) and the purchase date (which shall be the Change of Control
Date in the case of a Consensual



                                       9




Change of Control and a date no earlier than 30 days nor later than 60 days from
the date such notice is mailed in the case of a Non-Consensual Change of
Control) (the "Change of Control Payment Date");

               (iii) that any shares of Series B-2 Preferred Stock not tendered
will continue to accrue dividends;

               (iv) that, unless the Corporation defaults in making payment
therefor, any share of Series B-2 Preferred Stock accepted for payment pursuant
to the Change of Control Offer shall cease to accrue dividends after payment
therefor on the Change of Control Payment Date;

               (v) that holders electing to have any shares of Series B-2
Preferred Stock purchased pursuant to a Change of Control Offer will be required
to surrender stock certificates representing such shares of Series B-2 Preferred
Stock, properly endorsed for transfer, together with such other customary
documents as the Corporation and the Transfer Agent may reasonably request to
the Transfer Agent at the address specified in the notice prior to the close of
business on the Change of Control Payment Date;

               (vi) that holders will be entitled to withdraw their election if
the Corporation receives, not later than five business days prior to the Change
of Control Payment Date, a telegram, facsimile transmission or letter setting
forth the name of the holder, the number of shares of Series B-2 Preferred Stock
the holder delivered for purchase and a statement that such holder is
withdrawing its election to have such shares of Series B-2 Preferred Stock
purchased;

               (vii) that holders who tender only a portion of the shares of
Series B-2 Preferred Stock represented by a certificate delivered will, upon
purchase of the shares tendered, be issued a new certificate representing the
unpurchased shares of Series B-2 Preferred Stock; and

               (viii) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of Control).

          (e) The Corporation will comply with any tender offer rules under the
Exchange Act which may then be applicable in connection with any offer made by
the Corporation to repurchase the shares of Series B-2 Preferred Stock as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with provisions hereof, the Corporation
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligation hereunder by virtue thereof.


                                       10




          (f) On the Change of Control Payment Date, subject in the case of a
Consensual Change of Control to the consummation of the Consensual Change of
Control (if the Corporation has so conditioned its Change of Control Offer), the
Corporation shall (A) accept for payment the shares of Series B-2 Preferred
Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the
holders of shares so accepted the Change of Control Amount in cash and (C)
cancel each surrendered certificate and retire the shares represented thereby.
Unless the Corporation defaults in the payment for the shares of Series B-2
Preferred Stock tendered pursuant to the Change of Control Offer, dividends will
cease to accrue with respect to the shares of Series B-2 Preferred Stock
tendered and all rights of holders of such tendered shares will terminate,
except for the right to receive payment therefor on the Change of Control
Payment Date.

          (g) To accept the Change of Control Offer, the holder of a share of
Series B-2 Preferred Stock shall deliver, prior to the close of business on the
Change of Control Payment Date, written notice to the Corporation (or an agent
designated by the Corporation for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Series B-2 Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.

     6. Redemption.

          (a) (i) If the Approval Date has not occurred prior to the third
anniversary of the Original Date of Issue, the holders of a majority of the
shares of Series B-2 Preferred Stock then outstanding may require the
Corporation to redeem all of the outstanding shares of Series B-2 Preferred
Stock at a redemption price, payable in cash, equal to the Accrued Value of such
shares on the Redemption Payment Date for such shares (treating the Redemption
Payment Date for such shares as a Dividend Accrual Date for purposes of
calculating the Accrued Value on such date). In order to require such
redemption, the stockholders requesting such redemption (the "Requesting
Stockholders") shall deliver a notice of redemption (the "Redemption Notice") to
the Corporation no later than 30 days following the third anniversary of the
Original Date of Issue. If the Redemption Notice is delivered to the Corporation
in a timely manner, the shares of Series B-2 Preferred Stock shall be redeemed
in two installments, with 50% of the shares then outstanding to be redeemed (and
the redemption price for such shares paid) on the third business day following
delivery of the Redemption Notice and with all of the shares outstanding one
year following delivery of the Redemption Notice to be redeemed (and the
redemption price for such shares paid) on such one-year anniversary (each such
date of payment, as applicable, a "Redemption Payment Date"), subject, in each
case, to any limitations on such redemption that may be contained in the terms
of the senior credit arrangements of the Corporation in effect on the Original
Date of Issue (the "Senior Credit Arrangements"). If the Corporation is of the
opinion that any such redemption would be in violation of the terms of the
Senior Credit Arrangements, the Requesting Stockholders may require the
Corporation to use its best efforts to consummate the sale and issuance of
subordinated debt securities as soon as practicable after the third anniversary
of the Original Date of Issue and to use the proceeds from such sale and
issuance to redeem all of the shares of Series B-2 Preferred Stock. The first
installment of the redemption shall be made on a pro rata basis among all the
holder of Series B-2 Preferred Stock based on the number of shares of Series B-2
Preferred Stock then held of record by such holders.


                                       11




For the avoidance of doubt, it is understood that if a redemption occurs, the
shares of Series B-2 Preferred Stock to be redeemed in the second installment on
the date that is one year from the delivery of the Redemption Notice shall
continue to accrue dividends in accordance with Section 2 hereof until the
Redemption Payment Date for such shares.

               (ii) At any time (a) following the third anniversary (but before
the fifth anniversary) of the Original Date of Issue, the Corporation may, at
its option, redeem all, but not less than all, of the outstanding shares of
Series B-2 Preferred Stock at a redemption price per share, payable in cash,
equal to 105% of the Accrued Value of such share on the date of payment therefor
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date), and (b) following the fifth anniversary (but before
the seventh anniversary) of the Original Date of Issue, the Corporation may, at
its option, redeem all, but not less than all, of the outstanding shares of
Series B-2 Preferred Stock at a redemption price per share, payable in cash,
equal to the Accrued Value of such share on the date of payment therefor
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date).

               (iii) On the seventh anniversary of the Original Date of Issue,
the Corporation will be required to redeem, and the holders of the Series B-2
Preferred Stock shall be required to deliver for redemption, all of the
outstanding shares of Series B-2 Preferred Stock at a redemption price per
share, payable in cash, equal to the Accrued Value of such share on such date
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date).

          (b) In the case of subparagraphs (ii) and (iii) above, notice of any
redemption shall be given by the Corporation not less than 30 days nor more than
60 days prior to the redemption date, to each holder of record of the shares to
be redeemed; provided, that neither the failure to give such notice nor any
defect therein shall affect the validity of the giving of notice for the
redemption of any share of Series B-2 Preferred Stock to be redeemed except as
to the holder to whom the Corporation has failed to give said notice or except
as to the holder whose notice was defective. Each such notice shall state: (i)
the redemption date (which, in the case of a redemption pursuant to clause (iii)
shall be such seventh anniversary); (ii) the redemption price; (iii) the place
or places where certificates for such shares are to be surrendered for payment
of the redemption price; and (iv) that dividends on the shares to be redeemed
will cease to accrue from and after such redemption date (unless default shall
be made by the Corporation in providing for the payment of the redemption price
for the shares called for redemption on such redemption date).

          (c) Notice having been given as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in providing
for the payment of the redemption price of the shares called for redemption),
dividends on the shares of Series B-2 Preferred Stock so called for redemption
shall cease to accrue, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the redemption
price) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the


                                       12




Corporation shall so require and the notice shall so state), such share shall be
redeemed by the Corporation at the redemption price.

     7. Voting Rights.

          (a) Except as required by law, each holder of Series B-2 Preferred
Stock shall not be entitled to vote on any matter subject to the vote of the
holders of the Corporation's Voting Securities.

          (b) So long as any of the Series B-2 Preferred Stock is outstanding,
the affirmative vote of the holders of (x) 66 2/3% of the outstanding shares of
Series B-2 Preferred Stock, voting together as a single class, shall be
necessary to alter or change the preferences, rights or powers of the Series B-1
Preferred Stock or the Series B-2 Preferred Stock, and (y) a majority of the
outstanding shares of Series B-2 Preferred Stock, voting together as a single
class, shall be necessary to: (i) increase or decrease the authorized number of
shares of the Series B-1 Preferred Stock or the Series B-2 Preferred Stock, (ii)
amend, alter, repeal or waive any provision of the Corporation's articles of
incorporation (including any certificate of designation or articles of amendment
and whether by amendment, merger or otherwise) or by-laws so as to adversely
affect the preferences, rights or powers of the Series B-1 Preferred Stock or
the Series B-2 Preferred Stock, including, without limitation, the voting
powers, dividend rights and liquidation preference of the Series B-1 Preferred
Stock or the Series B-2 Preferred Stock, or change the Series B-1 Preferred
Stock or the Series B-2 Preferred Stock into any other securities, cash or other
property (other than the conversion of Series B-2 Preferred Stock into Series
B-1 Preferred Stock upon Shareholder Approval), or (iii) issue (other than,
prior to the Approval Date, in lieu of accrued dividends on the Series B-1
Preferred Stock) any additional Series B-2 Preferred Stock or create, authorize
or issue any capital stock that ranks prior to or pari passu with (whether with
respect to dividends or upon liquidation, dissolution, winding up or otherwise)
the Series B-1 Preferred Stock or the Series B-2 Preferred Stock (other than
Series C-1 Preferred Stock or Series C-2 Preferred Stock).

          (c) So long as any of the Series B-2 Preferred Stock or Series C-2
Preferred Stock is outstanding, unless such compliance is waived in writing by
the affirmative vote of the holders of a majority of the outstanding shares of
Series B-2 Preferred Stock and Series C-2 Preferred Stock, voting together as a
single class, the Corporation will comply with all provisions of Section 6.09 of
the Purchase Agreement, which provisions are incorporated by reference herein
with the same effect as if set forth in full herein. Any amendments to the
Purchase Agreement shall be ineffective with respect to the Series B-2 Preferred
Stock unless consented to by the holders of 66 2/3% of the outstanding shares of
Series B-2 Preferred Stock. Copies of the Purchase Agreement are available upon
request from the Secretary of the Corporation.

          (d) If the Corporation shall fail to comply with any one or more of
the provisions in paragraphs 7(b) or 7(c), then upon and during the continuance
of any such default, the Dividend Rate shall be increased to 23%.


                                       13



     8. Miscellaneous

          (a) Notwithstanding anything to the contrary herein contained, if in
connection with any conversion of shares of Series B-2 Preferred Stock pursuant
to Section 4 hereof, the amount of Series B-1 Preferred Stock to be received by
one or more holders of the Series B-2 Preferred Stock would result in such
conversion being subject to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules promulgated thereunder, or any successor thereto
(the "HSR Act"), then compliance with the HSR Act shall be a condition precedent
to the consummation of such conversion. The provisions of this paragraph 8(a)
shall in no way limit the obligation of the Corporation to comply with the
provisions of Sections 5 and 6 hereof.

          (b) Each holder of Series B-2 Preferred Stock hereby agrees, by
acceptance of its shares of Series B-2 Preferred Stock, to use its commercially
reasonable efforts to make all filings required by the HSR Act and comply with
all other provisions of the HSR Act as promptly as practicable to the extent
necessary in connection with any conversion of Series B-2 Preferred Stock.

          (c) Reacquired Shares. Any shares of Series B-2 Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by an amendment or amendments of the Corporation's articles of
incorporation adopted by the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.

          (d) Notices. (i) All notices, requests, demands and other
communications to the Corporation hereunder shall be in writing and shall be
delivered personally, sent by facsimile or sent by certified mail (return
receipt requested) or by express mail or overnight courier, addressed to the
President of the Corporation at the Corporation's principal executive offices.

               (ii) All notices, requests, demands and other communications to
the holders of Series B-2 Preferred Stock hereunder shall be in writing and
shall be delivered personally, sent by facsimile or sent by certified mail
(return receipt requested) or by express mail or overnight courier, addressed to
each holder of record at such holder's address appearing on the stock transfer
register of the Corporation.

               (iii) Such notices, requests, demands and other communications
shall be deemed given or delivered (A) three business days following sending by
registered or certified mail, postage prepaid, (B) upon delivery by express mail
or overnight courier, (C) when sent, if sent by facsimile (but only if such
facsimile is actually received) or (D) when delivered, if delivered by hand.


                                       14



     9. Definitions. The following terms, as used herein, shall have the
following meanings:

     "Accrued Value" equals, with respect to one share of Series B-2 Preferred
Stock on any date, $1,000 plus the amount of all dividends added to the Accrued
Value in accordance with paragraph 2(a) (which aggregate amount shall be subject
to adjustment whenever there shall occur a stock split, combination,
re-classification or other similar event involving the Series B-2 Preferred
Stock).

     "Approval Date" means the date on which Shareholder Approval is obtained.

     "Change of Control" means a Consensual Change of Control or a
Non-Consensual Change of Control.

     "Consensual Change of Control" means: (i) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all the
assets of the Corporation and its subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act), other than to a
wholly-owned subsidiary of the Corporation or (ii) the consummation of any
transaction approved by the Board of Directors of the Corporation (including any
merger or consolidation) the result of which is that any "person" (as defined
above), becomes the beneficial owner (as determined in accordance with Rules
13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to
have beneficial ownership of all shares that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the Voting Securities of
the Corporation; provided, however, that "person" as used in clauses (i) and
(ii) shall not include any Purchaser (as defined in the Purchase Agreement).

     "Change of Control Amount" means, with respect to one share of Series B-2
Preferred Stock, 101% of the Accrued Value on the Change of Control Payment Date
(treating such date as a Dividend Accrual Date for purposes of calculating the
Accrued Value on such date); provided, that if the Change of Control Payment
Date falls on a date prior to the third anniversary of the Original Date of
Issue, the Change of Control Amount shall be calculated assuming the Change of
Control Payment Date was on the third anniversary of the Original Date of Issue
(and assuming that no dividends had been paid in cash with respect to such share
from the actual date of the Change of Control Payment Date through the third
anniversary of the Original Date of Issue).

     "Continuing Directors" means individuals who constituted the Board of
Directors of the Corporation on the Original Date of Issue, after giving effect
to the issuance of the Series B-1 Preferred Stock (the "Incumbent Directors");
provided, that any individual becoming a director during any year shall be
considered to be an Incumbent Director if such individual's election,
appointment or nomination was recommended or approved by at least two-thirds of
the other Incumbent Directors continuing in office following such election,
appointment or nomination present, in person or by telephone, at any meeting of
the Board of Directors of the Corporation, after the giving of a sufficient
notice to each Incumbent Director so as to provide a reasonable opportunity for
such Incumbent Directors to be present at such meeting or (ii) such individual


                                       15



was nominated, appointed or selected by the holders of Series B-1 Preferred
Stock or nominated, appointed or selected in accordance with Section 6.02 of the
Purchase Agreement.

     "Dividend Rate" means eighteen percent (18%), or if adjusted pursuant to
Section 7(d), twenty-three (23%) percent.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Liquidation Value" on any date means, with respect to one share of Series
B-2 Preferred Stock, the greater of (i) the Accrued Value on such date (treating
such date as a Dividend Accrual Date for purposes of calculating the Accrued
Value on such date) and (ii) the amount that would have been payable in
connection with such Liquidation Event on the number of shares of Common Stock
into which the number of shares of Series B-1 Preferred Stock resulting from the
conversion of the Series B-2 Preferred Stock was convertible on such date (as if
the Approval Date had occurred on such date).

     "Non-Consensual Change of Control" means: (i) the consummation of any
transaction the result of which is that any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), becomes the beneficial owner (as
determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act
except that a person will be deemed to have beneficial ownership of all shares
that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the Voting Securities of the Corporation without the approval of the
Board of Directors of the Corporation or (ii) the first day on which a majority
of the members of the Board of Directors are not Continuing Directors; provided,
however, that "person" as used in clause (i) shall not include any Purchaser (as
defined in the Purchase Agreement).

     "Person" as used herein means any corporation, limited liability company,
partnership, trust, organization, association, other entity or individual.

     "Purchase Agreement" means the Securities Purchase Agreement dated as of
the Original Date of Issue among the Corporation, Welsh, Carson, Anderson &
Stowe IX, L.P. and the other purchasers named therein.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Shareholder Approval" means the approval of requisite holders of the
Common Stock with respect to each of the following: (1) the removal of the
Conversion Cap contemplated in paragraph 4(a)(iii) of the certificate of
designations for the Series B-1 Preferred Stock, (2) the automatic conversion of
the Series B-2 Preferred Stock into Series B-1 Preferred Stock pursuant to the
terms hereof, (3) the automatic conversion of the Series C-2 Preferred Stock, if
any, into Series C-1 Preferred Stock pursuant to the certificate of designation
for the Series C-2 Preferred Stock, and (4) the rights of the holders of the
Series B-1 Preferred Stock to elect directors to the Board of Directors of the
Corporation as described in paragraphs 7(c)(ii) and 7(c)(iii) of the certificate
of designations for the Series B-1 Preferred Stock.

     "Transfer Agent" means the transfer agent for the Series B-2 Preferred
Stock appointed by the Corporation, and if none is appointed, the Corporation.


                                       16



     "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

EX-99

                                                                     Exhibit 4.5

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 Senior Subordinated Note
                               Due August 31, 2008

                    $[__________](2) Dated: [__________](3)

           FOR VALUE RECEIVED, the undersigned, LABONE, INC., a Missouri
corporation (the "Company"), hereby promises to pay, in accordance with Section
2 below, to [NAME OF PURCHASER] or the registered assigns thereof (the
"Holder"), the principal sum of [_________] DOLLARS ($[____])(2) as follows:
(i) [_________] DOLLARS ($[____])(4) shall be due and payable on August 31,
2006 (the "First Amoritization Date"), (ii) [_________] DOLLARS ($[____])(5)
shall be due and payable on August 31, 2007 (the "Second Amortization Date")
and (iii) [_________] DOLLARS ($[____])5 shall be due and payable on August 31,
2008

- -------------------------
(1) OID legend to appear in Series B Notes only.
(2) Principal sum of the Note.
(3) Date of issuance of the Note.
(4) Twenty-five percent of the principal sum of the Note.
(5) Fifty percent of the principal sum of the Note.




(the "Maturity Date"), and to pay interest on the principal sum of this Note in
accordance with Sections 2 and 3 below.

           1.   Notes.

           [This Note is one of a duly authorized and issued series of Notes of
the Company, consisting of $15,000,000 in aggregate principal amount of Notes
designated "Series A Senior Subordinated Notes due August 31, 2008" that have
been issued pursuant to a Securities Purchase Agreement dated as of August 31,
2001 among the Company, Welsh, Carson, Anderson & Stowe IX, L.P. and the other
purchasers named on Schedule I thereto (the "Securities Purchase Agreement"). As
used herein, the term "Note" or "Notes" includes all of such Series A Senior
Subordinated Notes due August 31, 2008 as well as (i) all Series B Senior
Subordinated Notes due August 31, 2008 that are from time to time issued by the
Company as contemplated by Section 6.05 of the Securities Purchase Agreement,
(ii) all Deferred Interest Notes (as defined in Section 3(d) below) issued in
respect of any Notes and (iii) all Notes subsequently issued upon exchange or
transfer of any Notes or otherwise in substitution therefor.](6)

           [This Note is one of a duly authorized and issued series of Notes of
the Company, consisting of up to $15,000,000 in aggregate principal amount of
Notes designated "Series B Senior Subordinated Notes due August 31, 2008" that
have been or will be issued as contemplated by Section 6.05 of the Securities
Purchase Agreement dated as of August 31, 2001 among the Company, Welsh, Carson,
Anderson & Stowe IX, L.P. and the other purchasers named on Schedule I thereto
(the "Securities Purchase Agreement"). As used herein, the term "Note" or
"Notes" includes all of such Series B Senior Subordinated Notes due August 31,
2008 as well as (i) all Series A Senior Subordinated Notes due August 31, 2008
that were issued by the Company on August 31, 2001 pursuant to the Securities
Purchase Agreement, (ii) all Deferred Interest Notes (as defined in Section 3(d)
below) issued in respect of any Notes and (iii) all Notes subsequently issued
upon exchange or transfer of any Notes or otherwise in substitution
therefor.](7)

           2.   Payments of Principal and Interest.

           (a) Subject to Section 3(d) below, all payments of principal and
interest on this Note shall be in such coin or currency of the United States of
America as at the time of payment shall be legal tender for payment of public
and private debts. All such payments shall be made by check mailed to the person
deemed the Holder of this Note in accordance with Section 6 below at the address
for such person appearing in the Register (as defined in Section 4 below) or, if
arrangements reasonably satisfactory to the Company are made, by wire transfer
of immediately available funds to an account specified by such Holder.

- --------------------------
(6) For inclusion in Series A Notes.
(7) For inclusion in Series B Notes.

                                       2



           (b) If any payment of principal or interest on this Note is due on a
day which is not a Business Day, it shall be due on the next succeeding Business
Day. For purposes of this Note, "Business Day" shall mean any day other than a
Saturday, Sunday or a legal holiday or day on which banks are authorized or
required to be closed in Kansas City, Missouri or New York, New York.

           3. Interest on the Note.

           (a) The Company shall pay interest on the unpaid principal amount
from time to time outstanding under this Note at the rate of 11% per annum;
provided, that once any principal amount hereof or interest hereon shall have
become due and payable, if such amount is not timely paid, the Company shall
thereafter pay interest on any such overdue principal amount and, to the extent
permitted by applicable law, on any such overdue interest, at the rate of 13%
per annum until such amounts shall have been paid in full in cash. Interest on
this Note shall be computed on the basis of actual days elapsed over a 360-day
year.

           (b) Interest on this Note shall be payable in cash semi-annually in
arrears on each June 30 and December 31 hereafter (each an "Interest Payment
Date") and on the Maturity Date; provided, that with respect to any principal
amount of this Note that shall at any time become due and payable prior to the
Maturity Date (whether by means of amortization, acceleration or otherwise), all
accrued and unpaid interest on such principal amount hereof shall also become
due and payable on such earlier date; provided, further, that interest on
overdue amounts shall be payable on demand.

           (c) Notwithstanding anything to the contrary contained above, the
Company may elect (by providing not less than ten days prior written notice of
such election to the Holder at the address for such Holder appearing in the
Register) to pay the interest that would otherwise be due and payable in cash
hereunder on December 31, 2001 and/or June 30, 2002 in-kind rather than in cash
(any such election, an "Interest Deferral Election"). If any Interest Deferral
Election is made pursuant to this Section 3(c), the Company shall satisfy its
obligation to pay interest hereunder by issuing to the Holder a Note in a
principal amount equal to the product of (A) such unpaid amount of interest and
(B) 14/11 (each a "Deferred Interest Note"). Deferred Interest Notes shall be in
substantially the form hereof and shall be dated as of the Interest Payment Date
to which such Interest Deferral Election applies.

           4. Transfer, Etc. of Notes. The Company shall keep at its office or
agency maintained as provided in Section 9(a) a register in which the Company
shall provide for the registration of this Note and for the registration of
transfer and exchange of this Note (the "Register"). The Holder may, at its
option, and either in person or by its duly authorized attorney, surrender the
same for registration of transfer or exchange at the office or agency of the
Company maintained as provided in Section 9(a) and, without expense to such
Holder (except for taxes or governmental charges imposed in connection
therewith), receive in exchange therefor a Note or Notes each in such
denomination or denominations as such Holder may request, dated as of the date
to which interest has been paid on the Note or Notes so surrendered for transfer
or exchange, for the same aggregate principal amount as the then unpaid
principal

                                       3



amount of the Note or Notes so surrendered for transfer or exchange, and
registered in the name of such person or persons as may be designated by such
Holder. Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or shall be accompanied by a written instrument
of transfer, satisfactory in form to the Company, duly executed by the Holder or
its attorney duly authorized in writing. Every Note so made and delivered in
exchange for such Note shall in all other respects be in the same form and have
the same terms and legends thereon as such Note. No transfer or exchange of any
Note shall be valid unless (x) made in the foregoing manner at such office or
agency and (y) registered under the Securities Act of 1933, as amended, or any
applicable state securities laws or unless an exemption from registration is
available.

           5. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and an indemnity reasonably
acceptable in form and substance to the Company from the Holder, or in the case
of any such mutilation, upon surrender and cancellation of this Note, the
Company will make and deliver, in lieu of this Note, a new Note of like tenor
and unpaid principal amount and dated as of the date to which interest has been
paid on this Note.

           6. Persons Deemed Holders. The Company may deem and treat the person
in whose name this Note is registered in the Register as the Holder of this Note
for the purpose of receiving payment of principal of and interest on this Note
and for all other purposes whatsoever, whether or not this Note shall be
overdue.

           7.   Optional Prepayments.

           (a) Optional Prepayment. Subject to Section 7(c) below, upon notice
given as provided in Section 7(b) below, the Company may, at any time and from
time to time after August 31, 2003, at its option, prepay all or any portion of
the principal amount of this Note, without premium or penalty, together with any
accrued and unpaid interest thereon through the date of such prepayment. Except
as provided in Section 8 below, prior to August 31, 2003, the Company shall have
no right to prepay this Note without the prior written consent of the Holder.

           (b) Notice of Optional Prepayment. The Company shall give written
notice of any prepayment of this Note or any portion hereof pursuant to Section
7(a) not less than ten nor more than 60 days prior to the date fixed for such
prepayment. Such notice of prepayment and all other notices to be given to the
Holder of this Note shall be given by registered or certified mail at its
address designated on the Register on the date of mailing such notice of
prepayment or other notice. Upon notice of prepayment being given as aforesaid,
the Company covenants and agrees that it will prepay, on the date therein fixed
for prepayment, this Note or the portion hereof, as the case may be, so called
for prepayment. Any prepayment of less than all of the outstanding principal
amount of this Note and all accrued but unpaid interest hereon pursuant to this
Section 7 shall be applied as follows: first, to the payment of accrued and
unpaid interest on the principal amount being repaid, second, to reduce the
amount of principal otherwise payable on the Maturity Date, third, to reduce the
amount of principal otherwise payable on the Second

                                       4



Amortization Date, and fourth, to reduce the amount of principal otherwise
payable on the First Amortization Date.

           (c) Pro Rata Treatment of Notes. Any prepayment of some but less than
all of the principal of and accrued interest on the Notes or any purchase,
redemption or retirement of less than all of the principal of and accrued
interest on the Notes shall be made on a pro rata basis among all of the Notes
based on the aggregate principal amounts thereof.

           (d) Interest After Date Fixed for Prepayment. If this Note or a
portion hereof is called for prepayment as herein provided, this Note or such
portion shall cease to bear interest on and after the date fixed for such
prepayment unless, upon presentation for such purpose, the Company shall fail to
pay this Note or such portion, as the case may be, in which event this Note or
such portion, as the case may be, and, so far as may be lawful, any overdue
installment of interest, shall bear interest on and after the date fixed for
such prepayment and until paid in full in cash at the rate per annum provided
herein for overdue amounts.

           (e) Surrender of Note; Notation Thereon. Upon any prepayment of a
portion of the principal amount of this Note, the Holder, at its option, may
require the Company to execute and deliver at the expense of the Company (other
than for transfer taxes, if any), upon surrender of this Note, a new Note
registered in the name of such person or persons as may be designated by the
Holder for the principal amount of this Note then remaining unpaid, dated as of
the date to which the interest has been paid on the principal amount of this
Note then remaining unpaid, or may present this Note to the Company for notation
hereon of the payment of the portion of the principal amount of this Note so
prepaid.

           8. Mandatory Prepayments. (a) If at any time while any of the Notes
shall be outstanding, a Change of Control (as hereinafter defined) shall occur,
then, the Company shall take such action as may be necessary, to provide funds
sufficient to, and obtain any consent necessary to, prepay the entire principal
amount of this Note on the Change of Control Payment Date (as hereinafter
defined) and, in connection with such prepayment, pay to such Holders (x) all
interest accrued thereon through the date of prepayment and (y) a premium equal
to 1% of the principal amount of this Note. Notwithstanding anything to the
contrary contained in this Section 8, the Holders of not less than a majority in
principal amount of the Notes then outstanding may waive any mandatory
prepayment otherwise required pursuant to this Section 8 by giving prior written
notice of such waiver to the Company within ten Business Days after written
notice of the Change of Control is given to the Holders.

           (b) As used herein, the following terms shall have the
following meanings:

                "Change of Control" shall mean (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 Company and its subsidiaries taken as
      a whole to any "person" (as such term is used in Section 13(d)(3) of the
      Exchange Act), (ii) the consummation of any transaction (including any
      merger or consolidation) the result of which is that any "person" (as
      defined above), becomes the

                                       5



      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 fifty percent (50%)
      of the Voting Securities (as hereinafter defined) of the Company, or (iii)
      the first day on which a majority of the members of the board of directors
      are not Continuing Directors (as hereinafter defined). "Person" as used in
      clauses (i) and (ii) shall not include any Purchaser (as defined in the
      Securities Purchase Agreement).

                "Change of Control Payment Date" shall mean (i) in the case of
      any Change of Control resulting from a transaction to which the Company is
      a party, the date of consummation of such transaction and (ii) in the case
      of any other Change of Control, the date which is 30 days after the
      occurrence of such Change of Control.

                "Continuing Directors" shall mean individuals who constituted
      the Board of Directors of the Company on August 31, 2001 after giving
      effect to the issuance of the Series B-1 Preferred Shares (as defined in
      the Securities Purchase Agreement) (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 Company, 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 the Series B-1 Preferred Shares or
      nominated, appointed or selected in accordance with Section 6.02 of the
      Securities Purchase Agreement.

                "Voting Securities" means securities of the Company ordinarily
      having the power to vote for the election of directors of the Company.

           9. Affirmative Covenants.  The Company covenants and agrees that so
long as any of the Notes shall be outstanding:

           (a) Maintenance of Office. The Company will maintain an office or
agency in such place in the United States of America as the Company may
designate in writing to the Holder where this Note may be presented for
registration of transfer and for exchange as herein provided, where notices and
demands to or upon the Company in respect of this Note may be served and where
this Note may be presented for payment. Until the Company otherwise notifies the
Holder, said office shall be the principal office of the Company located at
10101 Renner Boulevard, Lenexa, Kansas 66219-9752.

           (b) Payment of Taxes. The Company will promptly pay and discharge or
cause to be paid and discharged, before the same shall become in default, all
material lawful taxes and assessments imposed upon the Company or any of its
subsidiaries or upon the income and profits

                                       6



of the Company or any of its subsidiaries, or upon any property, real, personal
or mixed, belonging to the Company or any of its subsidiaries, or upon any part
thereof by the United States or any State thereof, as well as all material
lawful claims for labor, materials and supplies which, if unpaid, would become a
lien or charge upon such property or any part thereof; provided, however, that
neither the Company nor any of its subsidiaries shall be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as both (x) the Company has established adequate
reserves for such tax, assessment, charge, levy or claim and (y)(i) the Company
or a subsidiary shall be contesting the validity thereof in good faith by
appropriate proceedings or (ii) the Company shall, in its good faith judgment,
deem the validity thereof to be questionable and the party to whom such tax,
assessment, charge, levy or claim is allegedly owed shall not have made written
demand for the payment thereof.

           (c) Corporate Existence. The Company will do or cause to be done all
things necessary and lawful to preserve and keep in full force and effect (i)
its corporate existence and the corporate existence of each of its subsidiaries
and (ii) the material rights and franchises of the Company and each of its
subsidiaries under the laws of the United States or any State thereof, or, in
the case of subsidiaries organized and existing outside the United States, under
the laws of the applicable jurisdiction; provided, however, that nothing in this
paragraph (c) shall prevent (x) a consolidation or merger of, or a sale,
transfer or disposition of all or any substantial part of the property and
assets of, the Company not prohibited by the provisions of Section 6.09(e) of
the Securities Purchase Agreement or (y) the abandonment or termination of any
rights or franchises of the Company, or the abandonment or termination of the
corporate existence, rights and franchises of any subsidiary of the Company, if
such abandonment or termination is not disadvantageous to the Holder and, in the
good faith business judgment of the Company, in the best interests of the
Company.

           (d) Maintenance of Property. The Company will at all times maintain
and keep, or cause to be maintained and kept, in good repair, working order and
condition (reasonable wear and tear excepted) all significant properties of the
Company and its subsidiaries used in the conduct of the business of the Company
and its subsidiaries, and will from time to time make or cause to be made all
needful and proper repairs, renewals, replacements, betterments and improvements
thereto, so that the business of the Company and its subsidiaries may be
conducted at all times in the ordinary course consistent with past practice;
provided, however, that nothing in this subsection (d) shall require (i) the
making of any repair or renewal or (ii) the continuance of the operation and
maintenance of any property or (iii) the retention of any assets (the sale or
other disposition of which would not be prohibited by Section 6.09(e) of the
Securities Purchase Agreement), if such action (or inaction) is not
disadvantageous to the Holder and, in the good faith business judgment of the
Company, in the best interests of the Company.

           (e) Insurance. The Company will, and will cause each of its
subsidiaries to, (i) keep adequately insured, by financially sound and reputable
insurers, all property of a character usually insured by corporations engaged in
the same or a similar business similarly situated against loss or damage of the
kinds customarily insured against by such corporations and (ii) carry, with
financially sound and reputable insurers, such other insurance (including
without

                                       7



limitation liability insurance) in such amounts as are available at reasonable
expense and to the extent believed advisable in the good faith business judgment
of the Company.

           (f) Keeping of Books. The Company will at all times keep, and cause
each of its subsidiaries to keep, proper books of record and account in which
proper entries will be made of its transactions in accordance with generally
accepted accounting principles consistently applied.

           (g) Notice of Certain Events. The Company shall, immediately after it
becomes aware of the occurrence of (i) any Event of Default (as hereinafter
defined) or any event which, upon notice or lapse of time or both, would
constitute such an Event of Default or (ii) any action, suit or proceeding at
law or in equity or by or before any governmental instrumentality or agency
which, if adversely determined, would materially impair the right of the Company
to carry on its business substantially as now or then conducted, or would
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, results of operations, condition (financial or
other) or prospects of the Company and its subsidiaries taken as a whole, give
notice to the holder of this Note, specifying the nature of such event.

           (h) Payment of Principal and Interest on the Note. Subject to
applicable law and the provisions of any agreements governing Senior
Indebtedness (as hereinafter defined), the Company will provide funds from its
subsidiaries by means of dividend, advance or otherwise that are sufficient to
permit payment by the Company of the principal of and interest on this Note in
accordance with its terms.

           (i) Inspection of Property. The Company will permit the Holder and
its agents and representatives to visit and inspect the properties of the
Company and its subsidiaries and their books and records and to discuss the
affairs, finances and accounts of the Company and its subsidiaries with their
principal officers and independent public accountants, all at such reasonable
times and as often as such Holders may reasonably request.

           10. Modification by Holders; Waiver. The Company may, with the
written consent of the Holders of not less than a majority in principal amount
of the Notes then outstanding, modify the terms and provisions of this Note or
the rights of the Holder or the obligations of the Company hereunder, and the
observance by the Company of any term or provision of this Note may be waived
with the written consent of the Holders of not less than a majority in principal
amount of the Notes then outstanding.

           Any such modification or waiver shall apply equally to each Holder of
the Notes and shall be binding upon them, upon each future Holder of any Note
and upon the Company, whether or not such Note shall have been marked to
indicate such modification or waiver, but any Note issued thereafter shall bear
a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the Holders as herein provided, the Company
shall transmit a copy of such modification or waiver to the Holders of the Notes
at the time outstanding.


                                       8



           11. Events of Default. (a) If any one or more of the following events
(herein called "Events of Default") shall occur (for any reason whatsoever, and
whether such occurrence shall, on the part of the Company or any of its
subsidiaries, be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of a court of competent jurisdiction or any order, rule or regulation of
any administrative or other governmental authority) and such Event of Default
shall be continuing:

           (i) default shall be made in the payment of all or any portion of the
      principal of this Note when the same shall have become due and payable,
      whether on a scheduled amoritization date, at maturity, on any date fixed
      for prepayment (including default of any optional prepayment in accordance
      with the requirements of Section 7 hereof or any mandatory prepayment in
      accordance with the requirements of Section 8 hereof), by acceleration or
      otherwise; or

           (ii) default shall be made in the payment of any installment
      of interest on this Note according to its terms when and as the same shall
      become due and payable, and such default shall continue for three Business
      Days; or

           (iii) default shall be made in the due observance or performance of
      any covenant, condition or agreement on the part of the Company contained
      in Section 6.09 of the Securities Purchase Agreement; or

           (iv) default shall be made in the due observance or performance of
      any other covenant, condition or agreement on the part of the Company to
      be observed or performed pursuant to the terms hereof, and such default
      shall continue for thirty Business Days after written notice thereof,
      specifying such default and requesting that the same be remedied, is given
      by any Holder to the Company; or

           (v) the entry of a decree or order for relief by a court having
      jurisdiction in the premises in respect of the Company or any of its
      subsidiaries in any involuntary case under the federal bankruptcy laws, as
      now constituted or hereafter amended, or any other applicable federal or
      state bankruptcy, insolvency or other similar laws, or appointing a
      receiver, liquidator, assignee, custodian, trustee, sequestrator (or
      similar official) of the Company or any of its subsidiaries for any
      substantial part of any of their property or ordering the winding-up or
      liquidation of any of their affairs and the continuance of any such decree
      or order unstayed and in effect for a period of 30 consecutive days; or

           (vi) the commencement by the Company or any of its material
      subsidiaries of a voluntary case under the federal bankruptcy laws, as now
      constituted or hereafter amended, or any other applicable federal or state
      bankruptcy, insolvency or other similar laws, or the consent by any of
      them to the appointment of or taking possession by a receiver, liquidator,
      assignee, trustee, custodian, sequestrator (or other similar official) of
      the Company or any of its material subsidiaries for any substantial part
      of any of their property, or the making by any of them of any general
      assignment for the benefit of creditors, or the failure of the Company or
      of any of its material subsidiaries generally to

                                       9



      pay its debts as such debts become due, or the taking of corporate action
      by the Company or any of its material subsidiaries in furtherance of or
      which might reasonably be expected to result in any of the foregoing; or

           (vii) a default or an event of default as defined in any instrument
      evidencing or under which the Company or any of its material subsidiaries
      has outstanding at the time any Indebtedness in excess of $500,000 in
      aggregate principal amount shall occur and as a result thereof the
      maturity of any such Indebtedness (as defined in the Securities Purchase
      Agreement) shall have been accelerated so that the same shall have become
      due and payable prior to the date on which the same would otherwise have
      become due and payable and such acceleration shall not have been rescinded
      or annulled within thrity days; or

           (viii) final judgment (not reimbursed by insurance policies of the
      Company or any of its subsidiaries) for the payment of money in excess of
      $500,000 shall be rendered against the Company or any of its subsidiaries
      and the same shall remain undischarged for a period of thirty days during
      which execution shall not be effectively stayed;

then the Holders of at least fifty percent in aggregate principal amount of the
Notes at the time outstanding may, at their option, by a notice in writing to
the Company declare this Note to be, and this Note shall thereupon be and become
immediately due and payable together with interest accrued thereon, without
diligence, presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Company to the extent permitted by law. For
purposes of clauses (vi) and (vii), the term "material subsidiary" shall mean
each subsidiary of the Company, other than subsidiaries that are dormant, or
conduct no business other than the holding of assets of insignificant value or
have less than $5 million in annual revenues at such time (collectively
"non-material subsidiaries"); provided, however, for purposes of clauses (vi)
and (vii), in the event that an Event of Default shall relate to one or more
non-material subsidiaries which have greater than $5 million in annual revenues
in the aggregate such Event of Default shall be deemed to be an Event of Default
that relates to material subsidiaries.

           (b) At any time after any declaration of acceleration has been made
as provided in this Section 11, the Holders of a majority in principal amount of
the Notes then outstanding may, by notice to the Company, rescind such
declaration and its consequences, provided, however, that no such rescission
shall extend to or affect any subsequent default or Event of Default or impair
any right consequent thereon.

           12. Suits for Enforcement. Subject to the provisions of Section 15
below, in case any one or more of the Events of Default specified in Section 11
of this Note shall happen and be continuing (subject to any applicable cure
period expressly set forth herein), the Holder may proceed to protect and
enforce its rights by suit in equity, action at law and/or by other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable right of the Holder.

                                       10



In case of any default under this Note, the Company will pay to the Holder
hereof reasonable collection costs and reasonable attorneys' fees, to the extent
actually incurred.

           13. Remedies Cumulative. No remedy herein conferred upon the Holder
is intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.

           14. Remedies Not Waived.  No course of dealing between the Company
and the Holder or any delay on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of any right of the Holder.

           15. Subordination. (a) Anything contained in this Note to the
contrary notwithstanding, the indebtedness evidenced by the Notes shall be
subordinate and junior, to the extent set forth in the following paragraphs (A),
(B), (C) and (D), to all Senior Indebtedness of the Company. "Senior
Indebtedness" shall mean the principal of, premium, if any, and interest on
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law), and all
reasonable fees, reimbursement and indemnity obligations, and all other
obligations due and payable under (x) any and all "Senior Indebtedness" (as
defined in Section 6.09(a)(i)(D) of the Securities Purchase Agreement) and (y)
any and all "Additional Indebtedness" (as defined in Section 6.09(a)(i)(L) of
the Securities Purchase Agreement) that is not subordinated to any other
Indebtedness of the Company.

           (A) In the event of any insolvency, bankruptcy, liquidation,
      reorganization or other similar proceedings, or any receivership
      proceedings in connection therewith, relative to the Company or its
      creditors or its property, and in the event of any proceedings for
      voluntary liquidation, dissolution or other winding up of the Company,
      whether or not involving insolvency or bankruptcy proceedings, then all
      Senior Indebtedness shall first be paid in full in cash (or such payment
      is duly provided for), before any payment, whether on account of
      principal, interest or otherwise, is made upon the Notes.

           (B) In any of the proceedings referred to in paragraph (A) above, any
      payment or distribution of any kind or character, whether in cash,
      property, stock or obligations which may be payable or deliverable in
      respect of the Notes shall be paid or delivered directly to the holders of
      Senior Indebtedness for application in payment thereof, unless and until
      all Senior Indebtedness shall have been paid in full in cash (or such
      payment is duly provided for).

           (C) No payment shall be made, directly or indirectly, on account of
      the Notes (i) upon maturity of any Senior Indebtedness obligation, by
      lapse of time, acceleration (unless waived), or otherwise, unless and
      until all principal thereof and interest thereon and all other obligations
      in respect thereof shall first be paid in full in cash (or such payment is
      duly provided for), or (ii) upon the happening of any default in payment
      of

                                       11



      any principal of, premium, if any, or interest on or any other amounts
      payable in respect of Senior Indebtedness when the same becomes due and
      payable whether at maturity or at a date fixed for prepayment or by
      declaration or otherwise (a "Senior Payment Default"), unless and until
      such Senior Payment Default shall have been cured or waived or shall have
      ceased to exist.

           (D) Upon the happening of a default (other than one described in
      clause (A), (B) or (C) above) with respect to any Senior Indebtedness
      permitting (after notice or lapse of time or both) one or more holders of
      such Senior Indebtedness to declare such Senior Indebtedness due and
      payable prior to the date on which it is otherwise due and payable (a
      "Nonmonetary Default"), upon the occurrence of (i) receipt by the Holders
      of the Notes of written notice from the holders of said Senior
      Indebtedness of a Nonmonetary Default (any such notice, a "Blockage
      Notice"), or (ii) if such Nonmonetary Default results from the
      acceleration of the Notes, the date of such acceleration; then (x) the
      Company will not make, directly or indirectly, to the Holder of the Notes
      any payment of any kind of or on account of all or any part of the Notes
      (other than Deferred Interest Notes); (y) the Holders of the Notes will
      not accept from the Company any payment of any kind of or on account of
      all or any part of the Notes (other than Deferred Interest Notes) and (z)
      the Holders of the Notes may not take, demand, receive, sue for,
      accelerate or commence any remedial proceedings with respect to any amount
      payable under the Notes, unless and until in each case described in
      clauses (x), (y) and (z) all such Senior Indebtedness shall have been paid
      in full in cash (or such payment is duly provided for) or such Nonmonetary
      Default shall have been cured or waived or such acceleration of the Notes
      shall have been rescinded; provided, however, that if such Nonmonetary
      Default shall have occurred and be continuing for a period (a "Blockage
      Period") commencing on the earlier of the date of receipt of such Blockage
      Notice or the date of the acceleration of the Notes and ending 179 days
      thereafter (it being understood that not more than one Blockage Period may
      be commenced with respect to the Notes during any period of 360
      consecutive days), and during such Blockage Period (i) such Nonmonetary
      Default shall not have been cured or waived, (ii) the holder of such
      Senior Indebtedness shall not have made a demand for payment and commenced
      an action, suit or other proceeding against the Company and (iii) none of
      the events described in subsection (A) above shall have occurred, then (to
      the extent not otherwise prohibited by subsections (A), (B) or (C) above)
      the Company may make and the Holders of all of the Notes may accept from
      the Company all past due and current payments of any kind of or on account
      of the Notes, and such Holder may demand, receive, retain, sue for or
      otherwise seek enforcement or collection of all amounts payable on account
      of principal of or interest on the Notes.

           (b) Subject to the payment in full in cash of all Senior Indebtedness
(or the provision for such payment) as aforesaid, the Holders of the Notes shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of any kind or character, whether in cash, property,
stock or obligations, which may be payable or deliverable to the holders of
Senior Indebtedness, until the principal of, and interest on, the Notes shall be
paid in full, and, as between the Company, its creditors other than the holders
of Senior

                                       12



Indebtedness, and the Holders of the Notes, no such payment or distribution made
to the holders of Senior Indebtedness by virtue of this Section 15 which
otherwise would have been made to the Holder of the Notes shall be deemed a
payment by the Company on account of the Senior Indebtedness, it being
understood that the provisions of this Section 15 are and are intended solely
for the purposes of defining the relative rights of the Holders of the Notes, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.
Subject to the rights, if any, under this Section 15 of holders of Senior
Indebtedness to receive cash, property, stock or obligations otherwise payable
or deliverable to the Holders of the Notes, nothing herein shall either impair,
as between the Company and the Holder of the Notes, the obligation of the
Company, which is unconditional and absolute, to pay to the Holder thereof the
principal thereof and interest thereon in accordance with its terms or prevent
(except as otherwise specified therein) the Holders of the Notes from exercising
all remedies otherwise permitted by applicable law or hereunder upon default
hereunder.

           (c) If any payment or distribution of any character or any security,
whether in cash, securities or other property, shall be received by any Holders
of the Notes in contravention of any of the terms hereof or before all the
Senior Indebtedness obligations have been paid in full in cash (or such payment
is duly provided for), such payment or distribution or security shall be
received in trust for the benefit of, and shall be paid over or delivered and
transferred to, the holders of the Senior Indebtedness at the time outstanding
in accordance with the priorities then existing among such holders for
application to the payment of all Senior Indebtedness remaining unpaid, to the
extent necessary to pay all such Senior Indebtedness in full in cash. In the
event of the failure of any such Holder to endorse or assign any such payment,
distribution or security, each holder of any Senior Indebtedness is hereby
irrevocably authorized to endorse or assign the name.

           (d) The rights under these subordination provisions of the holders of
any Senior Indebtedness as against any Holders of the Notes shall remain in full
force and effect without regard to, and shall not be impaired or affected by:

           (i)  Any act or failure to act on the part of the Company; or

           (ii) Any extension or indulgence in respect of any payment or
      prepayment of any Senior Indebtedness or any part thereof or in respect of
      any other amount payable to any holder of any Senior Indebtedness; or

           (iii)Any amendment, modification or waiver of, or addition or
      supplement to, or deletion from, or compromise, release, consent or other
      action in respect of, any of the terms of any Senior Indebtedness or any
      other agreement which may be made relating to any Senior Indebtedness;
      provided, that such Holders of the Notes shall have received a copy of the
      instrument evidencing any of the foregoing promptly (and in any event
      within 5 days after the effectiveness thereof); or

           (iv) Any exercise or non-exercise by the holder of any Senior
      Indebtedness of any right, power, privilege or remedy under or in respect
      of such Senior Indebtedness or of any default in respect of such Senior
      Indebtedness or any receipt by the holder of any

                                       13



      Senior Indebtedness of any security, or any failure by such holder to
      perfect a security interest in, or any release by such holder of, any
      security for the payment of such Senior Indebtedness; or

           (v) Any merger or consolidation of the Company or any of its
      subsidiaries into or with any other person, or any sale, lease or transfer
      of any or all of the assets of the Company or any of its subsidiaries to
      any other person; or

           (vi) Absence of any notice to or knowledge by, any holder of any
      claim hereunder of the existence or occurrence of any of the matters or
      events set forth in the foregoing clauses (i), (ii), (iv) or (v).

           (e) The Holders of the Notes unconditionally waive (i) notices of any
of the matters referred to in Section 15(d)(vi), (ii) all notices which may be
required, whether by statute, rule of law or otherwise, to preserve intact any
rights of any holder of any Senior Indebtedness, including, without limitation,
any demand, presentment and protest, proof of notice of nonpayment under any
Senior Indebtedness, and notice of any failure on the part of the Company to
perform and comply with any covenant, agreement, term or condition of any Senior
Indebtedness, (iii) any right to the enforcement, assertion or exercise by any
holder of any Senior Indebtedness of any right, power, privilege or remedy
conferred in such Senior Indebtedness or otherwise, (iv) any requirements of
diligence on the part of any holder of any of the Senior Indebtedness, (v) any
requirement on the part of any holder of any Senior Indebtedness to mitigate
damages resulting from any default under such Senior Indebtedness and (vi) any
notice of any sale, transfer or other disposition of any Senior Indebtedness by
any holder thereof.

           (f) The obligations of the Holder under these subordination
provisions shall continue to be effective, or be reinstated, as the case may be,
if at any time any payment in respect of any Senior Indebtedness, or any other
payment to any holder of any Senior Indebtedness in its capacity as such, is
rescinded or must otherwise be restored or returned by the holder of such Senior
Indebtedness upon the occurrence of any proceeding referred to in paragraph
13(a)(A) or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Company or any
substantial part of its property or otherwise, all as though such payment had
not been made.

           (g) Notwithstanding anything to the contrary herein, the Company
shall not at any time offer (and the Holder hereof shall not at any time accept)
(i) any pledge of collateral or (ii) any guaranty by any parent or subsidiary of
the Company, in each case with respect to the obligations of the Company under
this Note.

           16 Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.

           17  Governing Law.  This Note shall be governed by and construed in
accordance with the laws of the State of New York.


                                       14



           18  Third Party Beneficiaries.  The provisions of Section 15 are
intended to be for the benefit of, and shall be enforceable directly by each
holder of, the Senior Indebtedness.

           IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its corporate name by one of its officers thereunto duly authorized and to be
dated as of the day and year specified above.


                                    LABONE, INC.





                                    By
                                        Name:
                                        Title: