<PAGE>
As filed with the Securities and Exchange Commission on May 17, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BIO-RAD LABORATORIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
----------------
<TABLE>
<S> <C> <C>
Delaware 3826 94-1381833
(State or Other Jurisdiction
of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
1000 Alfred Nobel Drive
Hercules, California 94547
(510) 724-7000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
----------------
THOMAS C. CHESTERMAN
Chief Financial Officer
Bio-Rad Laboratories, Inc.
1000 Alfred Nobel Drive
Hercules, California 94547
(510) 724-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------
With Copies To:
TRACY K. EDMONSON, ESQ.
ANDREW S. WILLIAMSON, ESQ.
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
(415) 391-0600
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration number for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier, effective registration statement
for the same offering. [_]
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Title of Each Class of Proposed Aggregate Amount of
Securities to be Amount to be Offering Price Offering Registration
Registered Registered Per Note(1) Price(1) Fee
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 5/8% Senior
Subordinated Notes due
2007................. $150,000,000 100% $150,000,000 $39,600
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
----------------
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this registration statement shall become effective
on such date as the SEC, acting pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 17, 2000
PRELIMINARY PROSPECTUS
BIO-RAD LABORATORIES, INC.
OFFER TO EXCHANGE
$150,000,000 principal amount of its
11 5/8% senior subordinated notes due 2007,
which have been registered under the Securities Act,
for any and all of its outstanding 11 5/8% senior subordinated notes due 2007
Material Terms of the Exchange Offer
. The exchange offer expires at 5:00 p.m., New York City time, on ,
2000, unless extended.
. We will exchange all outstanding notes that are validly tendered and not
validly withdrawn for an equal principal amount of a new series of notes
which are registered under the Securities Act.
. The exchange offer is not subject to any conditions other than that it not
violate applicable law or any applicable interpretation of the staff of the
SEC.
. You may withdraw tenders of outstanding notes at any time before the exchange
offer expires.
. The exchange of notes will not be a taxable event for U.S. federal income tax
purposes.
. We will not receive any proceeds from the exchange offer.
. The terms of the new series of notes are substantially identical to the
outstanding notes, except for transfer restrictions and registration rights
relating to the outstanding notes.
. You may tender outstanding notes only in denominations of $1,000 and
multiples of $1,000.
. Our affiliates may not participate in the exchange offer.
Please refer to "Risk Factors" beginning on page 9 of this document for a
description of the risks you should consider when evaluating this investment.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
We are not making this exchange offer in any state where it is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved of the notes or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2000.
<PAGE>
We have not authorized any dealer, salesperson or other person to give any
information or to make any representations to you other than the information
contained in this prospectus. You must not rely on any information or
representations not contained in this prospectus as if we had authorized it.
This prospectus does not offer to sell or solicit an offer to buy any
securities other than the registered notes to which it relates, nor does it
offer to buy any of these notes in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
The information contained in this prospectus is current only as of the date
on the cover page of this prospectus, and may change after that date. We do not
imply that there has been no change in the information contained in this
prospectus or in our affairs since that date by delivering this prospectus.
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. This
information is available without charge to you upon written or oral request. If
you would like a copy of any of this information, please submit your request to
Bio-Rad Laboratories, Inc., 1000 Alfred Nobel Drive, Hercules, California
94547, Attention: Legal Department, or call (510) 724-7000 and ask to speak to
someone in our Legal Department. In addition, to obtain timely delivery of any
information you request, you must submit your request no later than
, 2000, which is five business days before the date the exchange
offer expires.
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 9
The Exchange Offer........................................................ 16
The Acquisition........................................................... 25
Use of Proceeds........................................................... 27
Capitalization............................................................ 27
Selected Historical and Unaudited Pro Forma Consolidated Financial
Statements............................................................... 28
Selected Historical Consolidated Financial Data of Bio-Rad................ 30
Selected Historical Consolidated Financial Data of PSD.................... 31
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 32
Business.................................................................. 39
Management................................................................ 51
Principal and Management Stockholders..................................... 53
Certain Relationships and Related Party Transactions...................... 54
Description of the Credit Facility........................................ 55
Description of Notes...................................................... 57
Material U.S. Federal Income Tax Consequences of the Exchange............. 92
Plan of Distribution...................................................... 93
Legal Matters............................................................. 93
Independent Auditors...................................................... 94
Available Information..................................................... 94
Incorporation by Reference................................................ 95
Glossary of Terms......................................................... 96
Index to Consolidated Financial Statements................................ F-1
</TABLE>
i
<PAGE>
FORWARD-LOOKING STATEMENTS
Other than statements of historical fact, statements made in this prospectus
or incorporated by reference into this prospectus include forward-looking
statements, such as statements with respect to our future financial
performance, operating results, plans and objectives. We have based these
forward-looking statements on our current expectations and projections about
future events. However, actual results may differ materially from those
currently anticipated depending on a variety of risk factors including, among
other things:
. our ability to successfully integrate with Pasteur Sanofi Diagnostics
S.A. ("PSD"), which we recently renamed "Bio-Rad Pasteur";
. our substantial leverage and ability to service our debt;
. our ability to successfully develop and market new products;
. our reliance on and access to necessary intellectual property;
. our ability to achieve management's objectives;
. competition in and government regulation of the industries in which we
operate;
. the continued performance of our business partners; and
. the monetary policies of various countries.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise. For a more detailed discussion of these and other potential risk
factors, see the section "Risk Factors."
INDUSTRY DATA
Industry data used throughout this prospectus reflect the good faith
estimates of our management, based upon how we define our market, upon
management's review of our internal surveys and upon published industry sources
and other publicly available information. Although we believe that these
sources are reliable, the accuracy and completeness of such information is not
guaranteed and has not been independently verified.
EXCHANGE RATES
When we refer to "dollars," or "$" we mean United States dollars. PSD's
functional currency is the French Franc. In this prospectus, as well as the
accompanying financial statements included in this prospectus, assets and
liabilities are translated into United States dollars at the current exchange
rate as of the applicable balance sheet dates. Revenues and expenses are
translated at the weighted average exchange rate prevailing during the
applicable periods. You should not interpret these conversions as expectations
that the French Franc amounts actually represent such United States dollar
amounts or could be converted into United States dollar amounts at the rates
indicated or used, or at any other rates.
ii
<PAGE>
The following table provides the French Franc exchange rates, set forth in
French Francs per United States dollar, solely for your convenience.
<TABLE>
<CAPTION>
French Francs per
United States dollar
---------------------
Year/Period
Calendar period End Average(1)
--------------- ----------- ---------
<S> <C> <C>
1997................................................ 6.02 5.84
1998................................................ 5.59 5.90
1999................................................ 6.52 6.16
2000 (through March 31, 2000)....................... 6.85 6.65
</TABLE>
- --------
(1) Based on the Pacific Exchange buying rate for French Francs during the
period listed.
All conversions of Euros have been translated into United States dollars at
the rate of 1.04 Euros per United States dollar, the noon buying rate in New
York City for cable transfers in Euros, as certified for customs purposes by
the Federal Reserve Bank of New York, as of March 31, 2000.
iii
<PAGE>
SUMMARY
On October 1, 1999, Bio-Rad acquired the stock of PSD and the rights to
certain other ancillary assets for $210 million, subject to downward
adjustments (the "Acquisition"). We paid for PSD with borrowings under a senior
subordinated credit facility and our senior credit facility, which includes a
term loan and a revolving credit facility. For ease of reference, we will
sometimes refer to the Acquisition and entering into the senior subordinated
credit facility and our Credit Facility, collectively, as the "Transactions."
We will refer to the offering of the private notes as the "Private Offering."
As used in this prospectus: (1) the terms "Company," "Bio-Rad," "we," "our,"
"ours," and "us" refer to Bio-Rad Laboratories, Inc. and its subsidiaries prior
to the Acquisition, except in the section "Description of Notes" and where it
is clear that such terms mean only Bio-Rad Laboratories, Inc. or Bio-Rad and
its consolidated subsidiaries, including PSD; and (2) "PSD" refers to Pasteur
Sanofi Diagnostics S.A. and its subsidiaries prior to the Acquisition. The
following summary contains basic information about this offering. It likely
does not contain all the information that is important to you. For a more
complete understanding of this offering, we encourage you to read this entire
document and the documents we reference herein.
The Exchange Offer
The Exchange Offer.......... We are offering to exchange our exchange notes
for our outstanding private notes that are
properly tendered and accepted. You may tender
outstanding notes only in denominations of $1,000
and multiples of $1,000. We will issue the
exchange notes on or promptly after the exchange
offer expires. As of the date of this prospectus,
$150,000,000 principal amount of private notes is
outstanding.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on , 2000, unless
extended, in which case the expiration date will
mean the latest date and time to which we extend
the exchange offer.
Conditions to the Exchange
Offer...................... The exchange offer is not subject to any
conditions other than that it not violate
applicable law or any applicable interpretation
of the staff of the SEC. The exchange offer is
not conditioned upon any minimum principal amount
of private notes being tendered for exchange.
Procedures for Tendering
Private Notes.............. If you wish to tender your private notes for
exchange notes pursuant to the exchange offer you
must transmit to Norwest Bank Minnesota, N.A., as
exchange agent, on or before the expiration date,
either:
. a computer generated message transmitted
through The Depository Trust Company's
Automated Tender Offer Program system and
received by the exchange agent and forming a
part of a confirmation of book-entry transfer
in which you acknowledge and agree to be bound
by the terms of the letter of transmittal; or
. a properly completed and duly executed letter
of transmittal, which accompanies this
prospectus, or a facsimile of the letter of
transmittal, together with your private notes
and any other
1
<PAGE>
required documentation, to the exchange agent at
its address listed in this prospectus and on the
front cover of the letter of transmittal.
If you cannot satisfy either of these procedures
on a timely basis, then you should comply with
the guaranteed delivery procedures described
below. By executing the letter of transmittal,
you will make the representations to us described
under "The Exchange Offer--Procedures for
Tendering."
Special Procedures for
Beneficial Owners.......... If you are a beneficial owner whose private notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender your private notes in the
exchange offer, you should contact the registered
holder promptly and instruct the registered
holder to tender on your behalf. If you wish to
tender on your own behalf, you must either (1)
make appropriate arrangements to register
ownership of the private notes in your name or
(2) obtain a properly completed bond power from
the registered holder, before completing and
executing the letter of transmittal and
delivering your private notes.
Guaranteed Delivery
Procedures................. If you wish to tender your private notes and time
will not permit the documents required by the
letter of transmittal to reach the exchange agent
before the expiration date, or the procedure for
book-entry transfer cannot be completed on a
timely basis, you must tender your private notes
according to the guaranteed delivery procedures
described in this prospectus under the heading
"The Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of Private Notes
and Delivery of Exchange
Notes...................... Subject to the satisfaction or waiver of the
conditions to the exchange offer, we will accept
for exchange any and all private notes which are
validly tendered in the exchange offer and not
withdrawn before 5:00 p.m., New York City time,
on the expiration date.
Withdrawal Rights........... You may withdraw the tender of your private notes
at any time before 5:00 p.m., New York City time,
on the expiration date, by complying with the
procedures for withdrawal described in this
prospectus under the heading "The Exchange
Offer--Withdrawal of Tenders."
Material U.S. Federal
Income Tax Consequences.... The exchange of notes will not be a taxable event
for United States federal income tax purposes.
For a discussion of the material federal income
tax consequences relating to the exchange of
notes, see the section "Material U.S. Federal
Income Tax Consequences of the Exchange."
Exchange Agent.............. Norwest Bank Minnesota, N.A., the trustee under
the indenture governing the private notes, is
serving as the exchange agent.
2
<PAGE>
Consequences of Failure to
Exchange Notes............. If you do not exchange your private notes for
exchange notes, you will continue to be subject
to the restrictions on transfer provided in the
private notes and in the indenture governing the
private notes. In general, the private notes may
not be offered or sold, unless registered under
the Securities Act, except pursuant to an
exemption from, or in a transaction not subject
to, the Securities Act and applicable state
securities laws. We do not currently plan to
register the private notes under the Securities
Act.
Registration Rights
Agreement.................. You are entitled to exchange your private notes
for exchange notes with substantially identical
terms. The exchange offer satisfies this right.
After the exchange offer is completed, you will
no longer be entitled to any exchange or
registration rights with respect to your private
notes. Under the circumstances described in the
registration rights agreement, you may require us
to file a shelf registration statement under the
Securities Act.
We explain the exchange offer in greater detail beginning on page 16.
3
<PAGE>
The Exchange Notes
The form and terms of the exchange notes are the same as the form and terms
of the private notes, except that the exchange notes will be registered under
the Securities Act and, therefore, the exchange notes will not be subject to
the transfer restrictions, registration rights and provisions providing for an
increase in the interest rate applicable to the private notes. The exchange
notes will evidence the same debt as the private notes and both the private
notes and the exchange notes, collectively, the "notes", are governed by the
same indenture.
Securities Offered.......... $150.0 million principal amount of 11 5/8% senior
subordinated notes due 2007.
Issuer...................... Bio-Rad Laboratories, Inc.
Maturity Date............... February 15, 2007.
Interest.................... The exchange notes will bear interest at the rate
of 11 5/8% per year, payable every six months on
February 15 and August 15, beginning August 15,
2000.
Optional Redemption......... We have the option to redeem any or all of the
exchange notes at any time prior to February 15,
2004 at a redemption price equal to 100% of the
principal amount thereof plus the applicable
premium plus accrued and unpaid interest and
liquidated damages, if any. Thereafter, we can
redeem some or all of the notes at the redemption
prices listed in the section "Description of
Notes" under the heading "Optional Redemption,"
plus accrued and unpaid interest and liquidated
damages, if any.
Optional Redemption after
Sales of Common Stock...... At any time (which may be more than once) on or
before February 15, 2003, we can choose to redeem
up to 35% of the original principal amount of the
notes with money that we raise from sales of our
common stock, as long as:
. we pay to holders of the notes a redemption
price of 111.625% on the face amount of the
notes we redeem, plus accrued and unpaid
interest and liquidated damages, if any;
. we redeem the notes within 90 days of
completing such equity offering; and
. at least 65% of the original aggregate amount
of the notes issued remains outstanding
afterwards.
Ranking..................... The notes:
. are our senior subordinated, unsecured general
obligations;
. rank junior in right of payment to all of our
existing and future senior debt (other than
trade payables);
. rank equally in right of payment with all of
our existing and future senior subordinated
debt;
4
<PAGE>
. rank senior in right of payment to all of our
existing and future subordinated indebtedness;
and
. are effectively behind all existing and future
debt of our subsidiaries that are not
guarantors, including trade payables.
As of March 31, 2000, we and our subsidiaries had
approximately $117.5 million of debt outstanding
(excluding trade payables) that is senior to the
notes.
Future Guarantees........... None of our subsidiaries were guarantors upon
issuance of the private notes. Our future
domestic subsidiaries that are material to our
business will be required to guarantee the notes.
For more details, see the section "Description of
Notes" under the heading "Certain Covenants--
Future Guarantors."
Change of Control........... If we go through a Change of Control, we must
give holders of the notes the opportunity to sell
to us their notes at a purchase price of 101% of
their face amount, plus accrued interest. The
term Change of Control is defined in the section
"Description of Notes."
Certain Covenants........... The indenture contains covenants that, among
other things and subject to certain exceptions,
restrict our ability and the ability of our
subsidiaries to:
. incur additional debt;
. pay dividends, redeem capital stock or make
certain other restricted payments or
investments;
. enter into agreements that prohibit our
subsidiaries from paying dividends, making
loans or otherwise transferring assets to us or
to any of our other subsidiaries;
. encumber or sell assets; or
. merge, consolidate or sell all or substantially
all of our assets.
Form of Exchange Notes...... The exchange notes will be represented by one or
more permanent global certificates, in fully
registered form, deposited with a custodian for,
and registered in the name of a nominee of, The
Depository Trust Company, as depositary. You will
not receive exchange notes in certificated form
unless one of the events described in the section
"Description of Notes" under the heading "Book-
Entry, Delivery and Form" occurs. Instead,
beneficial interests in the exchange notes will
be shown on, and transfers of these notes will be
effected only through, records maintained in
book-entry form by The Depository Trust Company
and its participants.
Use of Proceeds............. We will not receive any cash proceeds from the
exchange offer.
We explain the exchange notes in greater detail beginning on page 57.
5
<PAGE>
The Company
We are a world leader in serving the life science, clinical diagnostics and
analytical instruments markets, providing more than 8,000 products and services
to scientific research, healthcare, industrial, educational and government
customers in more than 70 countries. We have a worldwide reputation for
quality, innovative products and well-recognized brand names within our
industry. We are a leader in many of the market segments in which we compete,
and operate in three primary segments: Life Science, Clinical Diagnostics and
Analytical Instruments.
Life Science Segment
Our Life Science segment is at the forefront of discovery, creating advanced
tools for biological exploration. We are a leading life science company based
on Life Science segment net sales. Our Life Science segment develops,
manufactures and markets a complete range of laboratory instruments, apparatus
and consumables which are used in many established research techniques. These
techniques are typically used to separate, purify and analyze biological
materials such as proteins or nucleic acids, primarily within a laboratory
setting. We are a leading supplier of broad product lines in the following
areas:
. Electrophoresis
. Image analysis
. Gene transfer
. Chromatography
Our principal life science customers include prominent universities and
research institutions as well as government agencies and leading pharmaceutical
and biotechnology firms.
Clinical Diagnostics Segment
Our Clinical Diagnostics segment designs, manufactures, sells and supports
automated in vitro diagnostic ("IVD") test systems, reagents and quality
control ("QC") systems that serve clinical laboratories worldwide. In the
estimated $20 billion global diagnostics market, we believe we have leading
positions in certain specific diagnostic test areas. For instance, we believe
we are the world leader in the supply of QC systems to clinical laboratories.
We derive a substantial portion of our clinical diagnostics net sales from
long-term agreements for the supply of reagents and services for installed
instruments and for QC systems, both of which historically have generated a
stable and recurring stream of net sales. In addition to our leadership
position in QC systems, the clinical diagnostics industry recognizes our
technology as the "gold standard" for the following diagnostic tests and
procedures:
. Diabetes monitoring
. Broad-spectrum drug screening
. Hospital epidemiology
We also supply more than 350 different products covering more than 100
clinical diagnostic tests to what we estimate to be the approximately $1.9
billion specialty IVD test market, especially within the growing area of
genetic disorders. These tests are conducted outside the body and are used to
identify and measure substances in a patient's tissue, blood or urine.
The Clinical Diagnostics segment has also established significant commercial
alliances with Bayer Diagnostics (formerly Chiron Diagnostics Corporation), and
more recently with Abbott Laboratories, for the development, manufacture and
distribution of customized QC products. Abbott and Bayer, which are
6
<PAGE>
acknowledged industry leaders in the supply of diagnostic equipment, will
exclusively offer these QC products for use on their worldwide installed base
of instrumentation.
Analytical Instruments Segment
Our Analytical Instruments segment designs, manufactures, sells and services
analytical instruments used by industrial companies and government and
university laboratories to better understand the quality, quantity or chemical
identity of materials or processes. We provide analytical instruments for use
in measuring the critical dimensions and characterization of silicon chips and
wafers, and are at the forefront of the development of advanced systems for the
metrology and Fourier transform infrared ("FT-IR") characterization of 300mm
(12 inch) silicon wafers. We produced the first commercial rapid-scanning FT-IR
spectrometer in 1969 and have a reputation for innovation in molecular
spectroscopy technology. We produce and publish spectral databases under the
Sadtler name. Through Sadtler, we have the largest FT-IR and nuclear magnetic
resonance ("NMR") spectral databases. Sadtler is the world-recognized reference
used by spectroscopists for FT-IR.
We have determined that the sale or disposal of certain portions of this
segment is appropriate. We have engaged an investment bank to assist us in this
matter and are having discussions with a third party regarding a potential
strategic alliance with respect to these assets. These discussions may not lead
to any definitive agreement among the parties. In the event that we do not
complete this transaction, we may pursue other strategic alternatives,
including a joint venture with a third party or an internal reorganization. We
cannot assure you that we will be successful in consummating any of these
transactions.
The Acquisition
We believe our acquisition of PSD will increase our global presence in the
clinical diagnostics market. PSD is a global IVD company with leading positions
in selected segments of the market. For instance, PSD is an industry leader in
the supply of test kits for autoimmune-related disorders. PSD is also a
worldwide leader in the supply (either directly or through agreements with
third parties) of tests and bloodbank screens for HIV. In addition, PSD has a
significant presence in the bacteriology, infectious disease and immuno-
hematology diagnostic markets. PSD also is the exclusive supplier of certain
reagents for the Beckman Coulter automated analyzer, Access(TM).
PSD was founded by the Institut Pasteur to commercialize its diagnostics
research, and currently holds certain exclusive licenses from the Institut
Pasteur in the HIV and infectious disease product segments. Through a
Cooperation Agreement with Institut Pasteur, PSD has the exclusive right to use
the Pasteur name for IVD products and a priority to commercialize Institut
Pasteur's discoveries in the IVD market.
We believe that the Acquisition enhances Bio-Rad's clinical diagnostics
market position for the following reasons:
. Bio-Rad and PSD have complementary product lines.
. The combined company has increased geographic reach.
. The Cooperation Agreement provides us with a priority to commercialize
Institut Pasteur's discoveries in the IVD market.
. We have the opportunity to apply emerging Bio-Rad technologies to the
combined product portfolio.
. We expect to achieve operational efficiencies.
For more details, see the section "The Acquisition."
7
<PAGE>
Summary Historical and Unaudited Pro Forma Consolidated Financial Data
(in millions)
The table below includes summary historical financial information for Bio-
Rad and unaudited pro forma consolidated financial information for Bio-Rad and
PSD. You should read the information set forth below together with the other
financial information contained in this prospectus.
<TABLE>
<CAPTION>
Three Months
Year Ended December Ended March
31, Pro 31,
---------------------- Forma --------------
1997 1998 1999 1999(1) 1999 2000
------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $426.9 $441.9 $549.5 $722.0 $125.7 $183.7
Cost of goods sold........... 189.3 202.4 255.2 347.7 55.6 86.7
------ ------ ------ ------ ------ ------
Gross profit................. 237.6 239.5 294.3 374.3 70.2 97.0
Selling, general and
administrative expense...... 164.8 167.0 194.5 255.7 43.0 60.7
Product research and
development expense......... 46.1 41.4 51.2 66.7 10.5 17.9
Purchased in-process research
and development expense..... -- -- 15.5 -- -- --
------ ------ ------ ------ ------ ------
Income from operations....... 26.7 31.1 33.1 51.9 16.6 18.4
Interest expense, net........ (1.2) (3.7) (12.8) (34.3) (0.9) (8.8)
Other income (expense)....... (2.7) 6.8 (3.9) (11.8) (0.6) (5.3)
------ ------ ------ ------ ------ ------
Income before taxes.......... 22.8 34.2 16.4 5.8 15.1 4.3
Provision for income tax..... 6.4 9.9 4.7 3.5 4.3 1.4
------ ------ ------ ------ ------ ------
Net income (loss)............ $ 16.4 $ 24.3 $ 11.7 $ 2.3 $ 10.8 $ 3.0
====== ====== ====== ====== ====== ======
Other Financial Data:
EBITDA(2).................... $ 43.5 $ 58.9 $ 56.7 $ 80.1 $ 21.2 $ 23.8
Depreciation and
amortization................ 19.5 21.0 27.5 40.0 5.2 10.7
Capital expenditures, net.... 23.6 21.2 27.3 27.3 4.6 8.3
Selected Ratios:
EBITDA to interest expense... 2.3x
Total debt to EBITDA......... 3.3x
Net debt to EBITDA(3)........ 3.0x
Balance Sheet Information:
Cash......................... $ 10.8 $ 10.1 $ 17.1 $ 17.1 $ 8.0 $ 15.3
Total assets................. 351.9 367.3 668.9 668.9 369.6 671.4
Total debt................... 49.8 51.7 261.1 261.1 51.2 271.9
Stockholders' equity......... 196.7 214.3 220.1 220.1 220.9 219.0
</TABLE>
- --------
(1) The pro forma financial information gives effect to the Transactions and
the Private Offering as if they had occurred on January 1, 1999 in the case
of statements of operations data but does not give effect to any cost
savings we expect to realize as a result of the Acquisition.
(2) "EBITDA" is defined as net income (loss) from operations before interest,
taxes, depreciation and amortization. We believe that EBITDA is a key
financial measure but should not be construed as an alternative to
operating income or cash flows from operating activities (as determined in
accordance with generally accepted accounting principles). We believe that
EBITDA is a useful supplement to net income and other income statement data
in understanding cash flows generated from operations that are available
for taxes, debt service and capital expenditures. However, our method of
computation may or may not be comparable to other similarly titled measures
of other companies.
(3) "Net debt" is defined as total debt less cash and cash equivalents.
8
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RISK FACTORS
You should read and consider carefully each of the following factors, as
well as the other information contained in or incorporated by reference into
this prospectus, before making a decision to tender your private notes in the
Exchange Offer. The risk factors set forth below (other than the first risk
factor described below) are generally applicable to the private notes as well
as the exchange notes.
If you do not exchange your notes pursuant to this exchange, you may never be
able to sell your notes.
It may be difficult for you to sell notes that are not exchanged in the
exchange offer. Those notes may not be offered or sold unless they are
registered or there are exemptions from the registration requirements under the
Securities Act and applicable state securities laws.
If you do not tender your private notes or if we do not accept some of your
private notes, those notes will continue to be subject to the transfer and
exchange restrictions in:
. the indenture;
. the legend on the private notes; and
. the offering memorandum relating to the private notes.
The restrictions on transfer of your private notes arise because we issued
the private notes pursuant to an exemption from the registration requirements
of the Securities Act and applicable state securities laws. In general, you may
only offer or sell the private notes if they are registered under the
Securities Act and applicable state securities laws, or offered and sold
pursuant to an exemption from such requirements. We do not intend to register
the private notes under the Securities Act. To the extent private notes are
tendered and accepted in the exchange offer, the trading market, if any, for
the private notes would be adversely affected.
Our substantial amount of debt and debt service obligations could adversely
affect our financial health and prevent us from fulfilling our obligations
under the notes.
We have a substantial amount of debt outstanding. The following chart shows
certain important credit statistics as of March 31, 2000.
<TABLE>
<CAPTION>
At March 31, 2000
-----------------
<S> <C>
Total debt............................................... $271.9 million
Stockholders' equity..................................... $219.0 million
Debt to equity ratio................................... . 1.2x
</TABLE>
Our substantial amount of debt could have important consequences to you. For
example, it could:
. make it more difficult for us to satisfy our obligations with respect to
the notes;
. require us to dedicate a substantial portion of our cash flow to payments
on our debt;
. increase our vulnerability to general adverse economic and industry
conditions;
. limit our ability to fund future working capital, capital expenditures,
research and development costs and other general corporate requirements;
. limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate; and
. limit, along with the financial and other restrictive covenants in our
debt, among other things, our ability to borrow additional funds. Failing
to comply with those covenants could result in an event of default which,
if not cured or waived, could have a material adverse effect on us.
9
<PAGE>
We and our subsidiaries may be able to incur substantial additional debt in
the future. The terms of the indenture do not fully prohibit us or our
subsidiaries from doing so. As of March 31, 2000, our Credit Facility would
permit additional borrowings of up to $63.0 million and all of those borrowings
would be senior to the notes. If new debt is added to our and our subsidiaries'
current debt levels, the related risks that we and they now face could
intensify.
Our ability to make payments on and to refinance our debt, including these
notes, will depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us under our
Credit Facility in an amount sufficient to enable us to pay our debt, including
the notes, or to fund our other liquidity needs. We may need to refinance all
or a portion of our debt, including the notes, on or before maturity. We cannot
assure you that we will be able to refinance any of our debt, including our
Credit Facility and the notes, on commercially reasonable terms or at all.
The indenture and our Credit Facility contain provisions that could materially
restrict our business.
The indenture and our Credit Facility contain a number of significant
covenants that, among other things, restrict our ability to:
. dispose of assets;
. incur additional debt;
. guarantee third-party obligations;
. repay other debt or amend other debt instruments;
. create liens on assets;
. enter into capital leases;
. make investments, loans or advances;
. make acquisitions or engage in mergers or consolidations;
. make capital expenditures; and
. engage in certain transactions with our subsidiaries and affiliates.
In addition, under our Credit Facility, we are required to meet a number of
financial ratios and tests.
Our ability to comply with such agreements may be affected by events beyond
our control. The breach of any such covenants or restrictions could result in
an event of default under our Credit Facility or the indenture, which would
permit certain lenders to declare all amounts borrowed thereunder to be due and
payable, together with accrued and unpaid interest, and the commitments of the
senior lenders to make further extensions of credit under our Credit Facility
could be terminated. If we were unable to repay debt to our senior lenders,
such lenders could proceed against the collateral securing such debt. For more
details, see the section "Description of the Credit Facility."
Your right to receive payments on the notes is junior to our existing debt and
possibly all of our future borrowings.
The indebtedness evidenced by the notes ranks behind all of our existing
debt (other than trade payables) and all of our future borrowings (other than
trade payables), except any future debt that expressly provides that it ranks
equal with, or subordinated in right of payment to, the notes. As a result,
upon any distribution to our creditors in a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or our property, the
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<PAGE>
holders of our senior debt will be entitled to be paid in full in cash before
any payment may be made with respect to the notes. We cannot assure you that we
will have sufficient funds to pay all of our creditors, and holders of the
notes may receive less, ratably, than the holders of senior debt.
In addition, all payments on the notes will be blocked in the event of a
payment default on designated senior debt and may be blocked for up to 179 of
360 consecutive days in the event of non-payment defaults on designated senior
debt. For more details, see the section "Description of Notes" under the
heading "Subordination."
The notes are also effectively behind all debt of our subsidiaries which, as
of March 31, 2000, was $6.1 million.
Our ability to repay the notes and other debt depends in part on cash flow from
our subsidiaries.
Most of our active subsidiaries operate overseas. Our subsidiaries generated
58% of our net sales in the year ended December 31, 1999, and held 39% of our
consolidated assets as of March 31, 2000. Consequently, we depend in part on
distributions or other intercompany transfers of funds from our subsidiaries to
meet our debt service and other obligations, including with respect to the
notes. Our subsidiaries are not obligated to make funds available to us for
payment on the notes, so long as they do not become guarantors. In addition,
distributions and intercompany transfers to us from our subsidiaries will
depend on:
. their earnings;
. covenants contained in their debt agreements;
. covenants contained in other agreements to which our subsidiaries are or
may become subject;
. business and tax considerations; and
. applicable law.
We cannot assure you that the operating results of our subsidiaries at any
given time will be sufficient to make distributions or other payments to us and
that these distributions and/or payments will be adequate to pay principal and
interest on the notes when due. In addition, our rights and the rights of our
creditors, including holders of the notes, to participate in the assets of any
of our subsidiaries that are not guarantors upon their liquidation or
recapitalization will generally be subject to the prior claims of the
subsidiaries' creditors.
The Credit Facility grants to the lenders security interests in the capital
stock of certain of our subsidiaries. As a result, if an event of default
occurs under the Credit Facility, the lenders would be able to exercise certain
remedies with respect to that capital stock which would have the effect of
giving the lenders control over those subsidiaries and their assets.
We may face significant business disruption attempting to integrate PSD into
our company successfully.
The integration and consolidation of PSD is requiring substantial
management, financial and other resources. While we believe that we have
sufficient resources to manage the Acquisition, the Acquisition involves a
number of significant risks, including diversion of management's attention,
difficulties in assimilating the technologies, services and products of PSD and
unanticipated events or circumstances, some or all of which could have a
material adverse effect on our business, financial condition or results of
operations. If we are unable to integrate and manage PSD successfully, it could
have a material adverse effect on our business, financial condition or results
of operations.
We also cannot assure you that we will realize any expected benefits of the
Acquisition. Although we expect to realize certain cost savings and operating
efficiencies from the integration of PSD with Bio-Rad, these expectations are
based on our estimates and assumptions, which are subject to significant
business, economic
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<PAGE>
and other uncertainties and contingencies. These uncertainties and
contingencies are difficult to predict and, for the most part, are beyond our
control. For example, we may not realize the cost savings we expect with
respect to headcount reductions because work force laws and regulations in
Europe may make severance costs higher than we have estimated. Actual cost
savings and efficiencies, if any, could differ materially from our
expectations. For more information about the Acquisition, see the sections "The
Acquisition" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The industries and market segments in which we operate are highly competitive,
and we may not be able to compete effectively with larger companies with
greater financial resources than we have.
The life science, clinical diagnostics and analytical instruments markets
are each highly competitive. Some of our competitors have greater financial
resources than we do and are less leveraged than we are, making them better
equipped to license technologies and intellectual property from third parties
or to fund research and development, manufacturing and marketing efforts.
Moreover, competitive and regulatory conditions in many markets in which we
operate restrict our ability to fully recover, through price increases, higher
costs of acquired goods and services resulting from inflation. Our competitors
can be expected to continue to improve the design and performance of their
products and to introduce new products with competitive price and performance
characteristics. Although we believe that we have certain technological and
other advantages over our competitors, realizing and maintaining these
advantages will require us to continue to invest in research and development,
sales and marketing and customer service and support. We cannot assure you that
we will have sufficient resources to continue to make such investments or that
we will be successful in maintaining such advantages. For more details, see the
section "Business" under the heading "Competition."
We have significant international operations which subject us to various
foreign risks such as general economic and market conditions in the countries
in which we operate.
A significant portion of our sales are made outside of the United States. As
a result, our international operations are subject to risks common to foreign
operations, such as general economic and market conditions in the countries in
which we operate, changes in governmental regulations, political instability,
import restrictions and currency exchange rate risks. In particular, the
economic downturn in Asia had an impact on our operating results in 1998.
Although we enter into forward foreign exchange contracts to hedge against
future movements in foreign exchange rates that affect our intercompany
receivables and payables denominated in foreign currencies, we cannot assure
you that shifts in currency exchange rates will not have a material adverse
effect on our operating results and financial condition.
On January 1, 1999, certain member countries of the European Union began to
fix the conversion rates between their national currencies and a common
currency, the "Euro." Between January 1, 1999 and January 1, 2002,
participating countries will gradually transition from their national
currencies to the Euro.
This transition will have business implications including the need to adjust
internal systems to accommodate the Euro and cross-border price transparency.
We have assigned a group of Corporate and European managers the task of
preparing and accommodating the changes required to continue to do business in
the European Union. We have not experienced to date nor do we expect that these
changes will have a material impact on our business, operations, financial
position or liquidity. There will be increased competitive pressures as a
result of the change, and marketing strategies will need to be continuously
evaluated until the transition is complete. As a result of competitive forces
and government regulations, we cannot guarantee that all problems will be
foreseen and remediated, and that no material disruption will occur. For more
details, see the section "Management's Discussion and Analysis of Financial
Condition and Results of Operations" under the heading "Euro--A New European
Currency."
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<PAGE>
We are dependent on government funding and the capital spending policies of our
customers, and the effect of potential healthcare reform on government funding
and our customers' ability to purchase our products is uncertain.
Our customers include universities, clinical diagnostics laboratories,
hospitals and pharmaceutical, biotechnology and chemical companies. The capital
spending policies of these institutions and companies have a significant effect
on the demand for our products. Such policies are based on a wide variety of
factors, including the resources available to make such purchases, the
availability of funding from grants by governments or government agencies, the
spending priorities among various types of equipment and the policies regarding
capital expenditures during industry downturns or recessionary periods. If
government funding to our customers were to decrease, or if our customers were
to decrease or reallocate in a manner adverse to us their capital spending
budgets, it could have a material adverse effect on our business, financial
condition or results of operations.
Healthcare reform and the growth of managed care organizations have been and
continue to be significant factors in the clinical diagnostics market. The
trend towards managed care, together with efforts to reform the healthcare
delivery system in the U.S. and Europe, has resulted in increased pressure on
healthcare providers and other participants in the healthcare industry to
reduce costs. These competitive forces place constraints on the levels of
overall pricing, and thus could have a material adverse effect on our profit
margins for products we sell in clinical diagnostics markets. To the extent
that our customers in the healthcare industry seek to address the need to
contain costs by limiting the number of clinical tests being performed, our
results of operations could be materially and adversely affected. If these
changes in the United States and European healthcare markets continue, we could
be forced to alter our approach in selling, marketing, distributing and
servicing our products. For more details, see the section "Business" under the
heading "Regulatory Matters."
Our failure to respond to technological changes may negatively impact our
business.
Our future success depends on our ability to continue to improve our product
offerings and develop and introduce new product lines and extensions that
integrate new technological advances. If we are unable to integrate
technological advances into our product offerings or to design, develop,
manufacture and market new product lines and extensions successfully and in a
timely manner, our operating results will be adversely affected. While we
expect to continue to invest in research and development for all of our market
segments, we cannot assure you that our product and process development efforts
will be successful or that new products we introduce will achieve market
acceptance.
Risks relating to intellectual property rights may negatively impact our
business.
We rely on a combination of copyright, trade secret, patent and trademark
laws and third-party nondisclosure agreements to protect our intellectual
property rights and products. However, we cannot assure you that our
intellectual property rights will not be challenged, invalidated, circumvented
or rendered unenforceable, or that meaningful protection or adequate remedies
will be available to us. For instance, it may be possible for unauthorized
third parties to copy our intellectual property, to reverse engineer or obtain
and use information that we regard as proprietary, or to develop equivalent
technologies independently. Additionally, third parties may assert exclusive
patent, copyright and other intellectual property rights to technologies that
are important to us. If we are unable to license or otherwise access protected
technology used in our products, or if we lose our rights under any existing
licenses, such as the HCV License with Ortho Diagnostics Systems, Inc. and
Chiron Corporation, we could be prohibited from manufacturing and marketing
such products. We may find it necessary to enforce our patents or other
intellectual property rights or to defend ourselves against claimed
infringement of the rights of others through litigation, which could result in
substantial costs to us and divert our resources. We also could incur
substantial costs to redesign our products, to defend any legal action taken
against us or to pay damages to an infringed party. The foregoing matters could
adversely impact our business.
13
<PAGE>
We are subject to substantial government regulation.
Some of our products (primarily diagnostic products), production processes
and our marketing are subject to foreign and federal, state and local
regulation, including the U.S. Food and Drug Administration and its foreign
counterparts. We are also subject to government regulation of the use and
handling of a number of materials and controlled substances. Failure to comply
with present or future regulations could result in substantial liability to us,
suspension or cessation of our operations, restrictions on our ability to
expand at our present locations or requirements for the acquisition of
significant equipment or other significant expenses.
We are currently subject to environmental regulations and enforcement
proceedings.
Our operations are subject to federal, state, local and foreign
environmental laws and regulations that govern such activities as emissions to
air and discharges to water, as well as handling and disposal practices for
solid, hazardous and medical wastes. In addition to environmental laws that
regulate our operations, we are also subject to environmental laws and
regulations that create liability and clean-up responsibility for spills,
disposals or other releases of hazardous substances into the environment as a
result of our operations or otherwise impacting real property that we own or
operate. The environmental laws and regulations also subject us to claims by
third parties for damages resulting from any spills, disposals or releases
resulting from our operations or at any of our properties.
We will in the future incur capital and operating costs to comply with
currently existing laws and regulations, and possible new statutory enactments,
and these expenditures may be significant. We have incurred, and may in the
future incur, fines related to environmental matters and liability for costs or
damages related to spills or other releases of hazardous substances into the
environment at sites where we have operated, or at off-site locations where we
have sent hazardous substances for disposal. In that regard, we currently are
investigating soil and groundwater contamination at one of our properties under
the oversight of a state agency pursuant to a statewide assessment and
investigation of certain manufacturing operations. Based on the currently
available information, we believe that the costs to clean up this contamination
will not have a material adverse effect on the future results of our operations
or our financial condition. We can provide no assurance, however, that such
matters or any future obligations to comply with environmental laws and
regulations will not have a material impact on our operations or financial
condition.
A significant portion of our voting stock is held by a majority shareholder.
We have two classes of voting stock, Class A Common Stock and Class B Common
Stock. With a few exceptions, holders of Class A and Class B Common Stock vote
as a single class. When voting as a single class, each share of Class A Common
Stock is entitled to one-tenth of a vote, while each share of Class B Common
Stock has one vote. In the election or removal of directors, the classes vote
separately and the holders of Class A Common Stock are entitled to elect 25% of
the Board of Directors, with holders of Class B Common Stock electing the
remaining directors.
The Schwartz family currently holds a majority of the outstanding shares of
Class B Common Stock. As a result, the Schwartz family is able to elect a
majority of the directors and effect fundamental changes in our direction.
We may not have the ability to raise the funds necessary to finance the change
of control offer required by the indenture.
Upon the occurrence of a change of control of Bio-Rad, we will be required
to offer to repurchase all outstanding notes. However, it is possible that we
will not have sufficient funds at the time of the change of control to make the
required repurchase of notes or that restrictions in our Credit Facility will
not allow such repurchases. These repurchase requirements may also delay or
make it harder for others to obtain control of us. For more details, see the
section "Description of Notes" under the heading "Certain Covenants--Repurchase
of Notes at the Option of the Holder Upon a Change of Control."
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<PAGE>
You cannot be sure that an active trading market will develop for the exchange
notes.
Before this exchange offer, there was no established trading market for the
exchange notes. We have been informed by the initial purchasers of the private
notes that they intend to make a market in the exchange notes. However, they
may cease their market-making at any time. In addition, the liquidity of the
trading market in the exchange notes, and the market price quoted for the
exchange notes, may be adversely affected by changes in the overall market for
high yield securities and by changes in our financial performance or prospects
or in the prospects for companies in our industry generally. As a result, you
cannot be sure that an active trading market will develop for these notes.
Volatile trading prices may require you to hold the notes for an indefinite
period of time.
If a market develops for the notes, the notes might trade at prices higher
or lower than their initial offering price. The trading price would depend on
many factors, such as prevailing interest rates, the market for similar
securities, general economic conditions and our financial condition,
performance and prospects. Historically, the market for non-investment grade
debt has been subject to disruptions that have caused substantial fluctuation
in the prices of these securities. The market for the notes may be subject to
such disruptions, which could have an adverse effect on the price of the notes.
You should be aware that you may be required to bear the financial risk of an
investment in the notes for an indefinite period of time.
15
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
We issued the private notes on February 17, 2000 to Warburg Dillon Read LLC
and ABN AMRO Incorporated, the initial purchasers, pursuant to a purchase
agreement. The initial purchasers subsequently sold the private notes to
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act, in reliance on Rule 144A, and outside the United States under Regulation S
of the Securities Act. As a condition to the sale of the private notes, we
entered into a registration rights agreement with the initial purchasers on
February 17, 2000. Pursuant to the registration rights agreement, we agreed
that we would:
(1) file a registration statement with the SEC with respect to the exchange
notes on or before May 17, 2000;
(2) use our best efforts to cause the registration statement to be declared
effective by the SEC on or before August 15, 2000;
(3) use our best efforts to keep the registration statement effective until
the closing of the exchange offer;
(4) use our best efforts to keep the exchange offer open for a period of
not less than 20 business days; and
(5) use our best efforts to cause the exchange offer to be completed no
later than the 30th business day after it is declared effective by the
SEC.
Upon the effectiveness of the registration statement, we will offer the
exchange notes in exchange for the private notes. We filed a copy of the
registration rights agreement as an exhibit to the registration statement.
Resale of the Exchange Notes
Based upon an interpretation by the staff of the SEC contained in no-action
letters issued to third parties, we believe that you may exchange private notes
for exchange notes in the ordinary course of business. For further information
on the SEC's position, see Exxon Capital Holdings Corporation, available May
13, 1988, Morgan Stanley & Co. Incorporated, available June 5, 1991 and
Shearman & Sterling, available July 2, 1993, and other interpretive letters to
similar effect. You will be allowed to resell exchange notes to the public
without further registration under the Securities Act and without delivering to
purchasers of the exchange notes a prospectus that satisfies the requirements
of Section 10 of the Securities Act so long as you do not participate, do not
intend to participate, and have no arrangement with any person to participate,
in a distribution of the exchange notes. However, the foregoing does not apply
to you if you are:
. a broker-dealer who purchases the exchange notes directly from us to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act; or
. you are an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act.
In addition, if:
. you are a broker-dealer; or
. you acquire exchange notes in the exchange offer for the purpose of
distributing or participating in the distribution of the exchange notes,
you cannot rely on the position of the staff of the SEC contained in the no-
action letters mentioned above and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available.
Each broker-dealer that receives exchange notes for its own account in
exchange for private notes, which the broker-dealer acquired as a result of
market-making activities or other trading activities, must acknowledge
16
<PAGE>
that it will deliver a prospectus in connection with any resale of the exchange
notes. The letter of transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. A broker-dealer may
use this prospectus, as it may be amended or supplemented from time to time, in
connection with resales of exchange notes received in exchange for private
notes which the broker-dealer acquired as a result of market-making or other
trading activities.
Terms of the Exchange Offer
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept any and all private notes
validly tendered and not withdrawn before the expiration date. We will issue
$1,000 principal amount of exchange notes in exchange for each $1,000 principal
amount of outstanding private notes surrendered pursuant to the exchange offer.
You may tender private notes only in integral multiples of $1,000.
The form and terms of the exchange notes are the same as the form and terms
of the private notes except that:
. we will register the exchange notes under the Securities Act and,
therefore, the exchange notes will not bear legends restricting their
transfer; and
. holders of the exchange notes will not be entitled to any of the rights
of holders of private notes under the registration rights agreement,
which rights will terminate upon the completion of the exchange offer.
The exchange notes will evidence the same debt as the private notes and will be
issued under the same indenture, so the exchange notes and the private notes
will be treated as a single class of debt securities under the indenture.
As of the date of this prospectus, $150,000,000 in aggregate principal
amount of the private notes are outstanding and registered in the name of Cede
& Co., as nominee for The Depository Trust Company. Only registered holders of
the private notes, or their legal representative or attorney-in-fact, as
reflected on the records of the trustee under the indenture may participate in
the exchange offer. We will not set a fixed record date for determining
registered holders of the private notes entitled to participate in the exchange
offer.
You do not have any appraisal or dissenters' rights under the indenture in
connection with the exchange offer. We intend to conduct the exchange offer in
accordance with the provisions of the registration rights agreement and the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the SEC.
We will be deemed to have accepted validly tendered private notes when, as
and if we had given oral or written notice of acceptance to the exchange agent.
The exchange agent will act as your agent for the purposes of receiving the
exchange notes from us.
If you tender private notes in the exchange offer you will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
letter of transmittal, transfer taxes with respect to the exchange of private
notes pursuant to the exchange offer. We will pay all charges and expenses,
other than the applicable taxes described below, in connection with the
exchange offer.
Expiration Date; Extensions; Amendments
The term expiration date will mean 5:00 p.m., New York City time on
, 2000, unless we, in our sole discretion, extend the exchange
offer, in which case the term expiration date will mean the latest date and
time to which we extend the exchange offer.
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To extend the exchange offer, we will:
. notify the exchange agent of any extension orally or in writing; and
. mail to each registered holder an announcement that will include
disclosure of the approximate number of private notes deposited to date,
each before 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our reasonable discretion:
. to delay accepting any private notes;
. to extend the exchange offer; or
. if any conditions listed below under "--Conditions" are not satisfied, to
terminate the exchange offer by giving oral or written notice of the
delay, extension or termination to the exchange agent.
We will follow any delay in acceptance, extension or termination as promptly
as practicable by oral or written notice to the registered holders. If we amend
the exchange offer in a manner we determine constitutes a material change, we
will promptly disclose the amendment in a prospectus supplement that we will
distribute to the registered holders. We will also extend the exchange offer
for a period of five to ten business days, depending upon the significance of
the amendment and the manner of disclosure, if the exchange offer would
otherwise expire during the five to ten business day period.
Interest on the Exchange Notes
The exchange notes will bear interest at the same rate and on the same terms
as the private notes. Consequently, the exchange notes will bear interest at a
rate equal to 11 5/8% per annum. Interest will be payable semi-annually in
arrears on February 15 and August 15, commencing August 15, 2000.
You will receive interest on August 15, 2000 from the date of initial
issuance of the exchange notes, plus an amount equal to the accrued interest on
the private notes from the date of delivery to the date of exchange. We will
deem the right to receive any interest accrued on the private notes waived by
you if we accept your private notes for exchange.
Procedures for Tendering
You may tender private notes in the exchange offer only if you are a
registered holder of private notes. To tender in the exchange offer, you must:
. complete, sign and date the letter of transmittal or a facsimile of the
letter of transmittal;
. have the signatures guaranteed if required by the letter of transmittal;
and
. mail or otherwise deliver the letter of transmittal or the facsimile to
the exchange agent at the address listed below under "--Exchange Agent"
for receipt before the expiration date.
In addition, either:
. the exchange agent must receive certificates for the private notes along
with the letter of transmittal into its account at the depositary
pursuant to the procedure for book-entry transfer described below before
the expiration date;
. the exchange agent must receive a timely confirmation of a book-entry
transfer of the private notes, if the procedure is available, into its
account at the depositary pursuant to the procedure for book-entry
transfer described below before the expiration date; or
. you must comply with the guaranteed delivery procedures described below.
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Your tender, if not withdrawn before the expiration date, will constitute
an agreement between you and us in accordance with the terms and subject to
the conditions described in this prospectus and in the letter of transmittal.
The method of delivery of private notes and the letter of transmittal and
all other required documents to the exchange agent is at your election and
risk. We recommend that instead of delivery by mail, you use an overnight or
hand delivery service, properly insured. In all cases, you should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. You should not send letters of transmittal or private notes to us. You
may request your respective brokers, dealers, commercial banks, trust
companies or nominees to effect the transactions described above for you.
If you are a beneficial owner of private notes whose private notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender your notes, you should contact the
registered holder promptly and instruct the registered holder to tender on
your behalf. If you wish to tender on your own behalf, before completing and
executing the letter of transmittal and delivering the private notes you must
either:
. make appropriate arrangements to register ownership of the private notes
in your name; or
. obtain a properly completed bond power from the registered holder.
The transfer of registered ownership may take considerable time. Unless the
private notes are tendered:
(1) by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or the box entitled "Special Delivery
Instructions" on the letter of transmittal; or
(2) for the account of:
. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
. a commercial bank or trust company having an office or correspondent
in the United States; or
. an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act that is a member of one of the recognized
signature guarantee programs identified in the letter of transmittal,
an eligible guarantor institution must guarantee the signatures on a letter of
transmittal or a notice of withdrawal described below under "--Withdrawal of
Tenders."
If the letter of transmittal is signed by a person other than the
registered holder, the private notes must be endorsed or accompanied by a
properly completed bond power, signed by the registered holder as the
registered holder's name appears on the private notes.
If the letter of transmittal or any private notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
they should so indicate when signing, and unless waived by us, they must
submit evidence satisfactory to us of their authority to so act with the
letter of transmittal.
The exchange agent and the depositary have confirmed that any financial
institution that is a participant in the depositary's system may utilize the
depositary's Automated Tender Offer Program to tender notes.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance and withdrawal of
tendered private notes, which determination will be final and binding. We
reserve the absolute right to reject any and all private notes not properly
tendered or any private notes our acceptance of which would, in the opinion of
our counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular private notes. Our
interpretation of the terms and
19
<PAGE>
conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, you must
cure any defects or irregularities in connection with tenders of private notes
within the time we determine. Although we intend to notify you of defects or
irregularities with respect to tenders of private notes, neither we, the
exchange agent nor any other person will incur any liability for failure to
give you that notification. Unless waived, we will not deem tenders of private
notes to have been made until you cure the defects or irregularities.
While we have no present plan to acquire any private notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any private notes that are not tendered in the exchange offer, we
reserve the right in our sole discretion to purchase or make offers for any
private notes that remain outstanding after the expiration date. We also
reserve the right to terminate the exchange offer, as described below under "--
Conditions," and, to the extent permitted by applicable law, purchase private
notes in the open market, in privately negotiated transactions or otherwise.
The terms of any of those purchases or offers could differ from the terms of
the exchange offer.
If you wish to tender private notes in exchange for exchange notes in the
exchange offer, we will require you to represent that:
. you are not an affiliate of ours;
. you will acquire any exchange notes in the ordinary course of your
business; and
. at the time of completion of the exchange offer, you have no arrangement
with any person to participate in the distribution of the exchange notes.
In addition, in connection with the resale of exchange notes, any
participating broker-dealer who acquired the private notes for its own account
as a result of market-making or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The SEC has taken
the position that participating broker-dealers may fulfill their prospectus
delivery requirements with respect to the exchange notes, other than a resale
of an unsold allotment from the original sale of the notes, with the prospectus
contained in the registration statement.
Return of Notes
If we do not accept any tendered private notes for any reason described in
the terms and conditions of the exchange offer or if you withdraw or submit
private notes for a greater principal amount than you desire to exchange, we
will return the unaccepted, withdrawn or non-exchanged notes without expense to
you as promptly as practicable. In the case of private notes tendered by book-
entry transfer into the exchange agent's account at the depositary pursuant to
the book-entry transfer procedures described below, we will credit the private
notes to an account maintained with the depositary as promptly as practicable.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the private notes at the depositary for purposes of the exchange offer
within two business days after the date of this prospectus, and any financial
institution that is a participant in the depositary's systems may make book-
entry delivery of private notes by causing the depositary to transfer the
private notes into the exchange agent's account at the depositary in accordance
with the depositary's procedures for transfer. However, although delivery of
private notes may be effected through book-entry transfer at the depositary,
you must transmit and the exchange agent must receive, the letter of
transmittal or a facsimile of the letter of transmittal, with any required
signature guarantees and any other required documents, at the address below
under "--Exchange Agent" on or before the expiration date or pursuant to the
guaranteed delivery procedures described below.
20
<PAGE>
Guaranteed Delivery Procedures
If you wish to tender your private notes and (1) the notes are not
immediately available or (2) you cannot deliver the private notes, the letter
of transmittal or any other required documents to the exchange agent before the
expiration date, you may effect a tender if:
(a) the tender is made through an eligible guarantor institution;
(b) before the expiration date, the exchange agent receives from the
eligible guarantor institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form provided by us, that:
. states your name and address, the certificate number(s) of the private
notes and the principal amount of private notes tendered,
. states that the tender is being made by that notice of guaranteed
delivery, and
. guarantees that, within three New York Stock Exchange trading days after
the expiration date, the eligible guarantor institution will deposit with
the exchange agent the letter of transmittal, together with the
certificate(s) representing the private notes in proper form for transfer
or a confirmation of a book-entry transfer, as the case may be, and any
other documents required by the letter of transmittal; and
(c) within five New York Stock Exchange trading days after the expiration
date, the exchange agent receives a properly executed letter of transmittal, as
well as the certificate(s) representing all tendered private notes in proper
form for transfer and all other documents required by the letter of
transmittal.
Upon request, the exchange agent will send to you a notice of guaranteed
delivery if you wish to tender your notes according to the guaranteed delivery
procedures described above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders of
private notes at any time before 5:00 p.m. on the expiration date.
To withdraw a tender of private notes in the exchange offer, the exchange
agent must receive a written or facsimile transmission notice of withdrawal at
its address listed in this prospectus before the expiration date. Any notice of
withdrawal must:
. specify the name of the person who deposited the private notes to be
withdrawn;
. identify the private notes to be withdrawn, including the certificate
number(s) and principal amount of the private notes; and
. be signed in the same manner as the original signature on the letter of
transmittal by which the private notes were tendered, including any
required signature guarantees.
We will determine in our sole discretion all questions as to the validity,
form and eligibility of the notices, and our determination will be final and
binding on all parties. We will not deem any properly withdrawn private notes
to have been validly tendered for purposes of the exchange offer, and we will
not issue exchange notes with respect to those private notes, unless you
validly retender the withdrawn private notes. You may retender properly
withdrawn private notes by following one of the procedures described above
under "--Procedures for Tendering" at any time before the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange the exchange notes for, any
private notes, and may terminate the exchange offer as provided in this
prospectus before the acceptance of the private notes, if, in our reasonable
judgment, the exchange offer violates applicable law, rules or regulations or
an applicable interpretation of the staff of the SEC.
21
<PAGE>
If we determine in our reasonable discretion that any of these conditions
are not satisfied, we may:
. refuse to accept any private notes and return all tendered private notes
to you;
. extend the exchange offer and retain all private notes tendered before
the exchange offer expires, subject, however, to your rights to withdraw
the private notes; or
. waive the unsatisfied conditions with respect to the exchange offer and
accept all properly tendered private notes that have not been withdrawn.
If the waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that we will
distribute to the registered holders of the private notes, and we will extend
the exchange offer for a period of five to ten business days, depending upon
the significance of the waiver and the manner of disclosure to the registered
holders, if the exchange offer would otherwise expire during the five to ten
business day period.
Termination of Rights
All of your rights under the registration rights agreement will terminate
upon consummation of the exchange offer except with respect to our continuing
obligations:
. to indemnify you and parties related to you against liabilities,
including liabilities under the Securities Act; and
. to provide, upon your request, the information required by Rule
144A(d)(4) under the Securities Act to permit resales of the notes
pursuant to Rule 144A.
Shelf Registration
If (1) applicable law or SEC policy does not permit the exchange offer or
(2) you notify us before the 20th business day following the consummation
deadline for the exchange offer that:
. you are prohibited by law or SEC policy from participating in the
exchange offer;
. you may not resell the exchange notes acquired by you in the exchange
offer to the public without delivering a prospectus, and the prospectus
contained in the registration statement is not appropriate or available
for resales by you; or
. you are a broker-dealer and hold notes acquired directly from us,
we will file with the SEC a shelf registration statement to register for public
resale the transfer restricted securities held by you if you provide us with
the necessary information for inclusion in the shelf registration statement.
For the purposes of the registration rights agreement, "transfer restricted
securities" means each private note until the earliest date on which:
. the private note is exchanged in the exchange offer and entitled to be
resold to the public without complying with the prospectus delivery
requirements of the Securities Act;
. the private note is disposed of in accordance with the shelf registration
statement;
. the private note is disposed of by a broker-dealer pursuant to the "Plan
of Distribution" contemplated by the registration statement; or
. the private note is distributed to the public pursuant to Rule 144 under
the Securities Act.
22
<PAGE>
Liquidated Damages
If:
(1) we do not file the registration statement with the SEC on or before May
17, 2000;
(2) the SEC does not declare the registration statement effective on or
before August 15, 2000;
(3) we do not complete the exchange offer on or before the 30th business
day after the SEC declares the registration statement effective;
(4) if we are obligated to file the shelf registration statement, we fail
to file the shelf registration statement with the SEC on or before the
30th day after the filing obligation arises;
(5) if we are obligated to file a shelf registration statement, the SEC
does not declare the shelf registration statement effective on or
before the 60th day after the deadline to file a shelf registration
statement; or
(6) the registration statement or the shelf registration statement, as the
case may be, is declared effective but thereafter ceases to be
effective or useable in connection with resales of the transfer
restricted securities, for the time of non-effectiveness or non-
usability,
with each of items (1) through (6) constituting a "registration default," we
agree to pay you liquidated damages in an amount equal to $0.05 per week per
$1,000 in principal amount of transfer restricted securities held by you for
each week or portion of a week that the registration default continues for the
first 90-day period immediately following the occurrence of the registration
default. The amount of the liquidated damages will increase by an additional
$0.05 per week per $1,000 in principal amount of transfer restricted securities
at the beginning of and for each subsequent 90-day period until all
registration defaults have been cured, up to a maximum amount of liquidated
damages of $0.30 per week per $1,000 in principal amount of transfer restricted
securities. We will not be required to pay liquidated damages for more than one
registration default at any given time. Following the cure of all registration
defaults, the accrual of liquidated damages will cease.
Exchange Agent
We have appointed Norwest Bank Minnesota, N.A. as exchange agent for the
exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this prospectus or the letter of transmittal
and requests for a notice of guaranteed delivery to the exchange agent
addressed as follows:
<TABLE>
<S> <C>
By registered or Certified Mail: By Hand Delivery:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A.
333 South Grand Avenue, Suite 740 333 South Grand Avenue, Suite 740
Los Angeles, California 90071 Los Angeles, California 90071
Attn: Corporate Trust Department Attn: Corporate Trust Department
By Overnight Delivery: By Facsimile:
Norwest Bank Minnesota, N.A. (213) 680-1827
333 South Grand Avenue, Suite 740 Attn: Customer Service
Los Angeles, California 90071 Confirm by Telephone: (213) 253-6320
Attn: Corporate Trust Department
</TABLE>
Delivery to an address other than the one stated above or transmission via a
facsimile number other than the one stated above will not constitute a valid
delivery.
Fees and Expenses
We will bear the expenses of soliciting tenders. We are making the principal
solicitation by mail; however, our officers and regular employees may make
additional solicitations by facsimile, telephone or in person.
23
<PAGE>
We have not retained any dealer manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange offer
which we estimate to be approximately $0.5 million. These expenses include
registration fees, fees and expenses of the exchange agent and the trustee,
accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of notes
pursuant to the exchange offer. If, however, a transfer tax is imposed for any
reason other than the exchange of the private notes pursuant to the exchange
offer, then you must pay the amount of the transfer taxes. If you do not submit
satisfactory evidence of payment of the taxes or exemption from payment with
the letter of transmittal, we will bill the amount of the transfer taxes
directly to you.
Consequence of Failures to Exchange
Participation in the exchange offer is voluntary. We urge you to consult
your financial and tax advisors in making your decisions on what action to
take. Private notes that are not exchanged for exchange notes pursuant to the
exchange offer will remain restricted securities. Accordingly, those private
notes may be resold only:
. to a person whom the seller reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A under the Securities Act;
. in a transaction meeting the requirements of Rule 144 under the
Securities Act;
. outside the United States to a foreign person in a transaction meeting
the requirements of Rule 903 or 904 of Regulation S under the Securities
Act;
. in accordance with another exemption from the registration requirements
of the Securities Act and based upon an opinion of counsel if we so
request;
. to us; or
. pursuant to an effective registration statement.
In each case, the private notes may be resold only in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction.
24
<PAGE>
THE ACQUISITION
On October 1, 1999, Bio-Rad acquired the stock of PSD and the rights to
certain other ancillary assets for $210 million, subject to downward
adjustments. We paid for PSD with borrowings under a senior subordinated credit
facility and our senior credit facility, which includes a term loan and a
revolving credit facility.
In February 2000, after complying with certain procedures described in the
PSD purchase agreement, we provided the former stockholders of PSD with Arthur
Andersen's report on the PSD balance sheet as of September 30, 1999 and the
final calculation of PSD's debt as of that date. We have requested a downward
adjustment of the purchase price of approximately $11.0 million based on the
conclusions in that report. The former stockholders of PSD and we have
submitted those points on which we disagree to Deloitte Touche Tomatsu.
Deloitte's conclusions will be final and binding. As a result of this process,
it will be some time before we know the final amount, if any, of the adjustment
to the purchase price.
We believe our acquisition of PSD will increase our global presence in the
clinical diagnostics market. PSD is a global IVD company with leading positions
in selected segments of the market. For instance, PSD is an industry leader in
the supply of test kits for autoimmune-related disorders. PSD is also a
worldwide leader in the supply (either directly or through agreements with
third parties) of tests and bloodbank screens for HIV. In addition, PSD has a
significant presence in the bacteriology, infectious disease and immuno-
hematology diagnostic markets. PSD also is the exclusive supplier of certain
reagents for the Beckman Coulter automated analyzer, Access(TM).
PSD was founded by the Institut Pasteur to commercialize its diagnostics
research and currently holds certain exclusive licenses from the Institut
Pasteur in the HIV and infectious disease product segments. Through a
Cooperation Agreement with Institut Pasteur, PSD has the exclusive right to use
the Pasteur name for IVD products and a priority to commercialize Institut
Pasteur's discoveries in the IVD market.
We believe that the Acquisition enhances Bio-Rad's clinical diagnostics
market position for the following reasons:
. Bio-Rad and PSD have complementary product lines. There is essentially no
overlap between our clinical diagnostics products and those of PSD. We
are a leader in genetic tests, diabetes monitoring, toxicology and QC
systems. PSD holds leading positions in the autoimmunity-related
disorder, bacteriology, infectious disease and immuno-hematology
diagnostic market segments. We believe that the Acquisition represents a
unique opportunity to expand our leadership position in QC systems by
leveraging our expertise in this area with PSD's knowledge in its areas
of discipline.
. The combined company has increased geographic reach. We believe PSD's
significant presence in France, Japan and Latin America will complement
our strengths in the Americas, Asia Pacific and Northern Europe. New
sales territories for our products and PSD's products will give us the
opportunity to cross-sell our product lines and leverage our strong
brands.
. The Cooperation Agreement provides us with a priority to commercialize
Institut Pasteur's discoveries in the IVD market. Through the Cooperation
Agreement, we have a priority to commercialize Institut Pasteur's
discoveries in the IVD market. We intend to leverage our proven and
successful commercialization track record to exploit PSD's intellectual
property rights with respect to blood viruses (including HIV and
hepatitis), clinical and industrial bacteriology, infectious diseases,
immuno-hematology, cardiology, coagulation, immunoassays and other areas.
. We have the opportunity to apply emerging Bio-Rad technologies to the
combined product portfolio. We have a proven record of introducing
automation options and information technologies for clinical diagnostic
use. We intend to apply this experience to both existing and new products
in the combined portfolio. We also have extensive experience in the
development of testing platforms. We are currently developing a multi-
analyte system designed to accommodate many of the tests in the combined
portfolio.
25
<PAGE>
. We expect to achieve operational efficiencies. The Acquisition presents
several opportunities to reduce costs of the combined company, including
the consolidation of our sales operations, the rationalization of
manufacturing activities and the refocusing of research and development
resources. In addition, the increased size of the combined operations of
Bio-Rad and PSD is expected to present purchasing synergies. These
benefits, together with the advantages of increased global presence and
expanding customer bases, are expected to provide opportunities to
improve the profitability of the combined company in a manner that would
not be possible if both companies had remained independent.
Under the Purchase Agreement, the sellers must indemnify Bio-Rad for losses
Bio-Rad suffers due to inaccuracies or breaches of sellers' representations and
warranties or breaches of sellers' covenants in the Purchase Agreement. The
sellers must indemnify Bio-Rad in full for breaches of the representations and
warranties related to taxes and the environment and for any damages PSD may
suffer as a result of liabilities related to the HIV blood contamination that
occurred in France prior to 1986. However, for any other claims covered by the
indemnification provisions, the sellers cannot be required to pay more than
Euro 39.1 million (approximately $38 million) to indemnify Bio-Rad. This Euro
39.1 million increases up to a maximum of Euro 48.8 million (approximately $47
million) in the event PSD loses its HCV License Agreement with Ortho
Diagnostics Systems, Inc. and Chiron Corporation.
If these indemnification provisions are not adequate to compensate us for
losses we suffer as a result of sellers' breaches under the Purchase Agreement,
or if the sellers do not comply with their indemnification obligations, we may
be materially adversely affected.
The Relationship with Institut Pasteur
Institut Pasteur, a scientific research institution, originally founded PSD
as a vehicle for commercializing its IVD discoveries. Presently, the nature of
this scientific collaborative relationship is outlined in the Cooperation
Agreement dated July 11, 1990. The Cooperation Agreement grants to PSD and its
affiliates the right of first refusal for an exclusive license to exploit all
Institut Pasteur patents and know-how in the field of IVD technology for the
duration of the licensed patents or 15 years from the first marketing in
countries where there is no patented technology. The Cooperation Agreement also
grants PSD a worldwide exclusive license to use the "Pasteur" trademarks in the
IVD market. The Cooperation Agreement is for a 10-year term, expiring on
December 31, 2000. Although PSD and Institut Pasteur have not reached an
agreement regarding the renewal or extension of the Cooperation Agreement, Bio-
Rad and the Institut Pasteur have exchanged correspondence indicating each
party's intention to renew that agreement and have commenced discussions in
this regard. We cannot assure you that the parties will agree on the terms of a
new cooperation agreement.
While the commercialization of future IVD discoveries of Institut Pasteur is
covered by the Cooperation Agreement, PSD's rights to use existing Institut
Pasteur intellectual property in the IVD field is covered by a License
Agreement, pursuant to which Institut Pasteur confirmed its grant to PSD of
exclusive and nonexclusive licenses to manufacture, use and sell IVD products
presently covered by Institut Pasteur patents or know-how. The License
Agreement will remain in effect for the life of the corresponding Institut
Pasteur patents. The first patent covered by an exclusive license expires in
2004.
26
<PAGE>
USE OF PROCEEDS
The exchange offer satisfies an obligation under the registration rights
agreement. We will not receive any cash proceeds from the exchange offer.
CAPITALIZATION
(in millions)
The following table sets forth our short-term debt and consolidated
capitalization at March 31, 2000.
<TABLE>
<CAPTION>
March 31,
2000
---------
<S> <C>
Short-term debt:
Notes payable and current maturities of long-term debt.............. $ 13.8
------
Total short-term debt............................................. $ 13.8
======
Long-term debt:
Revolving facility(1)............................................... $ 37.0
Term loan(1)........................................................ 72.6
Other long-term debt................................................ 0.2
11 5/8% Senior Subordinated Notes due 2007(2)....................... 148.3
------
Total long-term debt.............................................. 258.1
Stockholders' equity:
Total stockholders' equity ....................................... 219.0
------
Total capitalization.................................................. $477.1
======
</TABLE>
- --------
(1) See the section "Description of the Credit Facility."
(2) The Senior Subordinated Notes are presented net of $1.7 million, which
represents the unamortized discount from the offering price.
27
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
information is based on the historical consolidated financial statements of
Bio-Rad and PSD included elsewhere in this prospectus, adjusted to give effect
to the Transactions and the Private Offering and the proceeds therefrom.
The unaudited pro forma consolidated income statement for the year ended
December 31, 1999 gives effect to the Transactions and the Private Offering as
if they had occurred on January 1, 1999. The unaudited pro forma adjustments
are based upon available information and certain assumptions that we believe
are reasonable under the circumstances. The unaudited pro forma consolidated
income statement does not purport to represent what our results of operations
would actually have been had the Transactions and the Private Offering in fact
occurred on such dates, nor do they purport to project our results of
operations for any future period. The information set forth below should be
read together with the other information contained in the sections
"Capitalization," "Selected Historical Consolidated Financial Data of Bio-Rad,"
"Selected Historical Consolidated Financial Data of PSD," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
Bio-Rad's and PSD's consolidated financial statements and related notes.
The unaudited pro forma consolidated income statement does not reflect any
of the anticipated cost savings that we expect to achieve through the
integration of the operations of Bio-Rad and PSD.
28
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1999
(in millions, except per share data)
<TABLE>
<CAPTION>
Bio-Rad PSD Acquisition Debt
Actual Actual Adjustments Adjustments Pro Forma
------- ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Total revenue........... $549.5 $173.3 $(0.8)(A) $722.0
Cost of goods sold...... 255.2 92.9 (0.4)(A) 347.7
------ ------ ----- ------ ------
Gross profit............ 294.3 80.4 (0.4)(A) 374.3
Selling, general and
administrative
expense................ 194.5 61.2 255.7
Research and development
expense................ 51.2 15.5 66.7
Purchased in-process
research and
development expense.... 15.5 -- (15.5)(B) --
------ ------ ----- ------ ------
Income from operations.. 33.1 3.7 15.1 51.9
Interest expense, net... (12.8) (2.7) $(18.8)(D) (34.3)
Other income (expense).. (3.9) (0.7) (4.2)(C) (3.0)(E) (11.8)
------ ------ ----- ------ ------
Income (loss) before
taxes.................. 16.4 0.3 10.9 (21.8) 5.8
Provision for income
tax.................... 4.7 0.2 4.8 (6.2) 3.5 (F)
------ ------ ----- ------ ------
Net income (loss)....... $ 11.7 $ 0.1 $ 6.1 $(15.6) $ 2.3
====== ====== ===== ====== ======
Basic earnings per
share: 12.1 weighted
average common shares.. $ 0.97 $ 0.19
====== ======
Diluted earnings per
share: 12.2 weighted
average common shares.. $ 0.96 $ 0.19
====== ======
EBITDA.................. 56.7 80.1
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
(in millions)
(A) Eliminates intercompany sales and related cost of sales.
(B) In-process research and development costs of $15.5 million was included in
income in the Company's consolidated financial statements in the fourth
quarter of 1999. These costs have not been considered in the pro forma
income statements.
(C) Represents an adjustment necessary to record a full year of goodwill
amortization including capitalized transaction and restructuring costs
arising from the Acquisition over a 15-year period.
(D) Represents an adjustment to interest expense to record a full year of
interest based on the actual transactions for the first six months since
the Acquisition and pro forma borrowings at March 31, 2000 interest rates
for the remainder of the year.
(E) Represents a payment to settle a dispute arising under the terms of an
engagement letter between the Company and an investment bank.
(F) Represents the tax expense after additional interest expense, elimination
of purchased in-process research and development expense, goodwill
amortization and PSD taxes at our effective rate.
29
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BIO-RAD
(in millions)
The selected consolidated income statement data and balance sheet data
presented below for the years ended December 31, 1999, 1998 and 1997 and as of
December 31, 1999 and 1998 are derived from Bio-Rad's consolidated financial
statements, audited by Arthur Andersen LLP, independent auditors, and should be
read in conjunction with Bio-Rad's audited financial statements and notes
thereto included elsewhere in this prospectus. The selected consolidated income
statement data and balance sheet data presented below for the years ended
December 31, 1996 and 1995 and as of December 31, 1997, 1996 and 1995 are
derived from Bio-Rad's audited consolidated financial statements not included
in this prospectus. In the opinion of our management, the unaudited
consolidated financial data presented below provide all adjustments, which
include only normal recurring adjustments, necessary for a fair presentation of
the results of operations for the periods specified. Such results, however, are
not necessarily indicative of the results which may be expected for the full
fiscal year. The following information should be read in conjunction with the
section "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and our consolidated financial statements included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
-------------------------------------- --------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................. $396.6 $418.8 $426.9 $441.9 $549.5 $125.7 $183.7
Cost of goods sold.................... 171.9 182.1 189.3 202.4 255.2 55.6 86.7
------ ------ ------ ------ ------ ------ ------
Gross profit.......................... 224.7 236.7 237.6 239.5 294.3 70.2 97.0
Selling, general and administrative
expense.............................. 150.3 155.5 164.8 167.0 194.5 43.0 60.7
Product research and development
expense.............................. 34.7 39.6 46.1 41.4 51.2 10.5 17.9
Purchased in-process research and
development expense.................. -- -- -- -- 15.5 -- --
Restructuring costs................... 1.5 2.7 -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Income from operations................ 38.2 38.9 26.7 31.1 33.1 16.6 18.4
Interest expense, net................. (4.5) (3.0) (1.2) (3.7) (12.8) (0.9) (8.8)
Other income (expense)................ (0.2) 0.6 (2.7) 6.8 (3.9) (0.6) (5.3)
------ ------ ------ ------ ------ ------ ------
Income before taxes and extraordinary
charge............................... 33.5 36.5 22.8 34.2 16.4 15.1 4.3
Provision for income tax.............. 8.4 9.1 6.4 9.9 4.7 4.3 1.4
------ ------ ------ ------ ------ ------ ------
Income before extraordinary charge.... 25.1 27.4 16.4 24.3 11.7 10.8 3.0
Extraordinary charge(1)............... -- (1.2) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net income............................ $ 25.1 $ 26.2 $ 16.4 $ 24.3 $ 11.7 $ 10.8 $ 3.0
====== ====== ====== ====== ====== ====== ======
Other Financial Data:
EBITDA(2)............................. $ 54.7 $ 57.4 $ 43.5 $ 58.9 $ 56.7 $ 21.2 $ 23.8
Depreciation and amortization......... 16.7 17.9 19.5 21.0 27.5 5.2 10.7
Capital expenditures, net............. 12.3 15.2 23.6 21.2 27.3 4.6 8.3
Earnings to fixed charges............. 5.1 6.4 5.6 5.3 1.9 8.6 1.4
Balance Sheet Information:
Cash.................................. $ 14.8 $ 9.4 $ 10.8 $ 10.1 $ 17.1 $ 8.0 $ 15.3
Working capital....................... 111.8 119.4 126.6 138.0 176.2 147.0 196.3
Total assets.......................... 285.1 284.9 351.9 367.3 668.9 369.6 671.4
Total debt............................ 35.2 12.3 49.8 51.7 261.1 51.2 271.9
Stockholders' equity.................. 157.1 183.5 196.7 214.3 220.1 220.9 219.0
</TABLE>
- --------
(1) Extraordinary charge in 1996 of $1.2 million, net of tax effect of $0.8
million, is for the redemption of subordinated debt.
(2) For the definition of "EBITDA," see footnote (2) in the section "Summary"
under the heading "Summary Historical and Unaudited Pro Forma Consolidated
Financial Data."
30
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PSD
(in millions)
The selected consolidated balance sheet and income statement data presented
below as of December 31, 1998 and 1997 and for the years ended December 31,
1998, 1997 and 1996 are derived from PSD's consolidated financial statements,
audited by PGA, a Member Firm of Andersen Worldwide, independent auditors, and
should be read in conjunction with PSD's audited financial statements and notes
thereto included elsewhere in this prospectus. The selected consolidated income
statement data and balance sheet data as of September 30, 1999 and for the nine
months then ended are derived from unaudited financial statements. In the
opinion of our management, the unaudited consolidated financial data presented
below provide all adjustments, which include only normal recurring adjustments,
necessary for a fair presentation of the results of operations for the periods
specified. Such results, however, are not necessarily indicative of the results
which may be expected for the full fiscal year.
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
------------------------- September 30,
1996 1997 1998 1999
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Net sales............................ $ 288.5 $ 256.6 $ 228.9 $173.3
Cost of sales........................ 140.5 131.2 121.0 92.9
------- ------- ------- ------
Gross profit......................... 148.0 125.4 107.9 80.4
Selling, general and administrative
expense............................. 122.5 98.4 83.0 61.2
Research and development expense..... 38.5 23.8 22.6 15.5
------- ------- ------- ------
Income (loss) from operations........ (13.0) 3.2 2.3 3.7
Interest expense, net................ (8.9) (5.9) (5.4) (2.7)
Other income (expense)(1)............ (26.8) (5.6) 0.3 (0.7)
------- ------- ------- ------
Income before taxes.................. (48.7) (8.3) (2.8) 0.3
Provision for income tax............. (0.2) 0.7 1.0 0.2
------- ------- ------- ------
Net income (loss).................... $ (48.5) $ (9.0) $ (3.8) $ 0.1
======= ======= ======= ======
Other Financial Data:
EBITDA(2)............................ $ 10.6 $ 13.0 $ 13.9 $ 11.3
Depreciation and amortization........ 24.0 15.4 11.3 8.3
Capital expenditures, net............ 25.8 2.9 14.0 6.5
Balance Sheet Information:
Cash................................. $ 3.7 $ 6.9 $ 8.4
Working capital...................... (23.3) (24.6) (18.4)
Total assets......................... 200.3 211.9 190.3
Total debt........................... 95.2 112.6 17.8
Stockholders' equity................. 30.1 26.8 25.1
</TABLE>
- --------
(1) On April 30, 1997, PSD sold its Access(TM) product line to Beckman
Instruments Inc., including all Access-related intellectual property
rights, the U.S. production facility and other Access assets worldwide. The
costs of the disposal were provided for in the financial statements for the
year ended December 31, 1996 for an aggregate amount of $26.4 million.
(2) EBITDA for the year ended December 31, 1996 has been adjusted to exclude
the impact of the $26.4 million accrual related to the disposal of
Access(TM) (see footnote (1) above). For the definition of EBITDA, see
footnote (2) in the section "Summary" under the heading "Summary Historical
and Unaudited Pro Forma Consolidated Financial Data."
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations of Bio-Rad
The following table shows operating income and expense items as a percentage
of net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
------------------------- ----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............... 44.3 45.8 46.5 44.2 47.2
------- ------- ------- ------- -------
Gross profit..................... 55.7 54.2 53.5 55.8 52.8
Selling, general and
administrative expense.......... 38.7 37.8 35.4 34.2 33.1
Product research and development
expense......................... 10.8 9.4 9.3 8.4 9.7
Purchased in-process research and
development..................... -- -- 2.8 -- --
------- ------- ------- ------- -------
Income from operations........... 6.2 7.0 6.0 13.2 10.0
------- ------- ------- ------- -------
Net income....................... 3.8% 5.5% 2.1% 8.6% 1.6%
======= ======= ======= ======= =======
</TABLE>
The year 1999 was highlighted by the acquisition of PSD. The details of the
Acquisition are discussed and disclosed throughout the remainder of this
section of the prospectus. The significance of this transaction is that the
Acquisition enhances our clinical diagnostics market position in the following
ways:
. the companies have complementary product lines with few actual
overlapping products;
. the combined company has increased geographic reach;
. there is an opportunity to apply emerging Bio-Rad technologies to the
combined product portfolio; and
. we expect to achieve operational efficiencies.
Profit performance in 2000 and 2001 could be impacted when compared to prior
years or until PSD is fully assimilated and reorganized.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999
Our net sales (sales) in the first quarter of 2000 were $183.7 million
compared to $125.7 million in the first quarter of 1999, an increase of 46%.
Sales increased 11.0% in the Life Science segment, 107.4% in the Clinical
Diagnostics segment and were unchanged in the Analytical Instruments segment
when compared to the first quarter of 1999. Both we and the Clinical
Diagnostics segment benefited from the Acquisition. Excluding the sales
attributable to PSD, our total sales and the Clinical Diagnostics segment's
sales grew by 7% and 5%, respectively. The growth in the Life Science segment
is attributed to a broad line of core and new products. Sales growth was
especially strong in European markets. The Clinical Diagnostics segment
experienced limited growth overall, in part from exchange rates lowering
comparable period sales by approximately 5%. In the Analytical Instruments
segment, sales of our semiconductor test and manufacturing instruments improved
but were offset by sales declines in our FTIR product line.
Consolidated gross margins were 52.8% for the first quarter of 2000 compared
to 55.8% for the first quarter of 1999 and 53.5% for all of 1999. Excluding the
impact of the Acquisition, gross margins would have been 55.8%. Margins on the
PSD products are lower than our historical rates. Gross margins improved in the
Life Science segment, as production rose above planned levels improving
overhead absorption. The Analytical Instruments segment's gross margin
increased as a result of increased sales volume for the semiconductor products
along with firmer pricing. The Clinical Diagnostics segment's margins were
impacted by increased temporary manufacturing and services costs for diagnostic
equipment.
32
<PAGE>
Selling, general and administrative expense decreased to 33.1% of sales in
the first quarter of 2000 from 34.2% of sales in the first quarter of 1999. The
program to lower costs through work force reductions is currently on schedule
as we comply with European statutory requirements and social customs. These
reductions, the majority of which are in Europe, should be complete and savings
should begin to be realized during the third quarter of 2000. Selling, general
and administrative expense for the Life Science segment grew at the same rate
as sales. Investments in e-commerce and the redefining of the Asian operations
represent current period increased costs. The long-term goal for management
remains a consistent gradual reduction in selling, general and administrative
spending as a percent of sales.
Product research and development expense increased to 9.7% as a percentage
of sales including the operations of PSD. The majority of increased research
and development expense is attributable to increased Clinical Diagnostics
spending and the Acquisition. The Clinical Diagnostics segment has completed
the realignment and review of research and development projects at PSD and has
assigned researchers to projects in support of its expanded strategic goals.
The Life Science segment's product research and development expense has
increased in the area of bulk process chromatography as our initial product
introductions have been met with positive acceptance.
Interest expense increased significantly from the prior year reflecting the
debt incurred to finance the Acquisition. During the first quarter, we incurred
an additional $1.0 million of non-recurring bank fees to replace the original
$100 million bridge loan with another senior subordinated bridge loan.
Additionally, we sold $150 million of 11 5/8% Senior Subordinated Notes due
2007 in a private placement, allowing us to replace the $100 million bridge
loan and reduce borrowings under our Senior Credit Facility. Investment income
in both years includes gains on sales of marketable securities. Net other
income and expense in the first quarter of 2000 includes a $3.0 million
non-recurring payment to settle a dispute arising under the terms of an
engagement letter between us and an investment bank. Net other income and
expense in both years includes net goodwill amortization and non-operating
legal costs.
Our effective tax rate rose to 32% for the first quarter of 2000 compared to
29% in the first quarter of 1999. The increased rate reflects the limitation on
the deductibility of goodwill amortization associated with the Acquisition, the
utilization of loss carryforwards and a change in source of income.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 andYear
Ended December 31, 1997
Our net sales (sales) for the fiscal year ended December 31, 1999 were
$549.5 million, an increase of 24.3% over 1998 sales. Included in the 1999
fourth quarter sales was $60.2 million from the recently acquired PSD
operations (see Note 2 to our Consolidated Financial Statements). Excluding
this amount, our sales grew by 10.7% over fiscal year 1998. The impact from
currency translation in 1999 on sales was less than $1.0 million. The
strengthening of the Japanese Yen offset the negative impact from most European
currencies. Excluding any impact from currency translation in 1999 and the PSD
acquisition, the Life Science and Clinical Diagnostics segments grew by 11.9%
and 11.2%, respectively. The growth in the Life Science segment was
attributable to laboratory products and scientific imaging equipment excellent
performance. The Clinical Diagnostics segment growth was a result of the
continuing demand for our diabetes monitoring and quality control systems. The
Analytical Instruments segment grew by 2.8% as the market for our semiconductor
test and manufacturing equipment grew significantly in the second half of 1999.
Our sales for the fiscal year ended December 31, 1998 were $441.9 million,
an increase of 3.5% over sales in 1997. The effect of a strengthening U.S.
dollar caused a reduction in sales growth in 1998 of 2.5% or approximately
$10.5 million. When 1998 sales are compared to 1997 at constant 1997 exchange
rates, our sales grew 6.0%. Eliminating the effect of a strengthened U.S.
dollar, sales increased 16% and 4% in the Clinical Diagnostics and Life Science
segments, respectively. The Analytical Instruments segment experienced lower
sales as the markets it served contracted almost worldwide. The growth in the
Clinical Diagnostics segment was attributed to the December 1997 purchase of
the controls business from Chiron Diagnostics Corporation.
33
<PAGE>
The Life Science segment experienced strong growth in the U.S., especially in
the imaging and microscopy product lines.
Consolidated gross margins were 53.5% for 1999 compared to 54.2% in the
prior year. After adjusting for the Acquisition, gross margins for the
businesses operated for 12 months were 55.3%, an improvement over the 54.2%
recorded in 1998. The Life Science segment's gross margin improved by 1% as
sales growth provided the opportunity to lower fixed factory overhead and new
product pricing remained firm. The Clinical Diagnostics segment's gross margin
declined slightly, by 0.3%, as pricing pressure in the healthcare industry
remained a considerable factor. Also, the cost of foreign sourced products rose
as the Yen strengthened when compared to the dollar. The Analytical Instruments
segment's gross margin improved as demand increased and pricing improved for
our semiconductor test and manufacturing equipment. Cost reductions begun in
prior years have been fully implemented across this segment.
Consolidated gross margins were 54.2% for 1998 compared to 55.7% for 1997.
Gross margins were adversely affected by lower prices on international sales
caused by a strengthening U.S. dollar and a majority of manufacturing costs
being U.S. dollar denominated. The Life Science segment margins declined from
higher service and warranty costs, and were particularly impacted in Asia. The
Clinical Diagnostics segment gross margins declined by 3.1% of sales, in part,
from the Chiron acquisition, where several large supply agreements existed.
Continued consolidation in the diagnostic laboratory and the role of government
in diagnostic reimbursement maintained severe pressure on prices received for
diagnostics products. Analytical Instruments segment margins were negatively
impacted by an increasingly weak semiconductor market and the strengthening
dollar.
Consolidated selling, general and administrative expense decreased to 35.4%
of sales in 1999 when compared to 37.8% for 1998. After adjusting for the
Acquisition, selling, general and administrative expense for the Company was
36.2%, a decline of 1.6% of sales from the prior year. For the Company
excluding PSD, total selling, general and administrative expense grew by less
than 60% of sales growth. We continue to make the efficient use of selling,
general and administrative expense a priority. The Acquisition should allow us
to further leverage this expense in a larger sales environment through the
elimination of redundant facilities and positions. In absolute dollars, the
largest increase in selling, general and administrative expense was in the Life
Science segment as the Clinical Diagnostics segment grew only slightly and
Analytical Instruments segment declined.
Consolidated selling, general and administrative expense decreased to 37.8%
of sales in 1998 from 38.7% for 1997. Spending increased in absolute dollars
only in the Clinical Diagnostics segment, yet at a growth rate of approximately
half the growth rate in sales. The Life Science and Analytical Instruments
segments each had declines in absolute spending both from the currency effect
on foreign incurred selling, general and administrative expenses and cost
elimination programs begun in late 1997.
Product research and development expense, including the operations of PSD,
increased by 23.7% in 1999 to $51.2 million compared to $41.4 million for the
year 1998. Both Life Science and Clinical Diagnostics segments, excluding PSD,
increased research and development spending at a rate higher than sales growth
as we are focusing on programs to increase sales both through new product
development and the acquisition of existing businesses. Future spending levels
are expected to be at or near current levels as a percentage of sales. The
write-off of $15.5 million "purchased in-process research and development
expense" is included in income from operations. Purchased in-process research
and development expense represents the value assigned in a purchase business
combination to research and development projects of the acquired business that
have been commenced but not completed at acquisition. In accordance with SFAS
No. 2, "Accounting for Research and Development Costs" the value of purchased
in-process research and development expense must be charged to expense as part
of the allocation of the purchase price.
Product research and development expense decreased in 1998 by 10% to $41.4
million compared to $46.1 million for the year 1997. Spending declined in the
Life Science and Analytical Instruments segments
34
<PAGE>
and increased 3% in the Clinical Diagnostics segment. Declines in the Life
Science and Analytical Instruments segments were due to the completion or
termination of projects.
Interest expense increased substantially for the year 1999 as the purchase
of PSD was financed almost entirely with borrowed funds. We borrowed
approximately $225 million on October 1, 1999 to pay for the Acquisition,
including one time bank charges and fees for a $200 million Credit Facility and
an interim $100 million Senior Subordinated Credit Facility. Costs associated
with the Credit Facility were capitalized and will be amortized over the five-
year life of the revolver and term loan. Expenses for the Senior Subordinated
Credit Facility amounted to $3.6 million at December 31, 1999. Going forward,
we expect to experience significantly higher interest expense. At December 31,
1999 our debt to equity ratio was 119% compared to 24% at December 31, 1998.
Average borrowings for the years 1999 and 1998 were $97.8 million and
$52.3 million, respectively.
Investment income in 1999, 1998 and 1997 includes gains on sales of
marketable securities. During 1999, we realized $0.9 million of investment
income as we liquidated our investment of marketable securities to raise cash
just prior to the Acquisition. During 1998, we realized significant investment
income, $8.6 million, as we sold some of our investments in marketable
securities in order to increase our investment in Instrumentation Laboratory
(see Note 4 to our Consolidated Financial Statements).
Net other income and expense for 1999 is comprised principally of
amortization of goodwill and exchange losses (see Note 9 to our Consolidated
Financial Statements). Net other income and expense for 1998 was principally
amortization of goodwill. Net other income and expense for 1997 was principally
non-operating litigation costs and amortization of goodwill. Our hedging
program is limited to non-speculative forward foreign exchange contracts (with
major financial institutions) which hedge the exposure of intercompany
receivables and payables. The net exchange gain or loss results from the
estimating inherent in projecting intercompany balances and from transaction
charges.
Our consolidated effective tax rate was 29%, 29% and 28% in 1999, 1998 and
1997, respectively. The tax rate for all years reflects the utilization of loss
carryforwards, foreign sales corporation benefits and foreign tax credits. The
effective tax rate in future periods is expected to rise as the deductibility
of goodwill amortization, interest expense as well as the utilization of loss
carryforwards are dependent on the source and amount of income generated by us.
Liquidity and Capital Resources
As a result of the substantial amount of debt and debt service obligations
undertaken in relation to the Acquisition, we now face increased risk from
inadequate levels of liquidity and capital resources.
We became substantially leveraged as we entered into new credit facilities.
We entered into a $200 million Credit Facility (consisting of a $100 million
term loan and a $100 million revolving facility) on September 30, 1999,
replacing the $100 million credit agreement previously in place. The new
facility provides for borrowing on a secured basis through September 30, 2004.
Interest is based upon the Eurodollar rate, the Federal Funds effective rate or
corporate based (prime) rate.
We also entered into an interim $100 million Senior Subordinated Credit
Agreement on September 30, 1999. This agreement had a one-year term and
provided for an automatic rollover for an additional term expiring September
30, 2005. This credit facility was replaced on January 29, 2000 with a new
interim $100 million Senior Subordinated Credit Agreement. We repaid amounts
outstanding under this agreement with proceeds from the offering of the private
notes.
The lenders have placed restrictions on our ability to borrow further,
service this and other debt, make expenditures for capital improvements, pay
dividends, repurchase our own stock and/or make strategic and tactical
investments in support of operating the business. We are also required to
comply with certain financial ratios. The amount of debt undertaken in
connection with the Acquisition could materially impact our financial condition
if management's plan for operating the new entity is not successful.
35
<PAGE>
At March 31, 2000, we had available $15.3 million in cash and cash
equivalents, approximately $19.0 million under various foreign lines of credit
and approximately $63.0 million under our principal revolving credit agreement
(see Note 5 to our Consolidated Financial Statements). We believe that this
availability, together with cash flow from operations, will be adequate to meet
our current objectives for operations, research and development, and investment
in our systems and equipment.
Net Cash. Net cash provided by (used in) operations was ($5.8 million),
$45.0 million, $27.3 million and $21.1 million for the three months ended March
31, 2000 and the years ended 1999, 1998 and 1997, respectively.
Consolidated Net Accounts Receivable. At March 31, 2000, consolidated net
accounts receivable decreased by $4.3 million from December 31, 1999. The
decrease represents the net impact of a strengthened U.S. dollar lowering
foreign denominated receivables, and the weighting of the recently acquired PSD
which historically offered more favorable credit terms.
Consolidated net accounts receivable increased approximately $90 million in
1999 when compared to 1998. This increase is primarily attributable to
receivables acquired from PSD of approximately $75 million and an increase in
fourth quarter sales of $15 million for our same period comparable operations.
Our management regularly reviews the allowance for uncollectible receivables
and believes net receivables are fully realizable.
Consolidated Inventories. At March 31, 2000, consolidated net inventories
increased by $10.0 million from December 31, 1999. Inventory increased in the
Life Science segment to meet anticipated requirements associated with the
introduction in the U.S. of its internet sales site, and to meet orders for the
segment's equipment and bulk process chemicals. The Clinical Diagnostics
segment's inventory grew related to a short term supplier problem that requires
the application of additional test and rework, and scheduled manufacturing for
the quality controls business. Inventory for the Clinical Diagnostics segment's
quality controls business is characterized by long lead times and large
infrequent batch production, which is necessary to meet customers'
requirements.
For the year ended December 1999, consolidated inventories rose $34.0
million to $126.3 million. The Acquisition added approximately $36.0 million to
the Clinical Diagnostics segment inventories. Inventory changes for comparable
segments were generally in line with sales activity, rising in the Life Science
segment, and declining in the Analytical Instruments segment. Management
regularly reviews the impact of obsolescence on current inventory caused by the
introduction of new products. Management will continue its focus on inventory
control in the coming year to moderate capital requirements.
A valuation reserve is necessary for deferred tax assets (see Note 6 to our
Consolidated Financial Statements) primarily because realization of tax
attributable to foreign loss carryforwards is uncertain.
Net Capital Expenditures. Net capital expenditures totaled $8.3 million for
the first three months of 2000 compared to $4.6 million for the same period of
1999. Expenditures rose as we invested in data communication and business
systems to standardize and integrate our new acquisition and production
equipment. Capital expenditures include additions of reagent rental equipment
placed with Clinical Diagnostics customers who then commit to purchasing our
diagnostic reagents for use. This was also a sales option offered by PSD.
Net capital expenditures in 1999 totaled $27.3 million compared to $21.2
million and $23.6 million in 1998 and 1997, respectively. Expenditures in all
years include clinical diagnostic equipment placed with customers to be used
with our diagnostic reagents. Expenditures in 1998 include additions to the
Clinical Diagnostics segment's southern California manufacturing facilities to
accommodate the consolidation of operations and assets acquired in the fourth
quarter of 1997. Management regularly approves capital spending in the normal
course of business.
36
<PAGE>
Our Board of Directors has authorized us to repurchase up to $18 million of
common stock over an indefinite period of time. From July 1996 through March
31, 2000, we have repurchased 567,786 shares of Class A Common Stock and 30,000
shares of Class B Common Stock for a total of $14.1 million. The indenture
restricts our ability to repurchase our own stock to an amount not to exceed
$4.0 million in the aggregate. We did not repurchase any shares in the quarter
ended March 31, 2000. Share repurchases made during 1999 amounted to $2.2
million. The repurchase is designed to improve shareholder value and to satisfy
our obligations under the employee stock purchase and stock option plans.
Year 2000
The scope of our Year 2000 compliance effort included (i) IT, such as
software and hardware; (ii) non-IT systems or embedded technology for
manufacturing and laboratory equipment, environmental and safety systems,
facilities and utilities; (iii) date-sensitive Company products; and (iv) the
readiness of key third-party suppliers and customers.
From inception of our effort on the Year 2000 issues through December 31,
1999, we spent an estimated $8.0 million related to the Year 2000 readiness
issue. The costs captured include external consultants, and purchased software
and hardware. No internal costs were captured as they principally related to
payroll costs for the information systems group working on the Year 2000
project. We expensed as incurred costs related to assessment and remediation.
These costs were funded through operating cash flows. From December 31, 1999 to
March 31, 2000, no material problems were reported in any of our facilities or
operations. As of the date of this filing, we have not experienced any material
Year 2000 problems with our IT or non-IT systems or products, nor have we
experienced any material problems with any of our key customers or suppliers.
We have no indication of any problems related to any customers or vendors.
Euro--A New European Currency
On January 1, 1999, certain member countries of the European Union began to
fix the conversion rates between their national currencies and a common
currency, the "Euro." Over the period January 1, 1999 through January 1, 2002
participating countries will gradually transition from their national
currencies to the Euro.
This transition will have business implications including the need to adjust
internal systems to accommodate the Euro and cross-border price transparency.
We have assigned a group of Corporate and European managers the task of
preparing and accommodating the changes required to continue to do business in
the European Union. We have not experienced to date nor do we expect that these
changes will have a material impact on our operations, financial position or
liquidity. There will be increased competitive pressures as a result of the
change, and marketing strategies will need to be continuously evaluated until
the transition is complete. As a result of competitive forces and government
regulations, we cannot guarantee that all problems will be foreseen and
remediated, and that no material disruption will occur.
Financial Risk Management
We use derivative financial instruments to reduce our exposure to
fluctuations in foreign exchange rates and interest rates. We do not enter into
derivative financial instruments for the purpose of speculating or trading. Our
policy limits all derivative positions exclusively to reducing risk by hedging
an underlying economic exposure that can be effectively correlated to our
chosen hedging vehicle. Changes in the value of the derivative are generally
offset by reciprocal changes in our underlying asset.
We operate and conduct business in many foreign countries and are exposed to
movements in foreign currency exchange rates. Additionally, our consolidated
net equity is impacted by the conversion of the net assets of international
subsidiaries for which the functional currency is not the U.S. dollar. Our
Treasury Department manages foreign currency exposures on a centralized basis.
This allows for the netting of natural
37
<PAGE>
offsets and lowers transaction costs and exposures. We currently make more than
50% of our sales outside the United States, and weakening in one currency can
often be offset by strengthening in another.
We typically enter into forward exchange contracts to sell our foreign
currency. Our contracts are typically for 30 to 60 days, primarily in pounds
sterling, yen, Italian lira and German marks. We recognize the costs monthly in
income and the costs are generally the reciprocal of the change in underlying
assets. We do not hold any derivative contracts that hedge our foreign currency
denominated net asset exposures.
We use sensitivity analysis to assess the market risk associated with our
foreign currency exchange risk. Market risk is the potential change in fair
value of derivative positions from an adverse movement in currency exchange
rates. The forward foreign exchange contracts at December 31, 1999 had a net
fair value of $58.1 million. A 10% adverse loss on quoted foreign currency
exchange rates would result in a $5.8 million loss to us. This impact of a
change in exchange rates excludes from the analysis the offset derived from the
change in our underlying assets and liabilities, which could reduce the effect
to zero.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) Number 133, "Accounting for
Derivative Instruments and Hedging Activities" effective for fiscal years
beginning after June 15, 1999, with early adoption permitted. The FASB has now
delayed the implementation of SFAS No. 133 for all fiscal quarters of all
fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards requiring companies to record all
derivatives on the balance sheet as either assets or liabilities and measure
those instruments at fair value. The manner in which companies are to record
gains or losses resulting from changes in the values of those derivatives
depends on the use of the derivative and whether it qualifies for hedge
accounting. The impact of SFAS No. 133 on our financial statements will depend
on a variety of factors, including future interpretive guidance from the FASB,
the future level of forecasted and actual foreign currency transactions, the
extent of our hedging activities, the types of hedging instruments used and the
effectiveness of such instruments. However, we do not expect the adoption of
SFAS No. 133 to have a material effect on our financial statements.
38
<PAGE>
BUSINESS
Our Company
We are a world leader in serving the life science, clinical diagnostics and
analytical instruments markets, providing more than 8,000 products and services
to scientific research, healthcare, industrial, educational and government
customers in more than 70 countries. We have a worldwide reputation for
quality, innovative products and well-recognized brand names within our
industry. We are a leader in many of the market segments in which we compete,
and operate in three primary segments: Life Science, Clinical Diagnostics and
Analytical Instruments.
Life Science Segment.
Our Life Science segment is at the forefront of discovery, creating advanced
tools for biological exploration. We are a leading life science company based
on Life Science segment net sales. Our Life Science segment develops,
manufactures and markets a complete range of laboratory instruments, apparatus
and consumables which are used in many established research techniques. These
techniques are typically used to separate, purify and analyze biological
materials such as proteins or nucleic acids, primarily within a laboratory
setting. We are a leading supplier of broad product lines in the following
areas:
. Electrophoresis
. Image analysis
. Gene transfer
. Chromatography
Our principal life science customers include prominent universities and
research institutions as well as government agencies and leading pharmaceutical
and biotechnology firms.
Clinical Diagnostics Segment.
Our Clinical Diagnostics segment designs, manufactures, sells and supports
automated IVD test systems, reagents and QC systems that serve clinical
laboratories worldwide. In the estimated $20 billion global diagnostics market,
we believe we have leading positions in certain specific diagnostic test areas.
For instance, we believe we are the world leader in the supply of QC systems to
clinical laboratories. We derive a substantial portion of our clinical
diagnostics net sales from long-term agreements for the supply of reagents and
services for installed instruments and for QC systems, both of which
historically have generated a stable and recurring stream of net sales. In
addition to our leadership position in QC systems, the clinical diagnostics
industry recognizes our technology as the "gold standard" for the following
diagnostic tests and procedures:
. Diabetes monitoring
. Broad-spectrum drug screening
. Hospital epidemiology
We also supply more than 350 different products covering more than 100
clinical diagnostic tests to what we estimate to be the approximately $1.9
billion specialty IVD test market, especially within the growing area of
genetic disorders. These tests are conducted outside the body and are used to
identify and measure substances in a patient's tissue, blood or urine.
The Clinical Diagnostics segment has also established significant commercial
alliances with Bayer Diagnostics (formerly Chiron Diagnostics Corporation), and
more recently with Abbott Laboratories, for the development, manufacture and
distribution of customized QC products. Abbott and Bayer, which are
acknowledged industry leaders in the supply of diagnostic equipment, will
exclusively offer these QC products for use on their worldwide installed base
of instrumentation.
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<PAGE>
Analytical Instruments Segment.
Our Analytical Instruments segment designs, manufacturers, sells and
services analytical instruments used by industrial companies and government and
university laboratories to better understand the quality, quantity or chemical
identity of materials or processes. We provide analytical instruments for use
in measuring the critical dimensions and characterization of silicon chips and
wafers, and are at the forefront of the development of advanced systems for the
metrology and FT-IR characterization of 300mm (12 inch) silicon wafers. We
produced the first commercial rapid-scanning FT-IR spectrometer in 1969 and
have a reputation for innovation in molecular spectroscopy technology. We
produce and publish spectral databases under the Sadtler name. Through Sadtler,
we have the largest FT-IR and NMR spectral databases. Sadtler is the world-
recognized reference used by spectroscopists for FT-IR.
We have determined that the sale or disposal of certain portions of this
segment is appropriate. We have engaged an investment bank to assist us in this
matter and are having discussions with a third party regarding a potential
strategic alliance with respect to these assets. These discussions may not lead
to any definitive agreement among the parties. In the event that we do not
complete this transaction, we may pursue other strategic alternatives,
including a joint venture with a third party or an internal reorganization. We
cannot assure you that we will be successful in consummating any of these
transactions.
Industry Overview
Life Science Segment.
Life science is the study of the characteristics, behavior, and structure of
living organisms and their component systems. Life science researchers use a
variety of products and systems--including reagents, instruments, software and
apparatus--to advance the study of life processes, drug discovery and
biotechnology, primarily within a laboratory setting.
We focus on selected segments of the life science market--laboratory
devices, biomaterials, imaging products and microscopy systems. The primary
technological applications that we supply to these segments are diverse and
consist of electrophoresis, image analysis and microplate readers,
chromatography, gene transfer and sample preparation and amplification. The
primary end-users in our sectors of the market are universities and medical
schools, industrial research organizations, government agencies, pharmaceutical
manufacturers and biotechnology researchers.
We believe that we are well-positioned to capitalize on the following
favorable trends influencing the life science industry:
. the rapid pace of drug discovery and commercialization by pharmaceutical
and biotechnology companies;
. the increasing importance of proteomics with respect to gene expression
and biological processes;
. the growth in research and development expenditures by pharmaceutical
manufacturers and in research grants from government agencies; and
. the vital role of the academic community in developing new analytical
methods for pharmaceutical and biotechnological applications.
Clinical Diagnostics Segment.
The clinical diagnostics industry encompasses a broad array of technologies
incorporated into a variety of tests used to detect, identify and quantify
substances in blood or other bodily fluids and tissues. The test results are
used as aids for medical diagnosis, detection, evaluation, monitoring and
treatment of diseases and other medical conditions. The bulk of tests are
performed in vitro (literally, "in glass"), while the remainder consists of in
vivo ("in the body") tests. The most common type of in vitro tests are routine
chemistry tests that measure important health parameters, such as glucose,
cholesterol or sodium, as part of routine blood checks. A
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second type of diagnostic tests, on which we focus, are more specialized and
require more sophisticated equipment and materials than do routine tests. These
specialized tests are also lower-volume and higher-priced than routine tests.
Within the global clinical diagnostics industry, we selectively compete in
niche areas:
. Quality Control Systems. Quality Control systems are used to assure the
accuracy of test results that are sent to physicians. We believe that we
are the leading provider of QC systems and provide the most comprehensive
line of control products, software and services in the industry. Our
UNITY(TM) information management programs allow multiple users the
ability to store, access and share their QC data and documents with and
between laboratory locations.
. Diabetes Monitoring. Within this niche of the clinical diagnostics
industry, we introduced the "gold standard" Hemoglobin Alc technology in
1983. Our recent introduction of the VARIANT(TM)II Automated Hemoglobin
Analyzer supports our strong position in diabetes monitoring, and the
compact DiaSTAT(TM) Analyzer allows for the monitoring and adjustment of
diabetic therapy in the doctor's office. Bio-Rad's diabetes monitoring
products are certified under the Diabetes Control Complications Trial
(DCCT).
. Toxicology. Within this niche of the clinical diagnostics industry, we
supply broad-spectrum drug screening instruments, including the
REMEDi(TM) HS Drug Profiling System which provides rapid detection of
drugs in overdosed patients, detecting up to 700 drugs in 20 minutes.
. Genetic Disorders Testing. Within this niche of the clinical diagnostics
industry, we provide conventional methods of genetic disorders screening
for both newborns and adults, involving immunoassay, chromatography and
biochemistry technologies. Common tests include those for sickle cell
anemia and other neonatal applications, as well as thalassemia testing
for adults and newborns.
. Specialty Chemistry. The majority of our specialty immunoassay tests,
including immunoassay kits for autoimmune disorders and infectious
diseases, such as H. pylori, HIV confirmation, syphilis and
toxoplasmosis, fall under the virology/serology market segment. This
testing area includes our radioimmunoassay and enzyme immunoassay kits
for anemia, thyroid, steroids and bone metabolism testing. Additional
assays for biogenic amines and certain vitamins utilize the high
performance liquid chromatography methodology.
. Molecular Pathology. An emerging technology-specific subset of many
traditional diagnostic markets, molecular pathology is also an emerging
technology for the confirmation of genetic disorders using DNA markers.
We use our mDx(TM) gene-based kits to confirm sickle cell anemia in
newborns, as well as Factor V Leiden, thalassemia and other hemoglobin
disorders in adults.
. Internet-based Software. Clinical Systems Network(TM) ("CSN") is an
Internet-based product pointed toward the healthcare informatics market.
Informatics involves software programs that create, annotate and link
various databases, plus software tools that use complex search algorithms
to make sense of diagnostic information. The CSN product allows users to
securely transmit patient data, instrument performance parameters and
usage statistics among numerous sites. In addition, it provides online
access to service manuals, user libraries, newsletters, journal articles,
user-approved links to medically-related web sites and Bio-Rad support 24
hours a day.
The primary end-users in the areas of the clinical diagnostics industry we
target are hospital laboratories, reference laboratories, physician office
laboratories, government agencies and other diagnostics manufacturers.
The global focus on reducing healthcare costs presents challenges as well as
opportunities for all diagnostic companies. Consolidation among healthcare
providers has resulted in more powerful groups whose purchasing power gives
them cost containment leverage. Consequently, the focus on economic outcomes
has made it imperative that manufacturers provide cost-effective diagnostics
systems and services to remain competitive. Broader product offerings that
encompass a wider range of testing capability, greater automation
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<PAGE>
and higher-volume capacity have become essential. In addition, consolidation
has made it increasingly necessary for diagnostics manufacturers to automate a
wide variety of tests on integrated workstations that link patient, test and QC
data.
Notwithstanding the challenges presented above, we believe that we are well-
positioned to capitalize on the following favorable trends influencing the
clinical diagnostics industry:
. the aging demographic profile within both the U.S. and international
markets;
. the emphasis on reducing downstream healthcare costs;
. the continuation of technological advances;
. the effective disease management of conditions requiring costly
treatment, such as HIV/AIDS, hepatitis and heart disease;
. the vital role that genetic disorders screening plays in identifying
predisposition to disease and reducing healthcare costs;
. the rapid growth and importance of information management systems within
the healthcare industry; and
. the expanding demand for improved healthcare services in developing
countries.
Analytical Instruments Segment.
. Spectroscopy. Spectrometers measure the infrared spectra of materials,
providing quantitative and qualitative information about their chemical
composition. The primary end-users for spectrometers are scientists and
researchers in a wide range of industries, including chemicals,
pharmaceuticals, biotechnology and food. Applications for the products
are varied but range from general analytical purposes to research and
development and QC. Today's market dynamics increasingly dictate single-
job instruments, from which end-users derive cost and time savings. Users
also require that these instruments provide validated analytical methods
to assure quality results.
. Semiconductor Measurement. Our Semiconductor division designs,
manufactures, and sells instruments and systems that measure the critical
dimensions of integrated circuits ("ICs") and the characterization of
silicon wafers and compound semiconductor materials. The primary end-
users for these instruments and systems include IC, silicon substrate and
compound semiconductor manufacturers, as well as universities and
research institutes. Overall investment demand within the silicon chip
and semiconductor industries drives the dynamics within this division.
Consequently, two of the more important market trends are the short
product life cycles within the industry and the mandatory conformance to
a wide range of rigorous standards.
. Sadtler. The primary end-users for spectral databases, chemists and
spectroscopists, use them to identify a sample through the spectrum it
produces against a spectra of known compounds. A variety of market
segments use these products, including the chemical, pharmaceutical,
biotechnology, forensic and environmental chemistry industries, as well
as academic researchers. The dynamics of today's market demand the use of
multiple spectroscopic techniques, as well as the ability to centrally
store, search, retrieve and communicate all chemical and analytical
information.
Bio-Rad Products
Life Science Segment. The primary use for our Life Science products is the
separation, purification and analysis of complex biological materials.
Applications of these products are diverse but are generally categorized into
six areas, including electrophoresis, image analysis, liquid chromatography,
gene transfer, sample preparation and amplification. Our customers use these
products for biochemistry, cellular and molecular biology, immunology and other
areas of life science, including cancer and genetic research as well as
manufacturing and quality control applications.
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We believe that the breadth of our Life Science segment product line and our
ability to provide complete life science systems distinguish us from our
competitors. For example, our laboratory devices equipment includes products
ranging from tubing and fittings, heaters, power supplies and electrophoresis
cells to particle delivery equipment and automated capillary and DNA
electrophoresis equipment. Researchers use our biomaterial products, such as
empty and prefilled chromatography columns, resins, staining gels and buffer
reagents in protein and nucleic acid electrophoresis. Our imaging products
consist of high-specification imaging equipment and image analysis software for
the analysis of protein and DNA separations. Our principal microscopy products
are confocal microscopes, which enable high-quality imaging of thick tissue
reactions in three dimensions and permit the direct study of living cells
without damage.
During 1998, the Life Science segment launched two new imaging systems used
by researchers to detect, image and quantitate radioisotopic and fluorescent
labeled samples. Additionally, the Biotechnology Explorer(TM) product line,
designed to teach molecular biology to high school and college students, helps
introduce our name to future researchers and scientists.
Selected Life Science products and applications by target market include:
<TABLE>
<CAPTION>
Target Market Products Applications
- -------------------------------------------------------------------------------------
<S> <C> <C>
Electrophoresis-- Electrophoresis Separation of protein and DNA into
separation of apparatus, gels, components, identification of
biological materials reagents and power specific bacteria in certain
utilizing an supplies infections and tracking of the source
electrical charge
DNA testing
- -------------------------------------------------------------------------------------
Image Analysis--image Instruments and Analysis of protein, DNA and cellular
capture and analysis specialized analysis structure
of biological software
materials
- -------------------------------------------------------------------------------------
Liquid Instruments and Separation and purification of new
Chromatography-- reagents drugs produced by genetic engineering
separation and techniques
purification of
complex biomolecules
- -------------------------------------------------------------------------------------
Gene Transfer-- Instruments and Infusion of DNA into cells to
transfer of genetic reagents understand gene function
material
- -------------------------------------------------------------------------------------
Sample Preparation-- Kits and reagents Purification of nucleic acids
preparation of
samples
- -------------------------------------------------------------------------------------
Amplification and Thermal cycler PCR amplification of nucleic acids
PCR--duplication and instruments and gene DNA fingerprinting
amplification of expression assays
genetic material
</TABLE>
The Life Science segment's customers include government agencies,
universities and pharmaceutical and biotechnology companies.
Clinical Diagnostics Segment. The Clinical Diagnostics segment supports
clinical laboratories worldwide in their challenge to provide quality patient
care while containing costs and streamlining work flow. This segment develops
and manufactures automated test systems, test kits and quality control systems
for hospitals and clinical laboratories to diagnose diseases, monitor patients
and assess the quality of laboratory test results. We develop, manufacture and
distribute quality control systems for immunoassay testing, therapeutic drug
monitoring and other applications. This segment also provides a broad range of
instrumentation, reagents and informatics. New clinical offerings include the
VARIANT(TM)II Automated Hemoglobin Analyzer, an automated system for
laboratories that require a high volume instrument for hemoglobin testing, and
CSN, an internet-based software program that enables licensed users to review
on-line service manuals, connect to medically related web sites, review patient
data from any location and access Bio-Rad on-line 24 hours a day. We have also
introduced UNITY(TM) for Windows(C), a network management program that enables
multiple users to store, access and share their quality control data and
documents within and between laboratory locations.
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<PAGE>
Selected Clinical Diagnostics products and applications by target market
include:
<TABLE>
<CAPTION>
Target Market Products Applications
- -------------------------------------------------------------------------------------
<S> <C> <C>
Diabetes Monitoring-- Automated hemoglobin Measurement of hemoglobin to
analysis of blood testing systems determine long-term sugar levels
providing information
for diabetes disease
management
- -------------------------------------------------------------------------------------
Quality Control Test specimens, Monitoring testing accuracy of
Systems--assures the analytical software therapeutic drugs, toxic substances,
accuracy of test and data management blood chemistries, blood clotting and
results and reports immune response
facilitates mandated
documentation
- -------------------------------------------------------------------------------------
Molecular DNA electrophoresis Strain-typing of hospital-borne
Epidemiology-- equipment, test kits (nosocomial) infections and outbreaks
analysis of DNA to and image analysis due to food contamination
determine the source software
of bacterial
outbreaks
- -------------------------------------------------------------------------------------
Genetic Disorders Automated hemoglobin Detection of sickle cell anemia,
Testing--use of testing systems and thalassemia, cardiovascular
protein or nucleic immunoassays and DNA complications and iron overload
acid markers to test kits
detect the genetic
link to certain
clinical diseases
- -------------------------------------------------------------------------------------
Toxicology--rapid REMEDi(TM)--Automated Treatment of comatose emergency
identification of chromatography patients
drugs system, which detects
up to 700 drugs
within 20 minutes
</TABLE>
The Clinical Diagnostics segment's customers include clinical and hospital
laboratories, physician office laboratories, diagnostic manufacturers and
public health laboratories.
Analytical Instruments Segment. The Analytical Instruments segment develops
products and services for use in advanced research, quality control and
production environments in industrial, medical, semiconductor and academic
applications. This segment's products range from general purpose
instrumentation to dedicated analyzers and scientific databases that are used
to better understand the quality, quantity or chemical identity of materials
and processes. Furthermore, this segment develops, produces and sells FT-IR
spectrometer systems, semiconductor measurement instruments and spectral
reference databases. We sell these products primarily to industrial customers,
semiconductor manufacturers, government agencies and universities.
The predecessor to our spectroscopy division developed the world's first
commercial rapid-scanning FT-IR spectrometer, and we believe that our
spectrometers and accessories offer scientists cost-effective sensitivity,
resolution, spectral range and computational power. In April 1998, we
introduced the Excalibur(TM) series of FT-IR spectrometers, which addresses the
analytical needs of both quality control and research personnel in the
pharmaceutical, chemical and polymer industries, as well as educational and
research institutions.
We also provide spectral databases under the Sadtler name. Through Sadtler,
we control the industry's largest FT-IR and NMR spectral databases. Sadtler is
the world-recognized reference used by spectroscopists for FT-IR.
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Selected Analytical Instruments products and applications by target market
include:
<TABLE>
<CAPTION>
Target Market Products Applications
- ----------------------------------------------------------------------------------
<S> <C> <C>
FT-IR--infrared Instruments, Industrial process quality control
spectrometers used to accessories, Incoming raw material inspection
determine "chemical specialized software, Life science method development,
fingerprint" of upgrades and spectral fluid and tissue imaging and
complex compounds reference libraries characterization
- ----------------------------------------------------------------------------------
Semiconductor process Sophisticated optical Semiconductor Test Measurement--
and materials measuring equipment verify the precise overlay
control--specialized to monitor registration of stacked integrated
measuring tools for manufacturing circuits to ensure yield
device manufacturing processes Semiconductor materials
process control for classification
semi-conductor
materials markets
- ----------------------------------------------------------------------------------
Spectral reference Sadtler Unknown compound identification
databases--databases Suite(TM)ChemWindow Chemical structure elucidation
with value-added IR-NMR--Raman Validation and quality control
software databases
</TABLE>
The Analytical Instruments segment's customers include industrial companies,
government and university laboratories and semiconductor manufacturing
companies.
PSD Products
PSD has strong commercial alliances in the diagnostics market for the
development, manufacture and distribution of test kits and systems. PSD also is
the exclusive supplier of certain reagents for the Beckman Coulter automated
analyzer, Access(TM). In the U.S., Ortho Diagnostics Systems, Inc. distributes
PSD's HIV and hepatitis products, and in Japan, Sanofi Fujirebio Diagnostics,
Inc., a joint venture between PSD and Fujirebio, Inc., sells and markets PSD's
infectious disease products.
Selected PSD products and applications by target market include:
<TABLE>
<CAPTION>
Target Market Products Applications
- ------------------------------------------------------------------------------------
<S> <C> <C>
Virology--testing of Reagents, consumable The detection and identification of
blood for virus supplies and manual, HIV and hepatitis infections
infections semi-automated and
automated test
systems for HIV and
hepatitis
- ------------------------------------------------------------------------------------
Bacteriology-- Culture media, The culture (growth) of bacterial
analysis of patient antibiotic organisms
specimens for susceptibility test The detection and identification of
pathogenic bacterial systems, rapid bacteria
infections immuno-bacteriology The determination of antibiotic
tests and DNA-based resistance and susceptibility
tests (PCR technology)
- ------------------------------------------------------------------------------------
Auto-immune--testing Immuno-fluorescence The testing for systemic lupus
of patient samples kits, enzyme erythematosis (SLE),
for immune response immunoassay kits, connective tissue disease,
disorders automated processing scleroderma and rheumatoid arthritis
systems and quality
control specimens
- ------------------------------------------------------------------------------------
Immuno-hematology-- Consumable reagents, Blood typing (Group A, B or O),
testing of blood for test systems and RH typing (+ or -) and antibody
donors and for control specimens detection and identification
patients receiving
transfusions
</TABLE>
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<PAGE>
PSD's customers include transfusion centers, public, commercial and hospital
laboratories and the food industry.
Product Research and Development
We conduct extensive product research and development activities in all
areas of our business, employing over 300 people worldwide in these activities.
Research and development have played a major role in our growth and are
expected to continue to do so in the future. Our research teams are
continuously developing new products and new applications for existing
products. In our development and testing of new products and applications, we
consult with scientific and medical professionals at universities, hospitals
and medical schools, and in industry. We spent approximately $51.2 million
(excluding $15.5 million of purchased in-process research and development
expense), $41.4 million and $46.1 million on research and development
activities during the years ended December 31, 1999, 1998 and 1997,
respectively.
PSD has a broad array of research and development expertise with an emphasis
on innovation. It also benefits from a network of worldwide research
cooperation agreements, most notably with the Instituts Pasteur. PSD has a
history of developing state-of-the-art reagents and testing systems and a
reputation for test development in difficult market segments, such as testing
for blood viruses.
Sales and Distribution
Each of our segments maintains a sales force to sell its products on a
direct basis. Every member of our sales force is technically trained in the
disciplines associated with its products. We also generate sales through direct
mail advertising, exhibits at trade shows and technical meetings,
telemarketing, and by extensive advertising in technical and trade
publications. Sales and marketing efforts are augmented by technical service
departments that assist customers in effective product installation,
utilization and new product applications. We also produce and distribute
technical literature and hold seminars for customers on the use of our
products.
Life Science Segment. We believe we have a strong position in the life
science research community in North America, Europe and Asia Pacific (more than
100,000 scientists in the United States alone). Historically, life science
research was conducted primarily at universities and government funded
institutions throughout the world. During the past ten years, this activity has
expanded to include biotechnology and pharmaceutical companies. We have
successfully followed this trend by maintaining direct contact with our
customers. We provide customers with periodic catalogs and regular updates on
the latest product innovations, applications and technology.
Clinical Diagnostics Segment. Clinical Diagnostics has an effective direct
distribution network in North America, Europe and Asia Pacific. Customers are
primarily clinical reference laboratories and larger hospital laboratories.
While laboratory results are ultimately provided to physicians, our dedicated
sales force markets our products directly to the laboratories.
Analytical Instruments Segment. Most of our sales are generated by our
direct sales force throughout the world. While our international operations are
subject to certain risks common to foreign operations in general, such as
changes in governmental regulations, import restrictions and foreign exchange
fluctuations, our international operations are principally in developed
nations.
Seasonality, Backlog and Material Customers
Our business is not inherently seasonal. However, the custom of taking
vacations during the summer months usually has had a negative impact on our
third quarter sales volume and operating income.
Although the markets in which we operate are generally characterized by
short lead times and the absence of significant backlogs, we produce several
analytical instruments against an order backlog. Our management has concluded
that backlog information is not material to our business as a whole.
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<PAGE>
Our customer base is broad and diversified. In 1999, no single customer or
product accounted for more than 2% of our total net sales. However, our sales
are affected by certain external factors. For example, a number of our
customers, particularly in Life Science, are substantially dependent on
government grants and research contracts for their funding, and a portion of
the Analytical Instruments segment depends on contracts with large
semiconductor manufacturers. Thus, the loss of government funding or a large
contract or a severe downturn in the semiconductor market would have a
detrimental effect on the results of these segments.
Competition
Most markets served by our product groups are competitive. Our competitors
range in size from start-ups to large multi-national corporations. Reliable
independent information on sales and market share of products produced by our
competitors is not generally available. We believe, however, based on our own
marketing information, that while some competitors are dominant with respect to
certain individual products, no one company, including us, is dominant with
respect to a material portion of any segment of our business.
Life Science Segment. Because of the breadth of its product lines, Life
Science does not face the same competitor for all of its products. Competitors
in this market include Amersham Pharmacia Biotech, Life Technologies, Qiagen,
Zeiss and PE Applied Biosystems. We compete primarily on meeting performance
specifications.
Clinical Diagnostics Segment. Competitors in this segment range in size from
small private companies to large multi-national corporations. We compete only
in very specific market niches and do not attempt to pursue
the most competitive general diagnostics markets. We compete based on our
technological ability to provide customers with very specific tests and believe
we are usually a significant competitor within our market niche. Competitors
include Abbott Laboratories, Roche Diagnostics, BioChem Pharma, Inova, diaSorin
and Medical Analysis Systems.
Analytical Instruments Segment. We compete in the high-end analytical
instruments market primarily on the basis of technology and features.
Competitors in this segment include Nicolet Instruments (a division of Thermo
Instruments) and EG&G (formerly Perkin-Elmer) in spectroscopy; and Hitachi and
KLA-Tencor in semiconductor measurement instruments.
PSD has a different competitive landscape in each of its served market
segments. Its competitors range from small suppliers like Diamedix, Inova,
Helix Diagnostics and diaSorin to more prominent manufacturers such as Abbott
Laboratories, Biomerieux and Dade Behring. PSD has historically distinguished
itself from its competitors by focusing on technological superiority,
customized region-specific product offerings and command of key intellectual
property rights.
Intellectual Property
We own numerous U.S. and international patents and patent licenses. We
believe, however, that our ability to develop and manufacture our products
depends primarily on our knowledge, technology and special skills. Under
several patent license agreements, we pay royalties on the sales of certain
products. We view these patents and license agreements as valuable assets.
PSD has a broad portfolio of intellectual property which it uses to advance
and promote its competitive position within the markets of blood viruses,
bacteriology, immuno-hematology, infectious diseases and cardiovascular
testing. Its portfolio is comprised of patents owned by PSD and its affiliates,
patent rights licensed from Institut Pasteur and other rights secured under
third-party licensing agreements.
PSD has a wide array of patents and patent applications which are owned and
licensed in the area of HIV testing. These include patents on purified virus
proteins, antigens used for detection of HIV, monoclonal antibodies, cloned DNA
sequences, primers and probes.
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<PAGE>
We expect to continue to rely on our rights under the Cooperation Agreement
with Institut Pasteur to be able to exploit all future Institut Pasteur patents
and know-how in IVD technology and for the use of the "Pasteur" trademarks.
Although PSD and Institut Pasteur have not reached an agreement regarding the
renewal or extension of the Cooperation Agreement, Bio-Rad and the Institut
Pasteur have exchanged correspondence indicating each party's intention to
renew that agreement and have commenced discussions in this regard. We cannot
assure you that the parties will agree on the terms of a new cooperation
agreement. For more information, see the section "The Acquisition." We expect
to continue to benefit from the existing License Agreement with Institut
Pasteur to manufacture, use and sell IVD products presently covered by Institut
Pasteur patents or know-how. For more information, see the section "Risk
Factors" under the heading "Risks relating to intellectual property rights may
negatively impact our business."
Regulatory Matters
The manufacturing, marketing and labeling of certain of our products
(primarily diagnostic products) are subject to regulation in the United States
by the Center for Devices and Radiological Health of the United States Food and
Drug Administration ("FDA") and in other jurisdictions by state and foreign
government authorities. FDA regulations require that some new products have
pre-marketing approval by the FDA and require certain of our products to be
manufactured in accordance with "good manufacturing practices," to be
extensively tested and to be properly labeled to disclose test results and
performance claims and limitations.
As a multinational manufacturer and distributor of sophisticated
instrumentation equipment, we must meet a wide array of electromagnetic
compatibility and safety compliance requirements to satisfy regulations in the
United States, the European Community and other jurisdictions. The FDA must
approve an export permit application before companies can market products
outside the U.S. prior to the products' receipts of FDA approval. The
requirements relating to testing and trials, product licensing, pricing and
reimbursement vary widely among countries.
Our operations are subject to federal, state, local and foreign
environmental laws and regulations that govern such activities as emissions to
air and discharges to water, as well as handling and disposal practices for
solid, hazardous and medical wastes. In addition to environmental laws that
regulate our operations, we are also subject to environmental laws and
regulations that create liability and clean-up responsibility for spills,
disposals or other releases of hazardous substances into the environment as a
result of our operations or otherwise impacting real property that we own or
operate. The environmental laws and regulations also subject us to claims by
third parties for damages resulting from any spills, disposals or releases
resulting from our operations or at any of our properties. For more
information, see the section "Risk Factors" under the heading "We are currently
subject to environmental regulations and enforcement proceedings."
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<PAGE>
Properties
We own our corporate headquarters located in Hercules, California. The
principal manufacturing and research locations for each segment are as follows:
<TABLE>
<CAPTION>
Approximate
Segment Location Square Footage Owned/Leased
------- -------- -------------- ------------
<S> <C> <C> <C>
Life Science Richmond, California 191,000 Owned/Leased
Hercules, California 95,400 Owned
Hemel Hempstead, England 102,000 Leased
Milan, Italy 50,000 Leased
Clinical
Diagnostics Hercules, California 112,000 Owned/Leased
Irvine, California 137,000 Leased
Greater Seattle, Washington 127,600 Owned/Leased
Lille, France 182,000 Owned
Paris, France 162,000 Leased
Munich, Germany 55,000 Leased
Nazareth-Eke, Belgium 30,000 Leased
Analytical
Instruments Cambridge, Massachusetts 76,000 Owned
York, England 144,000 Owned
Philadelphia, Pennsylvania 28,000 Owned
</TABLE>
Most manufacturing and research facilities also house administration, sales
and distribution activities. In addition, we lease office and warehouse
facilities in a variety of locations around the world. These facilities are
used principally for sales, service, distribution and administration for all
three segments.
The Life Science segment's Richmond, California distribution and instrument
manufacturing facility lease expires in November 2000. While we are currently
negotiating a renewal, the lease is not automatically renewable. The lease for
the Marnes la Coquette facility near Paris, France, which served as PSD's
corporate headquarters, expired on December 31, 1999 and is currently being
renegotiated. In the interim, we are occupying this space on a month-to-month
basis. We believe all of our other facilities are adequate to support our
current and anticipated production requirements. Historically, adequate space
to expand sales and distribution channels has been available and we have leased
space as needed.
We have received several non-binding offers to purchase our facility located
in Cambridge, Massachusetts. This facility houses a portion of the
manufacturing and distribution for the Analytical Instruments segment, which we
will relocate if the building is sold.
Employees
At December 31, 1999, we had approximately 4,100 full-time employees. Fewer
than 7% of our 1,900 U.S. employees are covered by a collective bargaining
agreement which will expire on November 7, 2002. Many of our non-U.S. full-time
employees, especially in France, are covered by collective bargaining
agreements. We are currently working with the representative unions of these
employees to achieve workforce reductions where duplication or redundancies
exist as a result of the PSD acquisition. We consider our employee relations in
general to be good.
Legal Proceedings
We are a party to various claims, legal actions and complaints arising in
the ordinary course of business. In our management's opinion an adverse outcome
of these claims, legal actions or complaints would not have a material adverse
effect on the future results of our operations or our financial position. See
above under the heading "Regulatory Matters."
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<PAGE>
PSD is currently subject to claims and suits arising in the ordinary course
of its business.
Additionally, PSD is involved in the following litigation:
. In September 1992, Biochem-Immuno Systems, Inc. sued Institut Pasteur and
PSD jointly, seeking a license under certain of Institut Pasteur's HIV1
and HIV2 patents and further requesting damages of CAD 17.5 million.
Prior to the filing of the claim, the parties had engaged in discussions
regarding a possible license arrangement but had not reached agreement as
to terms and conditions. Even though there was no license agreement,
Biochem-Immuno Systems, Inc. began marketing products covered by the
Institut Pasteur patents. As a result, Institut Pasteur sent Biochem-
Immuno Systems, Inc. a letter demanding that they cease such activities.
The matter is before the Superior Court of the District of Montreal, in
the province of Quebec, Canada. The parties engaged in discovery
proceedings, but since 1994, no papers have been filed and no action has
been taken by either party in this lawsuit. We have been advised by
counsel for PSD that the foregoing action has no merit and should be
dismissed.
. PSD granted to Biomerieux a license to sell certain HIV2 diagnostic
products in certain territories. Subsequently, Biomerieux purchased
Cambridge Biotech Corporation, which had an existing separate license
agreement with PSD granting it the right to sell certain HIV2 diagnostic
products (different than the products covered by the PSD-Biomerieux
license agreement) and which entitled Cambridge Biotech Corporation to
pay a royalty to PSD at a lower rate than the rate provided for in the
PSD-Biomerieux license.
. PSD filed an action against Biomerieux on January 15, 1999 before the
Tribunal de Grande Instance of Paris for unpaid royalties under the PSD-
Biomerieux license. Biomerieux counterclaimed that it was entitled to pay
royalties on sales pursuant to the lower rates set forth in the PSD-
Cambridge Biotech Corporation license and argued alternatively that if it
was not entitled to such lower royalty rates, then it was entitled to
indemnification from PSD of French Franc 57 million, which it alleged was
the price it paid to acquire Cambridge Biotech Corporation. We have been
advised by counsel for PSD that Biomerieux's counterclaim is of no merit,
and that PSD is vigorously defending against such counterclaim.
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<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
Our Board of Directors has seven members, with terms expiring as of the date
of the annual meeting of stockholders or on election and qualification of their
successors. David Schwartz and Alice N. Schwartz are husband and wife; Norman
Schwartz is their son. No other family relationships exist among our current
and nominated directors or executive officers.
<TABLE>
<CAPTION>
Name Age Principal Position(s)
- ---- --- ---------------------
<S> <C> <C>
David Schwartz.......... 76 President; Chief Executive Officer; Chairman of the Board
James J. Bennett........ 71 Executive Vice President; Chief Operating Officer; Director
Thomas C. Chesterman.... 40 Vice President and Chief Financial Officer
Norman D. Schwartz...... 50 Vice President and Group Manager, Life Science; Director
George Bers............. 49 Vice President and Group Manager, Clinical Diagnostics
Rello L. Cristea........ 56 Vice President and Group Manager, Analytical Instruments
Sanford S. Wadler....... 53 Vice President; General Counsel; Secretary
Burton A. Zabin......... 64 Vice President; Director
Ronald W. Hutton........ 43 Treasurer
Alice N. Schwartz....... 73 Director
Albert J. Hillman....... 68 Director
Philip L. Padou......... 66 Director
</TABLE>
David Schwartz co-founded Bio-Rad with his wife Alice Schwartz in 1957 and
has served as our President, Chief Executive Officer and Chairman of the Board
since its inception.
James J. Bennett has served as our Chief Operating Officer since 1993 and
was elected Executive Vice President in 1996. He has served as a director since
1977. From 1985 until 1993, Mr. Bennett was the Vice President and Group
Manager of the Clinical Diagnostics Group. He also served as our Vice President
and Chief Operating Officer from 1977 to 1985.
Thomas C. Chesterman was appointed Treasurer in 1996 and named Vice
President and Chief Financial Officer in March 1997. Prior to joining us, he
was Vice President and Chief Financial Officer of NordicTel Holdings AB
(Sweden) from 1993 to 1996.
Norman D. Schwartz has served as a Vice President since 1989 and Group
Manager, Life Science since 1997. He was elected as a director in 1995. He
served as Group Manager, Clinical Diagnostics from 1993 to 1997. He served as
the General Manager for certain of our subsidiaries in England and Japan from
1989 to 1993, and as our Treasurer from 1981 to 1989.
George Bers has served as Vice President since 1996 and has been the Group
Manager of Clinical Diagnostics since 1997. He was Group Manager of the
Molecular Bioscience Group from 1995 to 1997 and was a division manager from
1991 to 1996.
Rello L. Cristea was appointed Group Manager of Analytical Instruments in
1997 and was appointed Vice President in 1998. Previously, he was President of
Dayton Products Division of Emerson Electric Company from 1994 to 1997.
Sanford S. Wadler has been General Counsel and Secretary since 1989, and was
appointed Vice President in 1996. Mr. Wadler joined Bio-Rad as corporate
counsel in 1988. Prior to joining Bio-Rad, he was of counsel to the patent law
firm of Witherspoon & Hargest from 1984 to 1988.
Burton A. Zabin has been our Vice President since 1982 and served as Group
Manager, Life Science from 1982 to 1997. He has served as a director since
1968. Dr. Zabin served as Chemical Division Manager from
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<PAGE>
1970 to 1982 and he served as Director of Research from 1965 to 1970. He joined
us in 1963 as a Research Chemist.
Ronald W. Hutton was appointed Treasurer in 1997. Prior to his appointment
as Treasurer, he was Director of Treasury at Kaiser Aluminum & Chemical
Corporation from 1993 to 1997.
Alice N. Schwartz co-founded Bio-Rad with her husband David Schwartz in 1957
and served as Director of Research for Bio-Rad from 1957 to 1967. She has
served as a director since 1967. She was a Research Associate at the University
of California from 1972 to 1978 and retired in 1979.
Albert J. Hillman has served as a director since 1980. He has been of
counsel to the law firm of Townsend and Townsend and Crew since 1995 and was a
partner in that firm from 1965 to 1995.
Philip L. Padou has served as a director since 1980. Mr. Padou has been
retired since 1991. He previously served as Vice President and Chief Financial
Officer of Ozier Perry and Associates, a risk assessment software and
consulting company, from 1987 to 1991.
52
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table presents certain information as of February 28, 2000,
with respect to Class A Common Stock and Class B Common Stock beneficially
owned by: (1) any person who is known to us to be the beneficial owner of more
than five percent of the outstanding Common Stock of either class, (2) each of
our directors, (3) our executive officers, and (4) all of our directors and
executive officers as a group. The address for all executive officers and
directors is c/o Bio-Rad Laboratories, Inc., 1000 Alfred Nobel Drive, Hercules,
California 94547.
<TABLE>
<CAPTION>
Class A Class B
Common Stock(1) Common Stock
----------------------- -----------------------
Number of Number of
Shares and Shares and
Name and, with Respect to Nature of Percent of Nature of Percent of
Owner of 5% or More, Address Ownership(2) Class Ownership(2) Class
- ---------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
David and Alice N.
Schwartz(3)(4)(9).......... 1,607,124 16.6% 2,159,034 83.3%
Bio-Rad Laboratories, Inc.
1000 Alfred Nobel Drive
Hercules, CA 94547
Norman D.
Schwartz(3)(5)(6)(9)....... 108,540 1.1% 2,035,441 81.3%
Bio-Rad Laboratories, Inc.
1000 Alfred Nobel Drive
Hercules, CA 94547
Steven Schwartz(3)(5)(10)... 82,256 0.8% 2,032,627 81.3%
Bio-Rad Laboratories, Inc.
1000 Alfred Nobel Drive
Hercules, CA 94547
Blue Raven Partners,
L.P.(7).................... -- 0.0% 2,030,027 81.2%
1000 Alfred Nobel Drive
Hercules, CA 94547
Private Capital Management,
Inc. ...................... 1,294,982 13.3% -- 0.0%
3003 Tamiami Trail North
Naples, FL 34103
Bernard A. Egan(8).......... 910,380 9.4% -- 0.0%
1900 Old Dixie Highway
Fort Pierce, FL 34946
Dimensional Fund Advisors,
Inc.(8).................... 501,475 5.2% -- 0.0%
1299 Ocean Avenue, 11th
Floor
Santa Monica, CA 90401
James J. Bennett(9)......... 77,596 0.8% 23,727 0.9%
Burton A. Zabin(9).......... 14,494 0.1% 59,664 2.4%
Sanford S. Wadler(9)........ 20,313 0.2% -- 0.0%
George Bers(9) ............. 15,998 0.2% 207 *
Albert J. Hillman(9)........ 4,454 * 4,117 0.2%
Thomas C. Chesterman(9)..... 3,564 * -- 0.0%
Rello L. Cristea(9)......... 2,814 * -- 0.0%
Ronald W. Hutton(9)......... 555 * -- 0.0%
Philip L. Padou(9).......... -- 0.0% -- 0.0%
All directors and executive
officers as a group
(12 persons)(9)............ 1,855,452 19.0% 2,252,163 86.8%
</TABLE>
- --------
* Less than 0.1%.
53
<PAGE>
(1) Excludes Class A Common Stock that may be acquired on conversion of Class
B Common Stock. Class B Common Stock may be converted to Class A Common
Stock on a one for one basis and, if fully converted, would result in the
following percentage beneficial ownership of Class A Common Stock: David
and Alice N. Schwartz 30.6%; Norman Schwartz 17.6%; Steven Schwartz 17.3%;
Blue Raven Partners 16.6%; Private Capital Management, Inc. 10.6%; Bernard
A. Egan 7.5%; Dimensional Fund Advisors 4.1%; James J. Bennett 0.8%;
Burton A. Zabin 0.6%; Sanford S. Wadler 0.2%; George Bers 0.1%; Albert J.
Hillman 0.1%; Philip L. Padou 0.0%; Thomas C. Chesterman 0.0%; Rello L.
Cristea 0.0%; Ronald W. Hutton 0.0%; and all directors and executive
officers as a group 33.3%. Management considers any substantial
conversions by the executive officers or directors listed in the table to
be highly unlikely.
(2) Except as otherwise indicated and subject to applicable community property
and similar statutes, the persons listed as beneficial owners of the
shares have sole voting and investment power with respect to such shares.
Number of shares is based on the statements of the stockholders where not
identified specifically in the stockholder register.
(3) Includes 2,030,027 shares of Class B Common Stock held by the Blue Raven
Partners, L.P.
(4) David and Alice N. Schwartz each have a one-half community property
interest in these shares. Includes 20,588 shares of Class B Common Stock
held by DANSA Partners Limited, a California limited partnership, of which
David and Alice N. Schwartz are general partners.
(5) Norman Schwartz and Steven Schwartz are sons of David and Alice N.
Schwartz.
(6) Includes 2,600 shares of Class B Common Stock owned by Norman Schwartz's
wife, as to which Norman Schwartz disclaims any beneficial ownership.
(7) David Schwartz, Alice N. Schwartz, Norman Schwartz and Steven Schwartz are
general partners of Blue Raven Partners, L.P., a California limited
partnership (the "Partnership"), and, as such, share voting and
dispositive power over the Class B Common Stock held by the Partnership.
(8) As of December 31, 1999.
(9) Includes shares with respect to which such persons have the right to
acquire beneficial ownership immediately or within sixty days of February
28, 2000, under the Company's employee stock purchase plan and stock
option agreements, as follows: David Schwartz, 92,194 Class B shares;
Norman Schwartz, 6,563 Class A shares and 2,814 Class B shares; James J.
Bennett, 18,751 Class A shares; George Bers, 9,377 Class A shares; Sanford
S. Wadler, 7,500 Class A shares; Burton A. Zabin, 6,563 Class A shares;
Thomas C. Chesterman, 3,564 Class A shares; Rello L. Cristea, 2,814 Class
A shares; Ronald W. Hutton, 313 Class A shares; and all directors and
executive officers as a group, 55,445 Class A shares and 95,008 Class B
shares.
(10) Includes 2,600 shares of Class B Common Stock owned by Steven Schwartz's
wife, as to which Steven Schwartz disclaims any beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In 1999, Townsend and Townsend and Crew, the patent law firm to which Albert
J. Hillman is Of Counsel, rendered legal services to us. Our Board of Directors
has relied upon our General Counsel to determine that the services of Townsend
and Townsend and Crew were provided on terms at least as fair to us as if they
had been provided by a non-affiliate. Our General Counsel is responsible for
the management of all of our relationships with providers of legal services.
54
<PAGE>
DESCRIPTION OF THE CREDIT FACILITY
On September 30, 1999, we entered into the Credit Facility with certain
financial institutions (the "Lenders"), Banc One Capital Markets, Inc., as
arranger, and Bank One, NA, as administrative agent. The following is a summary
description of the principal terms of the Credit Facility and the other loan
documents related thereto. We urge you to read the definitive documentation for
a more complete understanding of the Credit Facility. You may request a copy of
the Credit Facility at our address set forth in the section "Where You Can Find
More Information." Our obligations under the Credit Facility will constitute
Senior Debt and Designated Senior Debt with respect to the notes.
The Facility
Structure. The Credit Facility currently consists of a $80.0 million Term
Loan and a $100.0 million Revolving Facility.
We borrowed the full amount of the Term Loan and $55.2 million under the
Revolving Facility on October 1, 1999, the date we consummated the Acquisition.
We used $20.0 million of the proceeds of the Private Offering to permanently
reduce the Term Loan from $100.0 million to $80.0 million. We may use the
Revolving Facility to fund our working capital requirements and other general
corporate expenditures.
The Term Loan and the Revolving Facility have a maturity of five years. The
Term Loan amortizes over a five-year period beginning in 2000, with annual
principal payments in any calendar year ranging from $10.0 million to $30.0
million. In addition, we are required to make annual prepayments on the Term
Loan based on excess available cash flow and to make mandatory prepayments with
a portion of the proceeds from certain asset sales and equity and debt
financings. Loans under the Revolving Facility are available at any time during
its five-year term in U.S. dollars or, subject to certain limitations, Euros,
subject to various conditions precedent typical of bank loans.
Interest. Borrowings under the Credit Facility bear interest at a variable
rate per annum equal (at our option) to (a) a reserve adjusted Eurodollar rate
or (b) a base rate equal to the higher of (1) the administrative agent's
announced corporate base rate and (2) the Federal Funds effective rate plus 1/2
of 1% per annum plus, in each case, an applicable margin based on our financial
performance and compliance with the terms of the Credit Facility. Initially,
the applicable margin is 2.75% for Eurodollar loans and 1.50% for base rate
loans.
Fees. We have agreed to pay certain fees with respect to the Credit
Facility, including fees on the unused portion of the revolving loan
commitments and on outstanding letters of credit, arrangement and other similar
fees.
Security. Debt outstanding under the Credit Facility is secured by
substantially all of our assets and the assets of our subsidiaries. In
addition, the Credit Facility requires that we:
. pledge all of the capital stock of each of our future material domestic
subsidiaries, which are defined to include any domestic subsidiary with
assets having a book value of $10.0 million or more or any group of
domestic subsidiaries (other than guarantors) having combined assets with
a book value of $15.0 million or more; and
. pledge at least 65% of the capital stock of any foreign subsidiary with
assets having a book value of $10.0 million or more.
Covenants. The Credit Facility contains a number of covenants that, among
other things, restrict our ability and the ability of our subsidiaries to
. sell, lease or otherwise dispose of assets;
. incur additional debt;
55
<PAGE>
. guarantee obligations of others;
. prepay or change the terms of other debt;
. pay dividends or make other distributions;
. redeem or repurchase capital stock;
. create liens on assets;
. make investments, loans or advances;
. make acquisitions;
. engage in mergers or consolidations;
. change the business conducted by us and our subsidiaries;
. enter into sale-leaseback transactions;
. make capital expenditures; or
. engage in certain transactions with affiliates.
In addition, the Credit Facility requires us to comply with specified
financial ratios and tests, including maximum consolidated leverage ratio
tests, minimum consolidated interest coverage and fixed charge coverage ratio
tests and a minimum net worth test. The Credit Facility also contains
provisions that prohibit any modifications of the indenture in any manner
adverse to the Lenders under the Credit Facility and that limit our ability to
refinance or otherwise prepay the notes without the consent of the Lenders.
Events of Default. The Credit Facility contains customary events of default,
including non-payment of principal, interest or fees, violation of covenants,
material inaccuracies of representations or warranties, cross defaults to
certain other indebtedness and hedge agreements, certain events of bankruptcy
or insolvency, material judgments against us and our subsidiaries, invalidity
of any guarantee or security interest, certain ERISA events, environmental
events or conditions which could reasonably be expected to have a material
adverse effect on us and a change of control under certain circumstances set
forth therein.
56
<PAGE>
DESCRIPTION OF NOTES
You can find the definitions of certain capitalized terms used in this
section under the heading "Certain Definitions" below. For purposes of this
section, references to "Bio-Rad" or "we," "our," or "us" include only Bio-Rad
Laboratories, Inc. and Bio-Rad's successors in accordance with the terms of the
Indenture and, except pursuant to the terms of any Guarantee, not our
Subsidiaries.
We issued the private notes, and will issue the exchange notes, pursuant to
an indenture (the "Indenture"), dated as of February 17, 2000, by and between
us and Norwest Bank Minnesota, N.A., as trustee (the "Trustee").
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended. The Notes are subject to all such terms, and holders of Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summaries of certain provisions of the Indenture are summaries
only, do not purport to be complete and are qualified in their entirety by
reference to all of the provisions of the Indenture. We urge you to read the
Indenture because it, and not this description, defines your rights as a holder
of the Notes.
Brief Description of the Notes
The Notes:
. are our senior subordinated, unsecured general obligations;
. rank junior in right of payment with all of our existing and future
Senior Debt (other than trade payables);
. rank equally in right of payment with all of our existing and future
senior subordinated debt;
. rank senior in right of payment to all of our existing and future
Subordinated Indebtedness; and
. are effectively behind all existing and future debt of our subsidiaries
that are not guarantors, including trade payables.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof.
The term "Subsidiaries" as used in this section does not include
Unrestricted Subsidiaries. As of the date of the Indenture, none of our
Subsidiaries were Unrestricted Subsidiaries. However, under certain
circumstances, we will be able to designate current or future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to the
restrictive covenants set forth in the Indenture.
Principal, Maturity and Interest
We will issue Notes with a maximum aggregate principal amount of $150
million. The Notes will mature on February 15, 2007.
These Notes bear interest at the rate per annum stated on the cover page
hereof from the date of issuance or from the most recent date to which interest
has been paid or provided for (the "Interest Payment Date"), payable semi-
annually in arrears on February 15 and August 15 of each year, beginning August
15, 2000, to the persons in whose names such Notes are registered at the close
of business on the February 1 or August 1 immediately preceding such Interest
Payment Date. Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
57
<PAGE>
Methods of Receiving Payments on the Notes
Principal of, premium, if any, and interest (and Liquidated Damages, if any)
on the Notes will be payable, and the Notes may be presented for registration
of transfer or exchange, at our office or agency maintained for such purpose,
which office or agency shall be maintained in the Borough of Manhattan, The
City of New York. Except as set forth below, at our option, payment of interest
may be made by check mailed to the holders of the Notes (the "Holders") at the
addresses set forth upon our registry books. No service charge will be made for
any registration of transfer or exchange of Notes, but we may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. Until otherwise designated by us, our office or agency
will be the corporate trust office of the Trustee presently located at the
office of the Trustee in the Borough of Manhattan, The City of New York.
Subordination
The Notes will be our general, unsecured obligations, respectively,
contractually subordinated in right of payment to all of our Senior Debt. This
effectively means that holders of Senior Debt must be paid in full before any
amounts are paid to the Holders in the event we become bankrupt or are
liquidated and that holders of Senior Debt can block payments to the Holders in
the event of a default by us on such Senior Debt, all as more fully described
below.
As of March 31, 2000, we had outstanding an aggregate of $123.1 million of
Senior Debt ($117.0 million of which was secured), and no Indebtedness that
ranks equal to the Notes or is subordinate to the Notes in right of payment.
The rights of Holders will be subordinated by operation of law to all
existing and future indebtedness and preferred stock of our subsidiaries which
as of March 31, 2000 was $6.1 million.
We may not make payment (by set-off or otherwise), as applicable, on account
of any Obligation, including the principal of, premium, if any, or interest on
the Notes (or Liquidated Damages, if any), or on account of the redemption
provisions of the Notes (including any repurchases of Notes), for cash or
property (other than payments made with Junior Securities or from the trust
described under "Legal Defeasance and Covenant Defeasance"):
(1) in the event of default in the payment of any principal of, premium,
if any, or interest on our Designated Senior Debt, when it becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise (a "Payment Default"), unless and until such
Payment Default has been cured or waived in writing or otherwise has ceased
to exist, or
(2) upon the happening of an event of default other than a Payment
Default that permits the holders of Designated Senior Debt to declare such
Designated Senior Debt to be due and payable (a "Non-payment Default") and
written notice of such event of default given to us and the Trustee by the
representative under the Credit Agreement (a "Payment Notice"), unless and
until such event of default has been cured or waived in writing or
otherwise has ceased to exist.
Notwithstanding the foregoing, unless the Designated Senior Debt in respect
of which a Non-payment Default exists has been declared due and payable in its
entirety within 179 days after the Payment Notice is delivered as set forth
above (the "Payment Blockage Period") (and such declaration has not been
rescinded or waived), at the end of the Payment Blockage Period, we shall be
required to pay all sums not previously paid to the Holders during the Payment
Blockage Period due to the foregoing prohibitions and to resume all other
payments as and when due on the Notes.
Any number of Payment Notices may be given; provided, however, that
(1) not more than one Payment Notice shall be given within a period of
any 360 consecutive days, and
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<PAGE>
(2) no Non-payment Default that existed upon the date of such Payment
Notice or the commencement of such Payment Blockage Period (whether or not
such event of default is on the same issue of Senior Debt) shall be made
the basis for the commencement of any other Payment Blockage Period (unless
such default has been cured or waived for a period of not less than 120
days).
Upon any distribution of our assets upon any dissolution, winding up, total
or partial liquidation or reorganization of us, whether voluntary or
involuntary, in bankruptcy, insolvency, receivership or a similar proceeding or
upon assignment for the benefit of creditors or any marshalling of assets or
liabilities
(1) the holders of all of our Senior Debt will first be entitled to
receive payment in full in cash or Cash Equivalents (or have such payment
first duly provided for to the satisfaction of the Holders of the Senior
Debt) or otherwise to the extent holders accept satisfaction of amounts due
by settlement in other than cash or Cash Equivalents before the Holders are
entitled to receive any payment on account of any Obligation, including the
principal of, premium, if any, and interest on the Notes (or Liquidated
Damages, if any) (other than payments made with Junior Securities or from
the trust described under "Legal Defeasance and Covenant Defeasance"), and
(2) any payment or distribution of our assets of any kind or character
from any source, whether in cash, property or securities (other than
payments or distributions made with Junior Securities or from the trust
described under "Legal Defeasance and Covenant Defeasance") to which the
Holders or the Trustee on behalf of the Holders would be entitled (by set-
off or otherwise), except for the subordination provisions contained in the
Indenture, will be paid by the liquidating trustee or agent or other Person
making such a payment or distribution directly to the holders of such
Senior Debt or their representative to the extent necessary to make payment
in full (or have such payment first duly provided for to the satisfaction
of the Holders of the Senior Debt) on all such Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt.
In the event that, notwithstanding the foregoing, any payment or
distribution of our assets (other than payments or distributions made with
Junior Securities or from the trust described under "Legal Defeasance and
Covenant Defeasance") shall be received by the Trustee or the Holders at a time
when such payment or distribution is prohibited by the foregoing provisions,
such payment or distribution shall be held in trust for the benefit of the
holders of such Senior Debt, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, upon a request in writing from or on behalf
of the holders of such Senior Debt remaining unpaid or unprovided for to such
holders or to their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Debt may have been issued, ratably according to the aggregate
principal amounts remaining unpaid on account of such Senior Debt held or
represented by each, for application to the payment of all such Senior Debt
remaining unpaid, to the extent necessary to pay or to provide for the payment
of all such Senior Debt in full in cash or Cash Equivalents or otherwise to the
extent holders accept satisfaction of amounts due by settlement in other than
cash or Cash Equivalents after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
No provision contained in the Indenture or the Notes will affect our
obligation or the obligations of any Guarantors, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest
(and, if applicable, Liquidated Damages) on the Notes. The subordination
provisions of the Indenture and the Notes will not prevent the occurrence of
any Default or Event of Default under the Indenture or limit the rights of the
Trustee or any Holder to pursue any other rights or remedies with respect to
the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of our creditors or a marshalling
of our assets and liabilities, Holders may receive ratably less than other
creditors of Bio-Rad.
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Certain Bankruptcy Limitations
We conduct a substantial portion of our operations through Subsidiaries.
Accordingly, our ability to meet our cash obligations may in part depend upon
the ability of those Subsidiaries and any future Subsidiaries to make cash
distributions to us and to pay intercompany receivables. Furthermore, any right
we have to receive the assets of any Subsidiary upon that Subsidiary's
liquidation or reorganization (and the consequent right of the Holders to
participate in the distribution of the proceeds of those assets) effectively
will be subject to the prior claims of that Subsidiary's creditors (including
trade creditors), except to the extent that we are recognized as creditors of
that Subsidiary.
Redemption
Optional Redemption
At any time prior to February 15, 2004, we may redeem all or part of the
Notes, upon not less than 30 days nor more than 60 days prior notice to each
Holder of the Notes to be redeemed, at a redemption price equal to 100% of the
principal amount of those Notes plus the Applicable Premium as of, and accrued
and unpaid interest and Liquidated Damages, if any, thereon to, the Redemption
Date.
At any time on or after February 15, 2004, we may redeem the Notes for cash
at our option, in whole or in part, upon not less than 30 days nor more than 60
days notice to each Holder of Notes, at the following redemption prices
(expressed as percentages of the principal amount) if redeemed during the 12-
month period commencing February 15 of the years indicated below, in each case
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption of the Notes ("Redemption Date"):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004............................................................ 105.813%
2005............................................................ 102.906%
2006............................................................ 100.000%
2007............................................................ 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 15, 2003, upon
any sale of our common stock for cash, up to 35% of the aggregate principal
amount of the Notes issued pursuant to the Indenture (only as necessary to
avoid any duplication, excluding any replacement Notes) may be redeemed at our
option within 90 days of such sale, on not less than 30 days, but not more than
60 days, notice to each Holder of the Notes to be redeemed, with cash received
by us from the Net Cash Proceeds of such sale, at a redemption price equal to
111.625% of principal, together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Redemption Date; provided, however, that
immediately following such redemption not less than 65% of the aggregate
principal amount of the Notes originally issued pursuant to the Indenture on
the Issue Date remain outstanding (only as necessary to avoid any duplication,
excluding any replacement Notes).
If the Redemption Date hereunder is on or after an interest record date
("Record Date") on which the Holders of record have a right to receive the
corresponding Interest due and Liquidated Damages, if any, and on or before the
associated Interest Payment Date, any accrued and unpaid interest and
Liquidated Damages, if any, due on such Interest Payment Date will be paid to
the Person in whose name a Note is registered at the close of business on such
Record Date, and such Interest and Liquidated Damages, if any, will not be
payable to Holders whose Notes are redeemed pursuant to such redemption.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days prior to the Redemption Date to the Holder of each
Note to be redeemed to such Holder's last address as then shown
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upon the registry books of our registrar. Any notice which relates to a Note to
be redeemed in part only must state the portion of the principal amount equal
to the unredeemed portion thereof and must state that on and after the
Redemption Date, upon surrender of such Note, a new Note or Notes in a
principal amount equal to the unredeemed portion thereof will be issued. On and
after the Redemption Date, interest will cease to accrue on the Notes or
portions thereof called for redemption, unless we default in the payment
thereof.
No Sinking Fund
The Notes will not have the benefit of any sinking fund and we will not be
required to make any mandatory redemption payments with respect to the Notes.
Certain Covenants
The Indenture contains certain covenants including, among others, the
following:
Repurchase of Notes at the Option of the Holder Upon a Change of Control
In the event that a Change of Control has occurred, each Holder of Notes
will have the right, at such Holder's option, pursuant to an offer (subject
only to conditions required by applicable law, if any) by us (the "Change of
Control Offer"), to require us to repurchase all or any part of such Holder's
Notes (provided, that the principal amount of such Notes must be $1,000 or an
integral multiple thereof) on a date (the "Change of Control Purchase Date")
that is no later than 45 Business Days after the occurrence of such Change of
Control, at a cash price equal to 101% of the principal amount thereof (the
"Change of Control Purchase Price"), together with accrued and unpaid interest
and Liquidated Damages, if any, to the Change of Control Purchase Date.
The Change of Control Offer shall be made within 10 Business Days following
a Change of Control (but may be commenced prior to the Change of Control so
long as it is contingent on the Change of Control) and shall remain open for 20
Business Days (the "Change of Control Offer Period"). Upon expiration of the
Change of Control Offer Period, we shall promptly purchase all Notes properly
tendered in response to the Change of Control Offer.
Notwithstanding the foregoing, we will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control Offer
made by us.
Prior to the commencement of a Change of Control Offer, but in any event
within 45 days following any Change of Control, we will
(1) (a) repay in full and terminate all commitments of Indebtedness
under the Credit Agreement and all other Senior Debt the terms of which
require repayment upon a Change of Control or (b) offer to repay in full
and terminate all commitments of Indebtedness under the Credit Agreement
and all such other Senior Debt and repay the Indebtedness owed to each
lender which has accepted such offer in full, or
(2) obtain the requisite consents under the Credit Agreement and all
such other Senior Debt to permit the repurchase of the Notes as provided
herein.
Our failure to comply with the preceding sentence shall constitute an Event
of Default described in clause (3) under the heading "Events of Default" below,
but without giving effect to the stated exceptions in that clause.
On or before the Change of Control Purchase Date, we will
(1) accept for payment Notes or portions thereof properly tendered
pursuant to the Change of Control Offer,
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(2) deposit with the paying agent for us (the "Paying Agent") cash
sufficient to pay the Change of Control Purchase Price (together with
accrued and unpaid interest and Liquidated Damages, if any) of all Notes or
portion thereof so tendered, and
(3) deliver to the Trustee the Notes so accepted together with an
Officers' Certificate listing the Notes or portions thereof being purchased
by us.
The Paying Agent promptly will pay the Holders of Notes so accepted an
amount equal to the Change of Control Purchase Price (together with accrued and
unpaid interest and Liquidated Damages, if any) and the Trustee promptly will
authenticate and deliver to such Holders a new Note equal in principal amount
to any unpurchased portion of the Note surrendered. Any Notes not so accepted
will be delivered promptly by us to the Holder thereof. We will announce
publicly the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of us, and, thus, the removal of incumbent management.
The phrase "all or substantially all" of our assets will likely be
interpreted under applicable state law and will be dependent upon particular
facts and circumstances. As a result, there may be a degree of uncertainty in
ascertaining whether a sale or transfer of "all or substantially all" of our
assets has occurred. In addition, no assurances can be given that we will be
able to acquire Notes tendered upon the occurrence of a Change of Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of this covenant, our compliance or
compliance by any of the Guarantors with such laws and regulations shall not in
and of itself cause a breach of their obligations under such covenant.
If the Change of Control Purchase Date hereunder is on or after an interest
payment Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest (and Liquidated Damages, if any) due on such
Interest Payment Date will be paid to the Person in whose name a Note is
registered at the close of business on such Record Date, and such interest (and
Liquidated Damages, if applicable) will not be payable to Holders who tender
the Notes pursuant to the Change of Control Offer.
Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock
We will not and we will not permit any of our Subsidiaries to, directly or
indirectly, issue, assume, guaranty, incur, become directly or indirectly
liable with respect to, or otherwise become responsible for, contingently or
otherwise (individually and collectively, to "incur" or, as appropriate, an
"incurrence"), any Indebtedness (including Disqualified Capital Stock and
Acquired Indebtedness).
Notwithstanding the foregoing if
(1) no Default or Event of Default shall have occurred and be continuing
at the time of, or would occur after giving effect on a pro forma basis to,
such incurrence of Indebtedness, and
(2) on the date of such incurrence (the "Incurrence Date"), our
Consolidated Coverage Ratio for the Reference Period immediately preceding
the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness and, to the extent set forth in the
definition of Consolidated Coverage Ratio, the use of proceeds thereof,
would be at least 2.25 to 1.00 (the "Debt Incurrence Ratio"),
then we and our Guarantors may incur such Indebtedness (including Disqualified
Capital Stock).
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In addition, the foregoing limitations of the first paragraph of this
covenant will not prohibit the following:
(1) our incurrence or the incurrence by any Subsidiary of Purchase Money
Indebtedness; provided, that
(a) the aggregate amount of such Indebtedness incurred and
outstanding at any time pursuant to this paragraph (1) (plus any
Refinancing Indebtedness issued to retire, defease, refinance, replace
or refund such Indebtedness) shall not exceed $15 million (or the
equivalent thereof, at the time of incurrence, in the applicable foreign
currency), and
(b) in each case, such Indebtedness shall not constitute more than
100% of our cost or the cost to such Subsidiary (determined in
accordance with GAAP), as applicable, of the property so purchased,
constructed, improved or leased;
(2) our incurrence or the incurrence by any of our Guarantors of
Indebtedness in an aggregate amount incurred and outstanding at any time
pursuant to this paragraph (2) (plus any Refinancing Indebtedness incurred
to retire, defease, refinance, replace or refund such Indebtedness) of up
to $20 million (or the equivalent thereof, at the time of incurrence, in
the applicable foreign currencies);
(3) our incurrence or the incurrence by any Guarantor of Indebtedness
pursuant to the Credit Agreement in an aggregate amount incurred and
outstanding at any time pursuant to this paragraph (3) (plus any
Refinancing Indebtedness incurred to retire, defease, refinance, replace or
refund such Indebtedness) of up to $180 million, minus the amount of any
such Indebtedness (a) retired with the Net Cash Proceeds from any Asset
Sale applied to permanently reduce the outstanding amounts or the
commitments with respect to such Indebtedness pursuant to clause (1)(b)(II)
of the first paragraph of the covenant below under the heading "Limitation
on Sale of Assets and Subsidiary Stock" or (b) assumed by a transferee in
an Asset Sale;
(4) the incurrence by our Subsidiaries that are not Guarantors of
Indebtedness so long as, immediately after giving effect thereto, the
aggregate principal amount of any such Indebtedness incurred and
outstanding pursuant to this clause (4) (plus any Refinancing Indebtedness
incurred to retire, defease, refinance, replace or refund such
Indebtedness) does not exceed 10% of our consolidated total assets;
(5) we and our Subsidiaries may incur Indebtedness evidenced by the
Notes and the Exchange Notes issued pursuant to the Indenture up to the
amounts being issued on the original Issue Date;
(6) we and our Guarantors may incur Refinancing Indebtedness with
respect to any Indebtedness (including Disqualified Capital Stock),
described in clause (5) above, or this clause (6) or clause (12) below
(less the amount of any such Existing Indebtedness repaid on or after the
Issue Date), or incurred pursuant to the Debt Incurrence Ratio or which was
refinanced pursuant to this clause (6);
(7) we and our Guarantors may incur Indebtedness solely in respect of
bankers' acceptances, letters of credit and performance bonds (to the
extent that such incurrence does not result in the incurrence of any
obligation to repay any obligation relating to borrowed money of others),
all in the ordinary course of business in accordance with customary
industry practices, in amounts and for the purposes customary in our
industry; provided, that the aggregate principal amount outstanding of such
Indebtedness (including any Refinancing Indebtedness and any other
Indebtedness issued to retire, refinance, refund, defease or replace such
Indebtedness) shall at no time exceed $10 million;
(8) we and our Subsidiaries may incur Indebtedness represented by
performance bonds and letters of credit for the account of Bio-Rad or any
such Subsidiary, as the case may be, in order to provide security for Value
Added Tax (VAT) or customs obligations under bonds posted to a governmental
authority, security for workers' compensation claims and payment
obligations in connection with self-insurance, in each case, that are
incurred in the ordinary course of business in accordance with customary
industry practice in amounts, and for the purposes, customary in our
industry;
(9) we may incur Indebtedness owed to (borrowed from) any Subsidiary,
and any Subsidiary may incur Indebtedness owed to (borrowed from) any other
Subsidiary or us; provided, that in any case where
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we are the obligor, such obligations shall be unsecured and contractually
subordinated in all respects to our obligations pursuant to the Notes, and
any event that causes such Subsidiary no longer to be a Subsidiary
(including by designation to be an Unrestricted Subsidiary) shall be deemed
to be a new incurrence subject to this covenant;
(10) any Subsidiary may guaranty any of our Indebtedness or the
Indebtedness of another Subsidiary that was permitted to be incurred
pursuant to the Indenture, substantially concurrently with such incurrence
or at the time such Person becomes a Subsidiary; provided, that a Guarantor
cannot guarantee debt of a Subsidiary that is not a Guarantor;
(11) we and our Subsidiaries may incur Interest Swap and Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate or currency risk with respect to any fixed or floating rate
Indebtedness that is permitted by the Indenture to be outstanding or any
receivable or liability the payment of which is determined by reference to
a foreign currency; provided, that the notional amount of any such Interest
Swap and Hedging Obligation does not exceed the principal amount of
Indebtedness to which such Interest Swap and Hedging Obligation relates;
(12) we and our Subsidiaries may incur Existing Indebtedness;
(13) we may incur Indebtedness arising from agreements of Bio-Rad or our
Subsidiaries providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary otherwise permitted
by the Indenture;
(14) the accrual of interest, accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock; provided, in each such case, that the amount thereof is
included in Consolidated Fixed Charges of Bio-Rad as accrued; and
(15) we and our Subsidiaries may incur Indebtedness to the extent the
proceeds thereof are used to purchase Notes pursuant to a Change of Control
offer.
Indebtedness (including Disqualified Capital Stock) of any Person which is
outstanding at the time such Person becomes one of our Subsidiaries (including
upon designation of any subsidiary or other Person as a Subsidiary) or is
merged with or into or consolidated with us or one of our Subsidiaries shall be
deemed to have been incurred at the time such Person becomes one of our
Subsidiaries or is merged with or into or consolidated with us or one of our
Subsidiaries as applicable.
Notwithstanding any other provision of this covenant, but only to avoid
duplication, a guarantee of our Indebtedness or of the Indebtedness of another
Subsidiary incurred in accordance with the terms of the Indenture issued at the
time such Indebtedness was incurred or if later at the time the guarantor
thereof became one of our Subsidiaries will not constitute a separate
incurrence, or amount outstanding, of Indebtedness. Upon each incurrence we may
designate pursuant to which provision of this covenant such Indebtedness is
being incurred and, at the time of each subsequent incurrence in accordance
with this covenant, may reclassify such item of Indebtedness (or any part
thereof) in any manner that complies with this covenant.
Limitation on Restricted Payments
We will not and we will not permit any of our Subsidiaries to, directly or
indirectly, make any Restricted Payment if, after giving effect to such
Restricted Payment on a pro forma basis,
(1) a Default or an Event of Default shall have occurred and be
continuing,
(2) we are not permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio in the covenant described
above under the heading "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock," or
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(3) the aggregate amount of all Restricted Payments made by us and our
Subsidiaries, including after giving effect to such proposed Restricted
Payment, on and after the Issue Date, would exceed, without duplication, the
sum of
(a) 50% of our aggregate Consolidated Net Income for the period
(taken as one accounting period), commencing on the first day of the
first full fiscal quarter commencing after the Issue Date, to and
including the last day of the fiscal quarter ended immediately prior to
the date of each such calculation for which our consolidated financial
statements are available (or, in the event our Consolidated Net Income
for such period is a deficit, then minus 100% of such deficit), plus
(b) the aggregate Net Cash Proceeds received by us from a Capital
Contribution or from the sale of our Qualified Capital Stock (other
than (I) to one of our Subsidiaries and (II) to the extent applied in
connection with a Qualified Exchange after the Issue Date), plus
(c) except in each case, in order to avoid duplication, to the
extent any such payment or proceeds have been included in the
calculation of Consolidated Net Income, an amount equal to the net
reduction in Investments (other than returns of or from Permitted
Investments) in any Person resulting from distributions on or
repayments of any Investments, including payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
distributions or other transfers of assets, in each case to us or any
Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of Investments
previously made by us or any Subsidiary in such Person, plus
(d) 50% of any cash dividends received by us or any of our
Subsidiaries after the date of the Indenture from an Unrestricted
Subsidiary, to the extent that such dividends were not otherwise
included in our Consolidated Net Income for such period, plus
(e) to the extent that any Unrestricted Subsidiary is redesignated
as a Subsidiary after the date of the Indenture, the lesser of (i) the
fair market value of the Investment by us in such Unrestricted
Subsidiary as of the date on which such Subsidiary was originally
designated as an Unrestricted Subsidiary (the "Designation Date") plus
the fair market value of any additional Investments in such
Unrestricted Subsidiary made by us after the Designation Date, if any,
and (ii) the fair market value of such Investments as measured on the
Determination Date, in each case to the extent such amount was not
otherwise included in our Consolidated Net Income.
The foregoing clauses (2) and (3) of the immediately preceding paragraph,
however, will not prohibit the following:
(1) any dividend, distribution or other payments by any of our
Subsidiaries on its Equity Interests that is paid pro rata to all holders
of such Equity Interests;
(2) a Qualified Exchange;
(3) the payment of any dividend on Qualified Capital Stock within 60
days after the date of its declaration if such dividend could have been
made on the date of such declaration in compliance with the foregoing
provisions;
(4) repurchases of our Capital Stock deemed to occur on the exercise of
stock options;
(5) payments in lieu of fractional shares not to exceed $2 million in
the aggregate;
(6) repurchases of our Capital Stock in accordance with a repurchase
program that is approved and adopted by our Board of Directors and whose
primary purpose is to provide Capital Stock to satisfy our obligations
under stock option plans and employee stock purchase plans not to exceed $4
million in the aggregate;
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(7) that portion of Investments the payment for which consists
exclusively of our Equity Interests (other than Disqualified Stock); or
(8) other Restricted Payments not to exceed $20 million in the
aggregate.
The full amount of any Restricted Payment made pursuant to the foregoing
clauses (1), (3), (5), (6) and (8) (but not pursuant to clause (2), (4) and
(7)) of the immediately preceding sentence, however, will be counted as
Restricted Payments made for purposes of the calculation of the aggregate
amount of Restricted Payments available to be made referred to in clause (3) of
the first paragraph of this covenant.
For purposes of this covenant, the amount of any Restricted Payment made or
returned, if other than in cash, shall be the fair market value thereof, as
determined in the good faith reasonable judgment of our Board of Directors,
unless stated otherwise, at the time made or returned, as applicable.
Additionally, not later than the date of making each Restricted Payment, we
shall deliver an Officers' Certificate to the Trustee describing in reasonable
detail the nature of such Restricted Payment, stating the amount of such
Restricted Payment, stating in reasonable detail the provisions of the
Indenture pursuant to which such Restricted Payment was made and certifying
that such Restricted Payment was made in compliance with the terms of the
Indenture.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
We will not and we will not permit any of our Subsidiaries to, directly or
indirectly, create, assume or suffer to exist any consensual restriction on the
ability of any of our Subsidiaries to pay dividends or make other distributions
to or on behalf of, or to pay any obligation to or on behalf of, or otherwise
to transfer assets or property to or on behalf of, or make or pay loans or
advances to or on behalf of, us or any of our Subsidiaries, except
(1) restrictions imposed by the Notes or the Indenture or by our other
Indebtedness ranking senior or pari passu with the Notes; provided, that
except as set forth in clause (5) below such restrictions are no more
restrictive taken as a whole than those imposed by the Indenture and the
Notes,
(2) restrictions imposed by applicable law,
(3) existing restrictions under Existing Indebtedness,
(4) restrictions under any Acquired Indebtedness not incurred in
violation of the Indenture or any agreement (including any Equity Interest)
relating to any property, asset, or business acquired by us or any of our
Subsidiaries, which restrictions in each case existed at the time of
acquisition, were not put in place in connection with or in anticipation of
such acquisition and are not applicable to any Person, other than the
Person acquired, or to any property, asset or business, other than the
property, assets and business so acquired,
(5) any restriction imposed by Indebtedness incurred under the Credit
Agreement; provided, that such restriction or requirement is no more
restrictive taken as a whole than that imposed by the Credit Agreement as
of the Issue Date,
(6) restrictions with respect solely to any of our Subsidiaries imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or assets
of such Subsidiary; provided, that such restrictions apply solely to the
Equity Interests or assets of such Subsidiary which are being sold,
(7) restrictions on transfer contained in Purchase Money Indebtedness;
provided, that such restrictions relate only to the transfer of the
property acquired with the proceeds of such Purchase Money Indebtedness,
(8) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements, asset sale agreements, stock sale
agreements and other similar agreements entered into in the ordinary course
of business,
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(9) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business,
and
(10) in connection with and pursuant to permitted Refinancings,
replacements of restrictions imposed pursuant to clauses (1), (3), (4), (5)
or (7) or this clause (10) of this paragraph that are not more restrictive
taken as a whole than those being replaced and do not apply to any other
Person or assets than those that would have been covered by the
restrictions in the Indebtedness so refinanced.
Notwithstanding the foregoing, (a) customary provisions restricting
subletting or assignment of any lease entered into in the ordinary course of
business, consistent with industry practice and (b) any asset subject to a Lien
which is not prohibited to exist with respect to such asset pursuant to the
terms of the Indenture may be subject to customary restrictions on the transfer
or disposition thereof pursuant to such Lien.
Limitations on Layering Indebtedness
We will not and we will not permit any of our Subsidiaries to, directly or
indirectly, incur, or suffer to exist any Indebtedness that is contractually
subordinate in right of payment to any other Indebtedness unless, by its terms,
such Indebtedness is our Indebtedness and is contractually subordinate in right
of payment to, or ranks pari passu with, the Notes.
Limitation on Liens
We will not and we will not permit any of our Subsidiaries to, create,
incur, assume or suffer to exist any Lien of any kind securing Indebtedness,
other than Permitted Liens, upon any of their respective assets now owned or
acquired on or after the date of the Indenture or upon any income or profits
therefrom unless we provide, and cause our Subsidiaries to provide,
concurrently therewith, that the Notes are equally and ratably so secured;
provided, that if such Indebtedness is Subordinated Indebtedness, the Lien
securing such Indebtedness shall be subordinate and junior to the Lien securing
the Notes with the same relative priority as such Subordinated Indebtedness
shall have with respect to the Notes.
Limitation on Sale of Assets and Subsidiary Stock
We will not and we will not permit any of our Subsidiaries to, in one or a
series of related transactions, convey, sell, transfer, assign or otherwise
dispose of, directly or indirectly, any of their property, business or assets,
including by merger or consolidation (in the case of one of our Subsidiaries),
and including any sale or other transfer or issuance of any Equity Interests of
any of our Subsidiaries, whether by us or one of our Subsidiaries or through
the issuance, sale or transfer of Equity Interests by one of our Subsidiaries
and including any sale and leaseback transaction (any of the foregoing, an
"Asset Sale") unless
(1) (a) an amount equal to the Net Cash Proceeds therefrom (the "Asset
Sale Offer Amount") are applied within 365 days after the date of such
Asset Sale to the repurchase of the Notes and such other Indebtedness on a
parity with the Notes and with similar provisions requiring us to make an
offer to purchase such Indebtedness with the proceeds from such Asset Sale
pursuant to a cash offer (subject only to conditions required by applicable
law, if any) (pro rata in proportion to the respective principal amounts
(or accreted values in the case of Indebtedness issued with an original
issue discount) of the Notes and such other Indebtedness then outstanding)
(the "Asset Sale Offer") at a purchase price of 100% of the principal
amount (or accreted value in the case of Indebtedness issued with an
original issue discount) (the "Asset Sale Offer Price") together with
accrued and unpaid interest and Liquidated Damages, if any, to the date of
payment, or
(b) within 365 days following such Asset Sale, the Asset Sale Offer
Amount is
(I) invested in property or assets (other than notes, bonds,
obligations and securities) which will immediately constitute or be
a part of a Related Business of the Company or such Subsidiary (if
it continues to be a Subsidiary) immediately following such
transaction, or
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(II) used to retire Purchase Money Indebtedness secured by the
asset which was the subject of the Asset Sale, Indebtedness
outstanding under the Credit Agreement or a Foreign Subsidiary
Credit Agreement, or other Senior Debt, on a pro rata basis, and to
permanently reduce (in the case of Senior Debt that is not such
Purchase Money Indebtedness) the amount of such Indebtedness
outstanding on the Issue Date or permitted pursuant to paragraph (3)
of the covenant described above under the heading "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital
Stock" (and, in the case of a revolver or similar arrangement that
makes credit available on a committed basis, to permanently reduce
the applicable commitment(s) by such amount or by the amount
required by such agreement, whichever is less),
except that, in the case of each of the provisions of clauses (a) and (b),
only proceeds from an Asset Sale of assets or capital stock of a Foreign
Subsidiary may be invested in or used to retire Indebtedness of a Foreign
Subsidiary,
(2) at least 75% of the total consideration for such Asset Sale or
series of related Asset Sales consists of cash or Cash Equivalents,
(3) no Default or Event of Default shall have occurred and be continuing
at the time of, or would occur after giving effect, on a pro forma basis,
to such Asset Sale, and
(4) our Board of Directors determines in good faith that we received or
such Subsidiary received, as applicable, fair market value for such Asset
Sale.
An acquisition of Notes pursuant to an Asset Sale Offer may be deferred
until the accumulated Net Cash Proceeds from Asset Sales not applied as set
forth in 1(a) or (b) above (the "Excess Proceeds") exceeds $10 million, and
each Asset Sale Offer shall remain open for 20 Business Days following its
commencement (the "Asset Sale Offer Period").
Upon expiration of the Asset Sale Offer Period, we shall apply the Asset
Sale Offer Amount plus an amount equal to accrued and unpaid interest and
Liquidated Damages, if any, to the purchase of all Indebtedness properly
tendered in accordance with the provisions hereof (on a pro rata basis if the
Asset Sale Offer Amount is insufficient to purchase all Indebtedness so
tendered) at the Asset Sale Offer Price (together with accrued interest and
Liquidated Damages, if any). To the extent that the aggregate amount of Notes
and such other pari passu Indebtedness tendered pursuant to an Asset Sale Offer
is less than the Asset Sale Offer Amount, we may use any remaining Net Cash
Proceeds for general corporate purposes as otherwise permitted by the Indenture
and following the consummation of each Asset Sale Offer the Excess Proceeds
amount shall be reset to zero. For purposes of (2) above, total consideration
received means the total consideration received for such Asset Sales minus the
amount of, (a) Purchase Money Indebtedness secured solely by the assets sold
and assumed by a transferee; provided, that we are and our Subsidiaries are
fully released from obligations in connection therewith and (b) property that
within 30 days of such Asset Sale is converted into cash or Cash Equivalents;
provided, that such cash and Cash Equivalents shall be treated as Net Cash
Proceeds attributable to the original Asset Sale for which such property was
received).
Notwithstanding, and without complying with, the provisions of this covenant
(1) we may and our Subsidiaries may, in the ordinary course of business,
(a) convey, sell, transfer, assign or otherwise dispose of inventory and
other assets acquired and held for resale in the ordinary course of
business, (b) liquidate Cash Equivalents and (c) liquidate securities that
consist of shares of capital stock that are traded on a nationally
recognized stock exchange,
(2) we may and our Subsidiaries may convey, sell, transfer, assign or
otherwise dispose of assets pursuant to and in accordance with the covenant
"Limitation on Merger, Sale or Consolidation,"
(3) we may and our Subsidiaries may sell or dispose of damaged, worn out
or other obsolete property in the ordinary course of business so long as
such property is no longer necessary for the proper conduct
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of our business or the business of such Subsidiary, and we may convey,
sell, transfer, assign or otherwise dispose of assets to any Subsidiary
provided such transaction is otherwise in compliance with the covenant
described below under the heading "Transactions with Affiliates," except
that we are not required to comply with the provisions of clause (3) of
such covenant,
(4) Subsidiaries may convey, sell, transfer, assign or otherwise dispose
of assets to us or any other Subsidiary,
(5) we may and our Subsidiaries may, in the ordinary course of business,
convey, sell, transfer, assign, or otherwise dispose of assets (or related
assets in related transactions) with a fair market value of less than $2
million,
(6) we may and our Subsidiaries may exchange assets held by us or such
Subsidiaries for assets held by any Person or entity; provided, that (a)
the assets received by us or such Subsidiaries in any such exchange will
immediately constitute, be a part of, or be used in, a Related Business of
the Company or such Subsidiaries, (b) our Board of Directors has determined
that the terms of any exchange are fair and reasonable, (c) any such
exchange shall be deemed to be an Asset Sale to the extent that we or any
of our Subsidiaries receives cash or Cash Equivalents in such exchange, and
(d) that, in the case of a transaction exceeding $10 million of
consideration to any party thereto, we shall have obtained a favorable
written opinion by an independent financial advisor of national reputation
in the United States as to the fairness from a financial point of view to
us or such Subsidiaries of the proposed transaction,
(7) our Subsidiaries may issue their Equity Interests to us or to
another Subsidiary,
(8) Permitted Liens may be granted, and
(9) we may and our Subsidiaries may make or liquidate any Restricted
Payment or Permitted Investment that is permitted by the covenant described
under the caption "Limitation on Restricted Payments."
All Net Cash Proceeds from an Event of Loss in excess of $10 million (other
than the proceeds of any business interruption insurance) shall be reinvested
or used as otherwise provided above in clauses 1(a) or (b) of the first
paragraph of this covenant.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this paragraph,
our compliance or the compliance of any of our subsidiaries with such laws and
regulations shall not in and of itself cause a breach of our obligations under
such covenant.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages,
if any) due on such Interest Payment Date will be paid to the Person in whose
name a Note is registered at the close of business on such Record Date, and
such interest (or Liquidated Damages, if applicable) will not be payable to
Holders who tender Notes pursuant to such Asset Sale Offer.
Limitation on Transactions with Affiliates
We will not and we will not permit any of our Subsidiaries on or after the
Issue Date to, enter into or suffer to exist any contract, agreement,
arrangement or transaction with any Affiliate (an "Affiliate Transaction"), or
any series of related Affiliate Transactions (other than Exempted Affiliate
Transactions)
(1) unless it is determined that the terms of such Affiliate Transaction
are fair and reasonable to us, and no less favorable to us than could have
been obtained in an arm's length transaction with a non-Affiliate,
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(2) if involving consideration to either party in excess of $5 million
such Affiliate Transaction(s) is evidenced by an Officers' Certificate
addressed and delivered to the Trustee certifying that such Affiliate
Transaction (or Transactions) has been approved by a majority of the
members of our Board of Directors that are disinterested in such
transaction, and
(3) if involving consideration to either party in excess of $7 million,
obtain a written favorable opinion as to the fairness of such transaction
to us from a financial point of view from an independent investment banking
firm of national reputation in the United States or, if pertaining to a
matter for which such investment banking firms do not customarily render
such opinions, an appraisal or valuation firm of national reputation in the
United States.
Limitation on Merger, Sale or Consolidation
We will not consolidate with or merge with or into another Person or,
directly or indirectly, sell, lease, convey or transfer all or substantially
all of our assets (computed on a consolidated basis), whether in a single
transaction or a series of related transactions, to another Person or group of
affiliated Persons unless
(1) either (a) we are the continuing entity or (b) the resulting,
surviving or transferee entity (the "Surviving Person") is a corporation
organized under the laws of the United States, any state thereof or the
District of Columbia and expressly assumes all of our obligations in
connection with the Notes, the Indenture and the Registration Rights
Agreement,
(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction,
(3) unless such transaction is solely the merger of us with or into any
person solely for the purpose of effecting a change in our state of
incorporation or us and one of our previously existing Wholly Owned
Subsidiaries and which transaction is not for the purpose of evading this
provision immediately after giving effect to such transaction on a pro
forma basis, (x) the Surviving Person would immediately thereafter be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Debt Incurrence Ratio set forth in the covenant described above under
the heading "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," and (y) the Consolidated Net Worth of the
Surviving Person is at least equal to our Consolidated Net Worth
immediately prior to such transaction, and
(4) each Guarantor, if any, unless such Guarantor is the Person with
which we have entered into a transaction under this covenant shall have by
amendment to its Guarantee confirmed that its Guarantee shall apply to our
obligations or the obligations of the surviving entity, as applicable, in
accordance with the Notes and the Indenture.
Upon any consolidation or merger or any transfer of all or substantially all
of our assets in accordance with the foregoing, the successor corporation
formed by such consolidation or into which we are merged or to which such
transfer is made shall succeed to and (except in the case of a lease) be
substituted for, and may exercise every right and power of, Bio-Rad under the
Indenture with the same effect as if such successor corporation had been named
therein as Bio-Rad, and (except in the case of a lease) we shall be released
from the obligations under the Notes and the Indenture except with respect to
any obligations that arise from, or are related to, such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, our interest in which constitutes all or substantially all
of our properties and assets, shall be deemed to be the transfer of all or
substantially all of our properties and assets.
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Consolidation of Genetic Systems
Within 180 days following the Issue Date, we will either (1) consolidate
with or merge with (such that we are the surviving entity), or cause to be
transferred to us all of the assets of, Genetic Systems or (2) cause Genetic
Systems to irrevocably and unconditionally guarantee the Notes on a senior
subordinated basis.
Future Guarantors
We will not permit any Subsidiary individually or together with all other
Subsidiaries that are not Guarantors to become Material Domestic Subsidiaries
unless such Subsidiary and all such other Subsidiaries, if applicable,
simultaneously executes a supplemental indenture to the Indenture providing for
the Guarantee of the payment of the Notes by such Subsidiary or Subsidiaries,
which Guarantee(s) shall be irrevocable and unconditional in respect of all
principal, premium, if any, and interest on the Notes on a senior subordinated
basis.
Release of Guarantors
No Guarantor will consolidate or merge with or into (whether or not such
Guarantor is the surviving Person) another Person unless, subject to the
provisions of the following paragraph and certain other provisions of the
Indenture
(1) the Person formed by or surviving any such consolidation or merger
(if other than such Guarantor) assumes all the obligations of such
Guarantor pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee, pursuant to which such Person shall
unconditionally guarantee, on a senior subordinated basis, all of such
Guarantor's obligations under such Guarantor's Guarantee on the terms set
forth in the Indenture, and
(2) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred or be continuing.
The provisions of the covenant shall not apply to the merger of any
Guarantors with and into each other or with or into us.
Upon the sale or disposition (whether by merger, stock purchase, Asset Sale
or otherwise) of a Guarantor or all of its assets to an entity which is not a
Guarantor, or the designation of a Subsidiary to become an Unrestricted
Subsidiary, which transaction is otherwise in compliance with the Indenture
(including, without limitation, the provisions of the covenant described above
under the heading "Limitations on Sale of Assets and Subsidiary Stock"), such
Guarantor will be deemed released from its obligations under its Guarantee of
the Notes; provided, however, that any such termination shall occur only to the
extent that all obligations of such Guarantor under all of its guarantees of
any of our Indebtedness or any Indebtedness of any other of our Subsidiaries
shall also terminate upon such release, sale or transfer and none of its Equity
Interests are pledged for the benefit of any holder of any of our Indebtedness
or any Indebtedness of any of our Subsidiaries.
Limitation on Status as Investment Company
We and our Subsidiaries will not become required to register as an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or from otherwise becoming subject to regulation under the
Investment Company Act.
Reports
Whether or not we are subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, we will deliver to the Trustee and to each Holder
and to prospective purchasers of Notes identified to us by an Initial
Purchaser, at the time we are or would have been (if we were subject to such
reporting obligations)
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required to file such with the Commission, such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act, if we were subject to the requirements of Section 13
or 15(d) of the Exchange Act, including, with respect to annual information
only, a report thereon by our certified independent public accountants as such
would be required in such reports to the Commission, and, in each case,
together with a management's discussion and analysis of financial condition and
results of operations which would be so required and, unless the Commission
will not accept such reports, file with the Commission the annual, quarterly
and other reports which it is or would have been required to file with the
Commission.
Events of Default and Remedies
The Indenture defines an "Event of Default" as
(1) our failure to pay any installment of interest (or Liquidated
Damages, if any) on the Notes as and when the same becomes due and payable
and the continuance of any such failure for 30 days,
(2) our failure to pay all or any part of the principal, or premium, if
any, on the Notes when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
payment of the Change of Control Purchase Price or the Asset Sale Offer
Price, on Notes validly tendered and not properly withdrawn pursuant to a
Change of Control Offer or Asset Sale Offer, as applicable,
(3) our failure or the failure by any of our Subsidiaries to observe or
perform any other covenant or agreement contained in the Notes or the
Indenture and, except for the covenants described above under the headings
"Repurchase of Notes at the Option of the Holder Upon a Change of Control,"
"Limitations on Sale of Assets and Subsidiary Stock," "Limitation on
Merger, Sale or Consolidation" and "Consolidation of Genetic Systems," the
continuance of such failure for a period of 45 days after written notice is
given to us by the Trustee or to us and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Notes outstanding,
(4) certain events of bankruptcy, insolvency or reorganization in
respect of us or any of our Significant Subsidiaries (or group of
Subsidiaries that on a combined basis would constitute a Significant
Subsidiary),
(5) a default in our Indebtedness or the Indebtedness of any of our
Subsidiaries with an aggregate amount outstanding in excess of $10 million
(a) resulting from the failure to pay principal at maturity or (b) as a
result of which the maturity of such Indebtedness has been accelerated
prior to its stated maturity,
(6) final unsatisfied judgments not covered by insurance aggregating in
excess of $10 million, at any one time rendered against us or any of our
Subsidiaries and not stayed, bonded or discharged within 60 days, and
(7) any Guarantee of a Guarantor that is a Significant Subsidiary (or
group of Guarantors that on a combined basis would constitute a Significant
Subsidiary) ceases to be in full force and effect or becomes unenforceable
or invalid or is declared null and void (other than in accordance with the
terms of the Guarantee) or any Guarantor that is a Significant Subsidiary
(or group of Guarantors that on a combined basis would constitute a
Significant Subsidiary) denies or disaffirms its Obligations under its
Guarantee.
If a Default occurs and is continuing, the Trustee must, within 90 days
after the occurrence of such Default, give to the Holders notice of such
Default; provided, however, that except in the case of a Default in payment of
principal of or interest on any Note, the Trustee may withhold the notice if
and so long as the Trustee in good faith determines that withholding the notice
is in the interest of the Holders.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (4) above relating to us or any of our Significant
Subsidiaries (or group of Subsidiaries that on a combined basis would
constitute a Significant Subsidiary)) then in every such case, unless the
principal of all of the Notes shall
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have already become due and payable, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding, by
notice in writing to us (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal, determined as set forth
below, and accrued interest (and Liquidated Damages, if any) thereon to be due
and payable immediately; provided, however, that if any Designated Senior Debt
is outstanding upon a declaration of such acceleration, such principal and
interest shall be due and payable upon the earlier of (x) the fifth Business
Day after sending to us and to the representative under the Credit Agreement
such written notice and (y) the date of acceleration of Designated Senior Debt.
If an Event of Default specified in clause (4) above relating to us or any of
our Significant Subsidiaries (or group of Subsidiaries that on a combined basis
would constitute a Significant Subsidiary) occurs, all principal and accrued
interest (and Liquidated Damages, if any) thereon will be immediately due and
payable on all outstanding Notes without any declaration or other act on the
part of the Trustee or the Holders. The Holders of a majority in aggregate
principal amount of Notes generally are authorized to rescind such acceleration
if all existing Events of Default, other than the non-payment of the principal
of, premium, if any, and interest on the Notes which have become due solely by
such acceleration and except a Default with respect to any provision requiring
a supermajority approval to amend, which Default may only be waived by such a
supermajority, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any Default, except a
Default with respect to any provision requiring a supermajority approval to
amend, which Default may only be waived by such a supermajority, and except a
Default in the payment of principal of or interest on any Note not yet cured or
a Default with respect to any covenant or provision which cannot be modified or
amended without the consent of the Holder of each outstanding Note affected.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Trustee will be under no obligation to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable security or
indemnity.
Subject to all provisions of the Indenture and applicable law, the Holders
of a majority in aggregate principal amount of the Notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee.
Legal Defeasance and Covenant Defeasance
We may, at our option, elect to have our obligations and the obligations of
the Guarantors discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that we shall be deemed to have paid
and discharged the entire indebtedness represented by the Notes, and the
Indenture shall cease to be of further effect as to all outstanding Notes and
Guarantees, except as to
(1) rights of Holders to receive payments in respect of the principal
of, premium, if any, and interest (and Liquidated Damages, if any) on such
Notes when such payments are due from the trust funds,
(2) our obligations with respect to such Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, and the maintenance of an office or agency for payment and
money for security payments held in trust,
(3) the rights, powers, trust, duties, and immunities of the Trustee,
and our obligations in connection therewith, and
(4) the Legal Defeasance provisions of the Indenture.
In addition, we may, at our option and at any time, elect to have our
obligations and the obligations of the Guarantors released with respect to most
of the covenants under the Indenture, except as described otherwise in the
Indenture ("Covenant Defeasance"), and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event Covenant Defeasance occurs,
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certain events (not including non-payment, non-payment of guarantees, and,
solely for a period of 91 days following the deposit referred to in clause (1)
of the next paragraph, bankruptcy, receivership, rehabilitation and insolvency
events) described above under the heading "Events of Default" will no longer
constitute an Event of Default with respect to the Notes. We may exercise our
Legal Defeasance option regardless of whether we previously exercised Covenant
Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance
(1) we must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders, U.S. legal tender, U.S. Government Obligations or a
combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on such Notes on the stated
date for payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such Notes,
and the Holders must have a valid, perfected, exclusive security interest
in such trust,
(2) in the case of Legal Defeasance, we shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that:
(a) we have received from, or there has been published by the
Internal Revenue Service, a ruling, or
(b) since the date of the Indenture, there has been a change in the
applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of such Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred,
(3) in the case of Covenant Defeasance, we shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
such Trustee confirming that the Holders of such Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred,
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit,
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which we or any of our
Subsidiaries are a party or by which we or any of our Subsidiaries are
bound,
(6) we shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by us with the intent of preferring
the Holders of such Notes over any other of our creditors or with the
intent of defeating, hindering, delaying or defrauding any other of our
creditors or others, and
(7) we shall have delivered to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that the conditions precedent provided
for in, in the case of the Officers' Certificate, (1) through (6) and, in
the case of the opinion of counsel, clauses (1) (with respect to the
validity and perfection of the security interest), (2), (3) and (5) of this
paragraph have been complied with.
If the funds deposited with the Trustee to effect Covenant Defeasance are
insufficient to pay the principal of, premium, if any, and interest on the
Notes when due, then our obligations and the obligations of Guarantors under
the Indenture will be revived and no such defeasance will be deemed to have
occurred.
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Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of
Notes) as to all outstanding Notes when either
(1) all such Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust or segregated
and held in trust by us and thereafter repaid to us or discharged from such
trust) have been delivered to the Trustee for cancellation, or
(2) (a) all Notes not theretofore delivered to the Trustee for
cancellation otherwise have become due and payable or, within one year will
become due and payable or subject to redemption as set forth above under
the heading "Optional Redemption," and we have irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust for such
purpose an amount of money sufficient to pay and discharge the entire
Indebtedness (including all principal, premium, if any, and accrued
interest and Liquidated Damages, if any) on the Notes not theretofore
delivered to the Trustee for cancellation,
(b) we have paid all sums payable by us under the Indenture,
(c) we have delivered irrevocable instructions to the Trustee to
apply the deposited money toward the payment of the Notes at maturity
or on the Redemption Date, as the case may be, and
(d) the Holders have a valid, perfected, exclusive security interest
in such trust.
In addition, we must deliver an Officers' Certificate and an opinion of
counsel stating that all conditions precedent to satisfaction and discharge
have been complied with.
Amendments and Supplements
The Indenture contains provisions permitting us and the Trustee to enter
into a supplemental indenture for certain limited purposes without the consent
of the Holders. With the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, we and the
Trustee are permitted to amend or supplement the Indenture or any supplemental
indenture or modify the rights of the Holders; provided, that no such
modification may, without the consent of Holders of at least 66 2/3% in
aggregate principal amount of Notes at the time outstanding, modify the
provisions (including the defined terms used therein) of the covenant described
above under the heading "Repurchase of Notes at the Option of the Holder upon a
Change of Control" in a manner adverse to the Holders; and provided, further,
that no such modification may, without the consent of each Holder affected
thereby
(1) change the Stated Maturity on any Note, or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof at our option,
or change the coin or currency in which, any Note or any premium or the
interest (or Liquidated Damages) thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption at our option, on or
after the Redemption Date), or
(2) amend or modify our obligation to make or consummate an Asset Sale
Offer after the obligation to make such an Asset Sale Offer arises, or
(3) alter the provisions (including the defined terms used therein)
regarding our right to redeem the Notes as a right, or at our option in a
manner adverse to the Holders, or
(4) reduce the percentage in principal amount of the outstanding Notes,
the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in the Indenture, or
(5) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Note affected thereby.
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Governing Law
The Indenture is and the Notes will be governed by, and construed in
accordance with, the laws of the State of New York including, without
limitation, Sections 5-1401 and 5-1402 of the New York General Obligations Law
and New York Civil Practice Laws and Rules 327(b).
No Personal Liability of Partners, Stockholders, Officers, Directors
No direct or indirect stockholder, employee, officer or director, as such,
past, present or future of the Company, the Guarantors or any successor entity
shall have any personal liability in respect of our obligations or the
obligations of the Guarantors under the Indenture or the Notes solely by reason
of his or its status as such stockholder, employee, officer or director, except
that this provision shall in no way limit the obligation of any Guarantor
pursuant to any guarantee of the Notes.
Book-Entry, Delivery and Form
We will initially issue the Notes in the form of one or more global notes
(the "Global Note"). The Global Note will be deposited with the Trustee as
custodian for DTC and registered in the name of a nominee of DTC. Except as set
forth below, the Global Note may be transferred, in whole and not in part, only
to DTC or another nominee of DTC. You may hold your beneficial interests in the
Global Note directly through DTC if you have an account with DTC or indirectly
through organizations which have accounts with DTC.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC (the "participants") and
to facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers (which may include the initial purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's book-entry system is also available to others such as banks, brokers,
dealers and trust companies (collectively, the "indirect participants") that
clear through or maintain a custodial relationship with a participant, whether
directly or indirectly.
We expect that pursuant to procedures established by DTC, upon the deposit
of the Global Note with DTC, DTC will credit, on its book-entry registration
and transfer system, the principal amount of Notes represented by such Global
Note to the accounts of participants. The accounts to be credited shall be
designated by the initial purchaser. Ownership of beneficial interests in the
Global Note will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the Global Note will
be shown on, and the transfer of those ownership interests will be effected
only through, records maintained by DTC (with respect to participants'
interests), the participants and the indirect participants (with respect to the
owners of beneficial interests in the Global Note other than participants). The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer or pledge beneficial interests in the
Global Note.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. In addition, no beneficial owner of
an interest in a Global Note will be able to transfer that interest except in
accordance with the applicable procedures of DTC and, if applicable, Morgan
Guaranty Trust Company of New York, as operator of the Euroclear system
("Euroclear"). Except as set forth below, as an owner of a beneficial interest
in the Global Note, you will not be entitled to have the Notes represented by
the Global Note registered in your name, will not receive or be entitled to
receive physical delivery of certificated Notes and will not be considered to
be the owner or holder
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of any Notes under the Global Note. We understand that under existing industry
practice, in the event an owner of a beneficial interest in the Global Note
desires to take any action that DTC, as the holder of the Global Note, is
entitled to take, DTC would authorize the participants to take such action, and
the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions
of beneficial owners owning through them.
We will make payments of principal of, premium, if any, and interest on the
Notes represented by the Global Note registered in the name of and held by DTC
or its nominee to DTC or its nominee, as the case may be, as the registered
owner and holder of the Global Note. Neither we, the Trustee nor any Paying
Agent under the Indenture will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Note as shown on the records of
DTC or its nominee. We also expect that payments by participants or indirect
participants to owners of beneficial interests in the Global Note held through
such participants or indirect participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants or indirect participants. We will not have any responsibility or
liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the Global Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between DTC and
its participants or indirect participants or the relationship between such
participants or indirect participants and the owners of beneficial interests in
the Global Note owning through such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear will be effected in the ordinary way in
accordance with its rules and operating procedures.
DTC has advised us that it will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the Global Note is credited and only in respect of such
portion of the aggregate principal amount of Notes as to which such participant
or participants has or have given such direction. However, if there is an Event
of Default under the Notes, DTC will exchange the Global Note for certificated
Notes which it will distribute to its participants.
Although DTC and Euroclear are expected to follow the foregoing procedures
in order to facilitate transfers of interests in the Global Note among
participants of DTC and Euroclear, they are under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither we nor the Trustee will have any responsibility or liability
for the performance by DTC, Euroclear or the participants or indirect
participants of their respective obligations under the rules and procedures
governing their respective operations.
Certain Definitions
"Acquired Indebtedness" means Indebtedness (including Disqualified Capital
Stock) of any Person existing at the time such Person becomes our Subsidiary,
including by designation, or is merged or consolidated into or with us or one
of our Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or all
or substantially all the assets of any Person by any other Person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
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"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with us. For purposes
of this definition, the term "control" means the power to direct the management
and policies of a Person, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract, or otherwise;
provided, that with respect to ownership interests in us and our Subsidiaries,
a Beneficial Owner of 10% or more of the total voting power normally entitled
to vote in the election of directors, managers or trustees, as applicable,
shall for such purposes be deemed to constitute control. Notwithstanding the
foregoing, Affiliate shall not include Wholly Owned Subsidiaries that are
Guarantors.
"Applicable Premium" means, with respect to any Note on any Redemption Date,
the greater of:
(1) 1.0% of the principal amount of the Note; or
(2) the excess of:
(a) the present value at such Redemption Date of (1) the redemption
price of the Note at February 15, 2004 (such redemption price being
stated in the table appearing under the heading "Optional Redemption")
plus (2) all required interest payments due on the Note through
February 15, 2004, computed using a discount rate equal to the Treasury
Rate as of such Redemption Date plus 75 basis points; over
(b) the principal amount of the Note.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (1) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (2) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Contribution" means any contribution to our equity for which no
consideration other than the issuance of common stock with no redemption rights
and no special preferences, privileges or voting rights is given.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
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"Cash Equivalent" means:
(1) securities issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof
(provided, that the full faith and credit of the United States of America
is pledged in support thereof) maturing within one year after the date of
acquisition;
(2) time deposits and certificates of deposit and commercial paper
issued by the parent corporation of any domestic commercial bank of
recognized standing having capital and surplus in excess of $500 million
and a Thompson Bank Watch rating of "B" or better maturing within one year
after the date of acquisition;
(3) commercial paper issued by others having the highest rating
obtainable from Standard & Poor's Corporation or Moody's Investors Service,
Inc.;
(4) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (2)
above;
(5) marketable obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing, or payable at the demand of the holder
thereof, within one year from the date of acquisition thereof and, at the
time of acquisition, having one of the three highest ratings obtainable
from either Standard & Poor's Corporation or Moody's Investors Service,
Inc.; and
(6) investments in money market funds substantially all of whose assets
comprise securities of the types described in clauses (1) through (5)
above.
"Change of Control" means:
(1) any merger or consolidation of us with or into any Person or any
sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all of our assets, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after
giving effect to such transaction(s), either (x) any "person" or "group"
(other than the Excluded Persons) is or becomes the "beneficial owner,"
directly or indirectly, of more than 40% of the Voting Equity Interests of
the transferee(s) or surviving entity or entities, and the Excluded Persons
shall cease to own beneficially at least a greater percentage of the Voting
Equity Interests of the transferee(s) or surviving entity or entities or
(y) the Excluded Persons shall cease to own beneficially (A) 30% of the
Voting Equity Interests of such transferee(s) or surviving entity or
entities or (B) a greater percentage of the Voting Equity Interests of such
transferee(s) or surviving entity or entities than any other person or
group, which ever is less,
(2) any "person" or "group" (other than the Excluded Persons) is or
becomes the "beneficial owner," directly or indirectly, of more than 40% of
our Voting Equity Interests, and the Excluded Persons shall cease to own
beneficially at least a greater percentage of our Voting Equity Interests,
(3) the Continuing Directors cease for any reason to constitute a
majority of our Board of Directors then in office, or
(4) we adopt a plan of liquidation or dissolution.
"Consolidated Coverage Ratio" of any Person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such Person (exclusive of amounts
attributable to operations and businesses permanently discontinued or disposed
of) for the Reference Period to (b) the aggregate Consolidated Fixed Charges of
such Person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to
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such Person's Consolidated Fixed Charges subsequent to the Transaction Date)
during the Reference Period; provided, that for purposes of such calculation
(1) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date
shall be assumed to have occurred on the first day of the Reference Period,
(2) transactions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period,
(3) the incurrence of any Indebtedness (including issuance of any
Disqualified Capital Stock) during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date (and the
application of the proceeds therefrom to the extent used to refinance or
retire other Indebtedness) shall be assumed to have occurred on the first
day of the Reference Period, and
(4) the Consolidated Fixed Charges of such Person attributable to
interest on any Indebtedness or dividends on any Disqualified Capital Stock
bearing a floating interest (or dividend) rate shall be computed on a pro
forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for
the entire period, unless such Person or any of its Subsidiaries is a party
to an Interest Swap or Hedging Obligation (which shall remain in effect for
the 12-month period immediately following the Transaction Date) that has
the effect of fixing the interest rate on the date of computation, in which
case such rate (whether higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person for such period adjusted to add thereto
(to the extent deducted from net revenues in determining Consolidated Net
Income), without duplication, the sum of
(1) Consolidated income tax expense,
(2) Consolidated depreciation and amortization expense,
(3) Consolidated Fixed Charges, and
(4) All other non-cash charges (excluding any such non-cash charge to
the extent that it represents an accrual of or reserve for cash
expenditures in any future period),
less the amount of all cash payments made by such Person or any of its
Subsidiaries during such period to the extent such payments relate to non-cash
charges that were added back in determining Consolidated EBITDA for such period
or any prior period; provided, that consolidated income tax expense,
depreciation and amortization and Consolidated Fixed Charges of a Subsidiary
(x) that is a less than Wholly Owned Subsidiary shall only be added to the
extent and in the same proportions that the net income of such Subsidiary was
included in the calculation of Consolidated Net Income of such Person and (y)
shall only be added to the extent and in the same proportions that the
Consolidated EBITDA of such Subsidiary is permitted to be paid or distributed
as a dividend, advance, loan or other distribution to such Person.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of
(1) interest expensed or capitalized, paid, accrued, or scheduled to be
paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such Person and
its Consolidated Subsidiaries during such period, including (a) original
issue discount and non-cash interest payments or accruals on any
Indebtedness, (b) the interest portion of all deferred payment obligations,
and (c) all commissions, discounts and other fees and charges owed with
respect to banker's acceptances and letters of credit financings and
currency and Interest Swap and Hedging Obligations, in each case to the
extent attributable to such period, and
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(2) the amount of dividends accrued or payable (or guaranteed) by such
Person or any of its Consolidated Subsidiaries in respect of Preferred
Stock (other than by Subsidiaries of such Person to such Person or such
Person's Wholly Owned Subsidiaries).
For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by such Person to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or
a Subsidiary of such Person of an obligation of another Person shall be deemed
to be the interest expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication)
(1) all gains or losses which are extraordinary (as determined in
accordance with GAAP) (including any gain from the sale or other
disposition of assets outside the ordinary course of business or from the
issuance or sale of any capital stock),
(2) the net income, if positive, of any Person, other than a
Consolidated Subsidiary, in which such Person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
Consolidated Subsidiary of such Person during such period, but in any case
not in excess of such Person's pro rata share of such Person's net income
for such period,
(3) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition,
(4) the net income, if positive, of any of such Person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the
terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Consolidated Subsidiary, and
(5) the net income of, and all dividends and distributions from, any
Unrestricted Subsidiary.
"Consolidated Net Worth" of any Person at any date means the aggregate
consolidated stockholders' equity of such Person (plus amounts of equity
attributable to preferred stock) as would be shown on the consolidated balance
sheet of such Person prepared in accordance with GAAP, adjusted to exclude (to
the extent included in calculating such equity), (a) the amount of any such
stockholders' equity attributable to Disqualified Capital Stock or treasury
stock of such Person and its Consolidated Subsidiaries, (b) all upward
revaluations and other write-ups in the book value of any asset of such Person
or a Consolidated Subsidiary of such Person subsequent to the Issue Date, and
(c) all investments in subsidiaries that are not Consolidated Subsidiaries and
in Persons that are not Subsidiaries.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such Person in accordance with GAAP.
"Consolidation" means the consolidation of our accounts with the accounts of
our Subsidiaries, all in accordance with GAAP; provided, that "consolidation"
will not include consolidation of the accounts of any Unrestricted Subsidiary
with our accounts. The term "consolidated" has a correlative meaning to the
foregoing.
"Continuing Director" means during any period of 12 consecutive months after
the Issue Date, individuals who at the beginning of any such 12-month period
constituted our Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for election by our
shareholders was approved by a vote of a majority of the directors then still
in office who were either directors
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at the beginning of such period or whose election or nomination for election
was previously so approved, including new directors designated in or provided
for in an agreement regarding the merger, consolidation or sale, transfer or
other conveyance, of all or substantially all of our assets, if such agreement
was approved by a vote of such majority of directors).
"Credit Agreement" means the credit agreement, dated as of September 30,
1999, by and among us, certain of our Subsidiaries, certain financial
institutions and Bank One, NA, as agent and representative, providing for
(1) an aggregate $100.0 million term loan facility, and
(2) an aggregate $100.0 million revolving credit facility,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, as such credit agreement and/or
related documents may be amended, restated, supplemented, renewed, replaced or
otherwise modified from time to time whether or not with the same agent,
trustee, representative lenders or holders, and, subject to the proviso to the
next succeeding sentence, irrespective of any changes in the terms and
conditions thereof. Without limiting the generality of the foregoing, the term
"Credit Agreement" shall include agreements in respect of Interest Swap and
Hedging Obligations with lenders party to the Credit Agreement or their
affiliates and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any Credit
Agreement and all refundings, refinancings and replacements of any Credit
Agreement, including any agreement
(1) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
(2) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and issuers include one or more of us and our Subsidiaries and
our respective successors and assigns,
(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder; provided, that on the date such
Indebtedness is incurred its incurrence would not be prohibited by the
Indenture, or
(4) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms of the Indenture.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means Senior Debt from time to time outstanding
under the Credit Agreement.
"Disqualified Capital Stock" means, with respect to any Person,
(1) Equity Interests of such Person that, by its terms or by the terms
of any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time or both would
be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such Person or any of its Subsidiaries, in whole or in
part, on or prior to the Stated Maturity of the Notes, and
(2) any Equity Interests of any Subsidiary of such Person other than any
common equity with no preferences, privileges, and no redemption or
repayment provisions.
"Equity Interests" means Capital Stock or partnership, participation or
membership interests and all warrants, options or other rights to acquire
Capital Stock or partnership, participation or membership interests (but
excluding any debt security that is convertible into, or exchangeable for,
Capital Stock or partnership, participation or membership interests).
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"Event of Loss" means, with respect to any property or asset, any (1) loss,
destruction or damage of such property or asset or (2) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Persons" means (1) David Schwartz, Alice Schwartz, Norman D.
Schwartz, Steven Schwartz, (2) any spouse, immediate family member, relative or
lineal descendant of any person described in clause (1), (3) any trust in which
any one or more of the persons described in clause (1) or (2) holds all of the
beneficial interests, and (4) any Affiliate of the persons described in clause
(1) or (2).
"Exempted Affiliate Transaction" means (1) customary employee compensation
and benefit arrangements approved by a majority of independent (as to such
transactions) members of our Board of Directors, (2) Restricted Payments, other
than Investments, permitted under the terms of the covenant discussed above
under the heading "Limitation on Restricted Payments," (3) transactions solely
between us and any Guarantor, or solely among Guarantors, (4) payment of
reasonable directors' fees to persons who are not otherwise our Affiliate, (5)
sales of Equity Interests (other than Disqualified Capital Stock) to our
Affiliates, (6) performance of all agreements in existence on the Issue Date
and any modification thereto or any transaction contemplated thereby in any
replacement agreement therefor so long as such modification or replacement is
not more disadvantageous to us, any of our Subsidiaries or the Holders in any
material respect than the original agreement as in effect on the Issue Date,
(7) transactions with suppliers or vendors pursuant to purchase orders executed
in the ordinary course of business consistent with past practice and (8)
transactions solely between us and any Subsidiary or solely among Subsidiaries;
provided, that in the case of clauses (7) and (8) only, such transactions are
otherwise in compliance with the covenant described above under the heading
"Limitations on Transactions with Affiliates" without giving effect to the
application of clause (3) of such covenant.
"Existing Indebtedness" means our Indebtedness and the Indebtedness of our
Subsidiaries immediately after giving effect to the Transactions (other than
Indebtedness under the Credit Agreement) in existence on the Issue Date,
reduced to the extent such amounts are repaid, refinanced or retired.
"Foreign Subsidiary" means any of our Subsidiaries which (1) is not
organized under the laws of the United States, any state thereof or the
District of Columbia and (2) conducts substantially all of its business
operations outside the United States of America.
"Foreign Subsidiary Credit Agreement" means any credit agreement or similar
instrument, including, without limitation, working capital or equipment
purchase lines of credit, entered into by any Foreign Subsidiary governing the
terms of a bona fide borrowing by such Foreign Subsidiary from (a) a third-
party financial institution that is primarily engaged in the business of
commercial banking or (b) a vendor or other provider of financial
accommodations in connection with the purchase of equipment, in either case for
valid business purposes, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, as such
may be amended, restated, supplemented, renewed, replaced or otherwise modified
from time to time whether or not with the same agent, trustee, representative
lenders or holders, and, subject to the proviso to the next succeeding
sentence, irrespective of any changes in the terms and conditions thereof.
Without limiting the generality of the foregoing, the term "Foreign Subsidiary
Credit Agreement" shall include agreements in respect of Interest Swap and
Hedging Obligations with lenders party to a Foreign Subsidiary Credit Agreement
and shall also include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Foreign Subsidiary
Credit Agreement and all refundings, refinancings and replacements of any
Foreign Subsidiary Credit Agreement, including any agreement
(1) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
(2) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and issuers include one or more of the Foreign Subsidiaries and
their respective successors and assigns,
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(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder; provided, that on the date such
Indebtedness is incurred its incurrence would not be prohibited by the
Indenture, or
(4) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms of the Indenture.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect from time to time.
"Genetic Systems" means Genetic Systems Corporation, a Delaware
corporation.
"Guarantor" means each of our Subsidiaries that in the future executes a
Guarantee pursuant to and in accordance with the requirements of the Indenture
in which such Subsidiary unconditionally guarantees on a senior subordinated
basis our obligations under the Notes and the Indenture; provided, that any
Person constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the
terms of the Indenture.
"Indebtedness" of any Person means, without duplication,
(1) all liabilities and obligations, contingent or otherwise, of such
Person, to the extent such liabilities and obligations would appear as a
liability upon the consolidated balance sheet of such Person in accordance
with GAAP
(a) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof),
(b) evidenced by bonds, notes, debentures or similar instruments,
(c) representing the balance deferred and unpaid of the purchase
price of any property or services, except (other than accounts payable
or other obligations to trade creditors which have remained unpaid for
greater than 90 days past their original due date) those incurred in the
ordinary course of its business that would constitute ordinarily a trade
payable to trade creditors,
(d) evidenced by bankers' acceptances or similar instruments issued
or accepted by banks, or
(e) relating to any Capitalized Lease Obligation,
(2) all liabilities and obligations, contingent or otherwise, of such
Person evidenced by a letter of credit or a reimbursement obligation of
such Person with respect to any letter of credit,
(3) all net obligations of such Person under Interest Swap and Hedging
Obligations,
(4) all liabilities and obligations of others of the kind described in
the preceding clause (1), (2) or (3) that such Person has guaranteed or
provided credit support or that is otherwise its legal liability or which
are secured by any assets or property of such Person,
(5) any and all deferrals, renewals, extensions, refinancing and
refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (1), (2), (3), (4), or this clause (5), whether or not between or
among the same parties,
(6) all Disqualified Capital Stock of such Person (measured at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends), and
(7) all obligations to purchase, redeem or acquire any third-party
Equity Interests.
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For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value to be determined in good
faith by the board of directors of the issuer (or managing general partner of
the issuer) of such Disqualified Capital Stock.
The amount of any Indebtedness outstanding as of any date shall be (1) the
accreted value thereof, in the case of any Indebtedness issued with original
issue discount, but the accretion of original issue discount in accordance with
the original terms of Indebtedness issued with an original issue discount will
not be deemed to be an incurrence and (2) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any Person in any other Person means (without duplication):
(1) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities
or otherwise) of Equity Interests, bonds, notes, debentures, partnership or
other ownership interests or other securities of such other Person or any
agreement to make any such acquisition;
(2) the making by such Person of any deposit with, or advance, loan or
other extension of credit to, such other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) or
any written commitment to make any such advance, loan or extension (but
excluding accounts receivable, endorsements for collection or deposits
arising in the ordinary course of business) within one year;
(3) other than guarantees of our Indebtedness or any Subsidiary to the
extent permitted by the covenant described above under the heading
"Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock," any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
Person;
(4) the making of any capital contribution (which shall be deemed to
include payment of consideration in excess of fair market value of any
assets received) by such Person to such other Person; and
(5) the designation by our Board of Directors of any Person to be an
Unrestricted Subsidiary.
We shall be deemed to make an Investment in an amount equal to the fair
market value of the net assets of any subsidiary (or, if neither we nor any of
our Subsidiaries has theretofore made an Investment in such subsidiary, in an
amount equal to the Investments being made), at the time that such subsidiary
is designated an Unrestricted Subsidiary, and any property transferred to an
Unrestricted Subsidiary from us or one of our Subsidiaries shall be deemed an
Investment valued at its fair market value at the time of such transfer. The
fair market value of each Investment shall be measured at the time made or
returned, as applicable.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Junior Security" means any Qualified Capital Stock and any Indebtedness of
ours or a Subsidiary, as applicable, that is contractually subordinated in
right of payment to Senior Debt at least to the same extent as
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the Notes, and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Notes; provided, that in the case of subordination in respect of Designated
Senior Debt, "Junior Security" shall mean any Qualified Capital Stock and any
Indebtedness of ours or the Subsidiary that
(1) has a final maturity date occurring after the final maturity date of
all Designated Senior Debt on the date of issuance of such Qualified
Capital Stock or Indebtedness,
(2) is unsecured,
(3) has an Average Life longer than the security for which such
Qualified Capital Stock or Indebtedness is being exchanged, and
(4) by their terms or by law are subordinated to Designated Senior Debt
on the date of issuance of such Qualified Capital Stock or Indebtedness at
least to the same extent as the Notes.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Liquidated Damages" means all liquidated damages then owing pursuant to the
Registration Rights Agreement.
"Material Domestic Subsidiary" means any Subsidiary (other than a Foreign
Subsidiary) that is a Significant Subsidiary or any group of Subsidiaries
(other than Foreign Subsidiaries) that on a combined basis would constitute a
Significant Subsidiary.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by us in the case of a sale of Qualified Capital Stock or a Capital
Contribution and by us and our Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of our securities (including options, warrants, rights
and convertible or exchangeable debt) that were issued for cash on or after the
Issue Date, the amount of cash originally received by us upon the issuance of
such securities (including options, warrants, rights and convertible or
exchangeable debt) less, in each case, the sum of all payments, fees,
commissions and (in the case of Asset Sales, reasonable and customary),
expenses (including, without limitation, the fees and expenses of legal counsel
and investment banking fees and expenses) incurred in connection with such
Asset Sale, sale of Qualified Capital Stock or Capital Contribution, and, in
the case of an Asset Sale only, less the amount (estimated reasonably and in
good faith by us) of income, franchise, sales and other applicable taxes
required to be paid by us or any of our Subsidiaries in connection with such
Asset Sale in the taxable year that such sale is consummated or in the
immediately succeeding taxable year, the computation of which shall take into
account the reduction in tax liability resulting from any available operating
losses and net operating loss carryovers, tax credits and tax credit
carryforwards, and similar tax attributes.
"Non-Recourse Indebtedness" means Indebtedness of a Person as to which
neither we nor any Subsidiary provides any guarantee, collateral or other
credit support of any kind whatsoever.
"Obligation" means any principal, premium or interest payment, or monetary
penalty, or damages, due by us or any Guarantor under the terms of the Notes or
the Indenture, including any Liquidated Damages due pursuant to the terms of
the Registration Rights Agreement.
"Offering" means the offering of the Notes by us.
"Officers' Certificate" means the officers' certificate to be delivered upon
the occurrence of certain events as set forth in the Indenture.
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"Permitted Investment" means:
(1) any Investment in us or any Subsidiary; provided, that Investments
by us or any Guarantor in Subsidiaries (other than Guarantors) shall be
limited to $15 million in the aggregate, subject to clause (4) below;
(2) any Investment in Cash Equivalents;
(3) intercompany notes to the extent permitted under the covenant
described above under the heading "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock;"
(4) any Investment by us or any Subsidiary in a Person in a Related
Business if as a result of such Investment such Person immediately becomes
a Subsidiary or such Person is immediately merged with or into us or a
Subsidiary; provided, that Investments by us or any Guarantor under this
clause (4) shall be subject to and reduce dollar for dollar the amount of
Investments in Subsidiaries that may be made under clause (1) above,
unless, as a result of such Investment, such Person immediately becomes a
Guarantor or is immediately merged with or into us or a Guarantor, in which
case such Investment shall not reduce the amount available under clause
(1);
(5) other Investments in any Person or Persons; provided, that after
giving pro forma effect to each such Investment, the aggregate amount of
all such Investments made on and after the Issue Date pursuant to this
clause (5) that are outstanding (after giving effect to any such
Investments that are returned to us or any Subsidiary that made such prior
Investment, without restriction, in cash on or prior to the date of any
such calculation, but only up to the amount of the Investment made under
this clause (5) in such Person) at any time does not in the aggregate
exceed $10 million (measured by the value attributed to the Investment at
the time made);
(6) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that complies with the covenant described
above under "Limitation on Sale of Assets and Subsidiary Stock;"
(7) any acquisition of assets solely in exchange for the issuance of our
Equity Interests (other than Disqualified Capital Stock);
(8) any Investment in connection with Interest Swap and Hedging
Obligations otherwise permitted under this Indenture;
(9) any Investment received (a) in satisfaction of judgments or (b) as
payment on a claim made in connection with any bankruptcy, liquidation,
receivership or other insolvency proceeding; and
(10) Investments in a Person or Persons existing on the Issue Date, plus
additional Investments in such Person or Persons made on or after the Issue
Date in an aggregate amount not to exceed at any time outstanding $10
million.
"Permitted Lien" means:
(1) Liens existing on the Issue Date, immediately after giving effect to
the Transactions;
(2) Liens imposed by governmental authorities for taxes, assessments or
other charges not yet subject to penalty or which are being contested in
good faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on our books and records in accordance with
GAAP;
(3) statutory liens of carriers, warehousemen, mechanics, material men,
landlords, repairmen or other like Liens arising by operation of law in the
ordinary course of business; provided, that (a) the underlying obligations
are not overdue for a period of more than 30 days, or (b) such Liens are
being contested in good faith and by appropriate proceedings and adequate
reserves with respect thereto are maintained on our books in accordance
with GAAP;
(4) Liens securing the Notes and the Exchange Notes;
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(5) Liens securing Indebtedness of a Person existing at the time such
Person becomes one of our Subsidiaries or is merged with or into us or one
of our Subsidiaries or Liens securing Indebtedness incurred in connection
with an Acquisition; provided, that such Liens were in existence prior to
the date of such acquisition, merger or consolidation, were not incurred in
anticipation thereof, and do not extend to any other assets;
(6) Liens arising from Purchase Money Indebtedness permitted to be
incurred pursuant to the Indenture; provided, that such Liens relate solely
to the property which is subject to such Purchase Money Indebtedness;
(7) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by us or any of
our Subsidiaries in the ordinary course of business;
(8) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to
the Holders than the terms of the Liens securing such refinanced
Indebtedness; provided, that, the Indebtedness secured is not increased and
the Lien is not extended to any additional assets or property that would
not have been security for the Indebtedness refinanced;
(9) Liens securing Indebtedness under the Credit Agreement incurred in
accordance with the terms of the Indenture;
(10) Liens securing Indebtedness of any Foreign Subsidiary incurred in
accordance with the terms of the Indenture;
(11) Liens in favor of Bio-Rad or any Subsidiary Guarantor;
(12) Liens securing reimbursement obligations with respect to commercial
letters of credit which solely encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(13) Liens securing other Indebtedness not exceeding $10.0 million at
any time outstanding; and
(14) Liens on the Equity Interests of Unrestricted Subsidiaries securing
obligations of Unrestricted Subsidiaries to the extent permitted by the
terms of the Indenture.
"Person" or "person" means any corporation, individual, limited liability
company, joint stock company, joint venture, partnership, limited liability
partnership, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality or other
entity.
"Preferred Stock" means any Equity Interest of any class or classes of a
Person (however designated) which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
"Pro Forma" or "pro forma" shall have the meaning set forth in Regulation S-
X of the Securities Act of 1933, as amended, unless otherwise specifically
stated herein.
"Purchase Money Indebtedness" of any Person means any Indebtedness of such
Person to any seller or other Person incurred solely to finance the acquisition
(including in the case of a Capitalized Lease Obligation, the lease),
construction, installation or improvement of any after acquired real or
personal tangible property which, is directly related to a Related Business of
the Company and which is incurred concurrently with (or within 180 days
following) such acquisition, construction, installation or improvement and is
secured only by the assets so financed.
"Qualified Capital Stock" means any of our Capital Stock that is not
Disqualified Capital Stock.
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"Qualified Exchange" means:
(1) any legal defeasance, redemption, retirement, repurchase or other
acquisition of our Capital Stock or our Indebtedness issued on or after the
Issue Date with the Net Cash Proceeds received by us from the substantially
concurrent sale of our Qualified Capital Stock or, to the extent used to
retire our Indebtedness (other than Disqualified Capital Stock) issued on
or after the Issue Date, our Subordinated Indebtedness;
(2) any issuance of our Qualified Capital Stock in exchange for any of
our Capital Stock or Indebtedness issued on or after the Issue Date; or
(3) any exchange of our Subordinated Indebtedness for our Subordinated
Indebtedness issued on or after the Issue Date.
"Reference Period" with regard to any Person means the four full fiscal
quarters (or such lesser period during which such Person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(1) issued in exchange for, or the proceeds from the issuance and sale
of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in
part, or
(2) constituting an amendment, modification or supplement to, or a
deferral or renewal of (clauses (1) and (2) above are, collectively, a
"Refinancing"), any Indebtedness (including Disqualified Capital Stock) in
a principal amount or, in the case of Disqualified Capital Stock,
liquidation preference, not to exceed (after deduction of reasonable and
customary fees and expenses incurred in connection with the Refinancing
plus the amount of any premium paid in connection with such Refinancing in
accordance with the terms of the documents governing the Indebtedness
refinanced without giving effect to any modification thereof made in
connection with or in contemplation of such refinancing) the lesser of
(1) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness (including
Disqualified Capital Stock) so Refinanced and
(2) if such Indebtedness being Refinanced was issued with an original
issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing;
provided, that (a) such Refinancing Indebtedness shall only be used to
refinance outstanding Indebtedness (including Disqualified Capital Stock) of
such Person issuing such Refinancing Indebtedness, (b) such Refinancing
Indebtedness shall (I) not have an Average Life shorter than the Indebtedness
(including Disqualified Capital Stock) to be so refinanced at the time of such
Refinancing and (II) in all respects, be no less contractually subordinated or
junior, if applicable, to the rights of Holders than was the Indebtedness
(including Disqualified Capital Stock) to be refinanced, (c) such Refinancing
Indebtedness shall have a final stated maturity or redemption date, as
applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness (including Disqualified Capital Stock) to be so
refinanced or, if sooner, 91 days after the Stated Maturity of the Notes, and
(d) such Refinancing Indebtedness shall be secured (if secured) in a manner no
more adverse to the Holders than the terms of the Liens (if any) securing such
refinanced Indebtedness, including, without limitation, the amount of
Indebtedness secured shall not be increased.
"Related Business" means the business conducted (or proposed to be
conducted) by us and our Subsidiaries as of the Issue Date and any and all
businesses that in the good faith judgment of our Board of Directors are
materially related businesses.
"Restricted Investment" means, in one or a series of related transactions,
any Investment other than Permitted Investments.
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"Restricted Payment" means, with respect to any Person:
(1) the declaration or payment of any dividend or other distribution in
respect of Equity Interests of such Person or any parent or Subsidiary of
such Person;
(2) any payment on account of the purchase, redemption or other
acquisition or retirement for value of Equity Interests of such Person or
any Subsidiary or parent of such Person;
(3) other than with the proceeds from the substantially concurrent sale
of, or in exchange for, Refinancing Indebtedness any purchase, redemption,
or other acquisition or retirement for value of, any payment in respect of
any amendment of the terms of or any defeasance of, any Subordinated
Indebtedness (other than the Notes), directly or indirectly, by such Person
or a parent or Subsidiary of such Person prior to the scheduled maturity,
any scheduled repayment of principal, or scheduled sinking fund payment, as
the case may be, of such Indebtedness; and
(4) any Restricted Investment by such Person;
provided, however, that the term "Restricted Payment" does not include
(1) any dividend, distribution or other payment on or with respect
to Equity Interests of an issuer to the extent payable solely in shares
of Qualified Capital Stock of such issuer, or
(2) any dividend, distribution or other payment to us, or to any
Subsidiary, by us or any of our Subsidiaries.
"Senior Debt" with respect to us means Indebtedness (including any monetary
obligation in respect of the Credit Agreement, and interest, whether or not
allowable, accruing on Indebtedness incurred pursuant to the Credit Agreement
after the filing of a petition initiating any proceeding under any bankruptcy,
insolvency or similar law) of ours or any Guarantor arising under the Credit
Agreement or any Guarantee thereof or that is permitted to be incurred under
the terms of the Indenture unless the terms of the instrument creating or
evidencing such Indebtedness expressly provides that it is on a parity with or
subordinated in right of payment to the Notes; provided, that in no event shall
Senior Debt include (1) Indebtedness to any of our Subsidiaries or any officer,
director or employee of ours or any of our Subsidiaries or any other Affiliate,
(2) Indebtedness incurred in violation of the terms of the Indenture, (3)
Indebtedness to trade creditors, (4) Disqualified Capital Stock, (5)
Capitalized Lease Obligations, and (6) any liability for taxes owed or owing by
us or such Guarantor.
"Significant Subsidiary" shall have the meaning provided under Regulation S-
X of the Securities Act, as in effect on the Issue Date, except that all
references to "10%" in such Regulation shall be deemed to be references to "5%"
for purposes of this definition.
"Stated Maturity" when used with respect to any Note, means February 15,
2007.
"Subordinated Indebtedness" means our Indebtedness that is subordinated in
right of payment by its terms or the terms of any document or instrument or
instrument relating thereto to the Notes.
"Subsidiary" with respect to any Person, means (1) a corporation a majority
of whose Equity Interests with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned by such Person,
by such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person, (2) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries of such Person, or such Person and
one or more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has at least majority ownership interest, or (3) a
partnership in which such Person or a Subsidiary of such Person is, at the
time, a general partner and in which such Person, directly or indirectly, at
the date of determination thereof has at least a majority ownership interest.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be a
"Subsidiary" of ours or a "Subsidiary" of any of our Subsidiaries. Unless the
context requires otherwise, Subsidiary means each direct and indirect
Subsidiary of the Company.
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"Treasury Rate" means, as of any Redemption Date, the yield to maturity as
of that Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days before the Redemption Date (or, if that Statistical Release is no
longer published, any publicly available source of similar market date)) most
nearly equal to the period from the Redemption Date to February 15, 2004;
provided, however, that if the period from the Redemption Date to February 15,
2004 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Unrestricted Subsidiary" means any of our subsidiaries that does not own
any Capital Stock of, or own or hold any Lien on any property of, us or any of
our Subsidiaries and that, at the time of determination, shall be an
Unrestricted Subsidiary (as designated by our Board of Directors); provided,
that such subsidiary at the time of such designation
(1) has no Indebtedness other than Non-Recourse Indebtedness,
(2) is not party to any agreement, contract, arrangement or
understanding with us or any of our Subsidiaries unless the terms of any
such agreement, contract, arrangement or understanding are no less
favorable to us or such Subsidiary than those that might be obtained at the
time from Persons who are not our Affiliates,
(3) is a Person with respect to which neither we nor any of our
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels
of operating results, and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of ours or any of our Subsidiaries,
other than Guarantees of the Notes.
Our Board of Directors may designate any Unrestricted Subsidiary to be a
Subsidiary; provided, that (1) no Default or Event of Default is existing or
will occur as a consequence thereof and (2) immediately after giving effect to
such designation, on a pro forma basis, we could incur at least $1.00 of
Indebtedness pursuant to the Debt Incurrence Ratio set forth in the covenant
described above under the heading "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock." Each such designation shall be
evidenced by filing with the Trustee a certified copy of the resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Voting Equity Interests" means Equity Interests which at the time are
entitled to vote in the election of, as applicable, directors, members or
partners generally.
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of
which (other than directors' qualifying Shares) are owned by us or one or more
of our Wholly Owned Subsidiaries.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE
The following discussion summarizes the material U.S. federal income tax
income consequences expected to result to you if you exchange your private
notes for exchange notes in the exchange offer. This summary is based on:
. the facts described in the registration statement of which this
prospectus is a part,
. the Internal Revenue Code of 1986, as amended,
. current, temporary and proposed treasury regulations promulgated under
the Internal Revenue Code,
. the legislative history of the Internal Revenue Code,
. current administrative interpretations and practices of the Internal
Revenue Service, and
. court decisions,
all as of the date of this prospectus. In addition, the administrative
interpretations and practices of the Internal Revenue Service include its
practices and policies as expressed in private letter rulings that are not
binding on the Internal Revenue Service, except with respect to the particular
taxpayers who requested and received those rulings. Future legislation,
treasury regulations, administrative interpretations and practices and/or court
decisions may adversely affect, perhaps retroactively, the tax considerations
contained in this discussion. Any change could apply retroactively to
transactions preceding the date of the change. The tax considerations contained
in this discussion may be challenged by the Internal Revenue Service and may
not be sustained by a court if challenged by the Internal Revenue Service, and
we have not requested, and do not plan to request, any rulings from the
Internal Revenue Service concerning the tax treatment of the exchange of
private notes for the exchange notes.
Certain holders may be subject to special rules not discussed below
including, without limitation:
. insurance companies;
. financial institutions or broker-dealers;
. tax-exempt organizations;
. stockholders holding securities as part of a conversion transaction, or a
hedge or hedging transaction or as a position in a straddle for tax
purposes;
. foreign corporations or partnerships; and
. persons who are not citizens or residents of the United States.
You should consult your tax advisor as to the particular tax consequences of
exchanging private notes for exchange notes, including the applicability and
effect of any state, local or foreign laws.
The exchange of private notes for exchange notes will be treated as a "non-
event" for U.S. federal income tax purposes. That is, the exchange of private
notes for exchange notes will not be treated as an "exchange" for U.S. federal
income tax purposes, because the exchange notes will not be considered to
differ materially in kind or extent from the private notes. Therefore, no
material federal income tax consequences will result to you from exchanging
private notes for exchange notes.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. Broker-dealers may use this
prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of exchange notes received in exchange for private
notes where the broker-dealer acquired the private notes as a result of market-
making activities or other trading activities. We have agreed that for a period
of up to one year after the expiration date, we will make this prospectus, as
amended or supplemented, available to any broker-dealer that requests it in the
letter of transmittal for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by broker-
dealers or any other persons. Broker-dealers may sell exchange notes received
by broker-dealers for their own account pursuant to the exchange offer from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the exchange notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to the prevailing market prices or negotiated
prices. Broker-dealers may resell exchange notes directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any broker-dealer and/or the purchasers of the
exchange notes. Any broker-dealer that resells exchange notes that were
received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of the exchange notes may
be deemed to be "underwriters" within the meaning of the Securities Act and any
profit on any resale of exchange notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify you
against liabilities under the Securities Act.
By its acceptance of the exchange offer, any broker-dealer that receives
exchange notes pursuant to the exchange offer agrees to notify us before using
the prospectus in connection with the sale or transfer of exchange notes. The
broker-dealer further acknowledges and agrees that, upon receipt of notice from
us of the happening of any event which makes any statement in the prospectus
untrue in any material respect or which requires the making of any changes in
the prospectus to make the statements in the prospectus not misleading or which
may impose upon us disclosure obligations that my have a material adverse
effect on us, which notice we agree to deliver promptly to the broker-dealer,
the broker-dealer will suspend use of the prospectus until we have notified the
broker-dealer that delivery of the prospectus may resume and have furnished
copies of any amendment or supplement to the prospectus to the broker-dealer.
LEGAL MATTERS
Certain legal matters in connection with the notes offered hereby will be
passed upon for us by Latham & Watkins, San Francisco, California.
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INDEPENDENT AUDITORS
The consolidated financial statements of Bio-Rad as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999
included in this prospectus have been audited by Arthur Andersen LLP,
independent auditors, as stated in their report appearing herein.
The consolidated financial statements of PSD as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998
included in this prospectus have been audited by PGA, a Member Firm of Andersen
Worldwide, independent auditors, as stated in their report appearing herein.
AVAILABLE INFORMATION
We are subject to the information requirements of the Exchange Act (File No.
001-07928), and in accordance therewith we file periodic reports, proxy
statements and other information with the SEC relating to our business,
financial statements and other matters. The reports, proxy statements and other
information we file may be inspected and copied at prescribed rates at the
SEC's Public Reference Room at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and should be available for inspection and copying at the regional
offices of the SEC located at 7 World Trade Center, Suite 1375, New York, New
York 10048 and at 44 Montgomery Street, Suite 1100, San Francisco, California
94104. You may obtain information on the operation of the SEC's Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an
Internet site that contains reports, proxy statements and other information
regarding issuers that file electronically with the SEC. The address of the
SEC's Internet site is http://www.sec.gov.
This prospectus constitutes part of a registration statement on Form S-4
filed under the Securities Act with respect to the exchange notes to be issued
in the exchange offer. As permitted by the SEC rules, this prospectus omits
some of the information, exhibits and undertakings included in the registration
statement. You may read and copy the information omitted from this prospectus
but contained in the registration statement, as well as the periodic reports
and other information we file with the SEC, at the public reference facilities
maintained by the SEC in Washington, D.C., New York, New York and San
Francisco, California.
Statements contained in this prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance we refer
you to the copy of the contract or document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference.
94
<PAGE>
INCORPORATION BY REFERENCE
We have elected to "incorporate by reference" certain information into this
prospectus. By incorporating by reference, we can disclose important
information to you by referring you to another document we have filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this prospectus, except for information incorporated by reference
that is superseded by information contained in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC:
<TABLE>
<CAPTION>
Bio-Rad SEC Filings (File No. 001-07928) Filed on
---------------------------------------- --------
<S> <C>
Annual Report on Form 10-K (including information
specifically incorporated by reference into our Form 10-K
from our 1999 Annual Report to Stockholders and Proxy
Statement for our 2000 Annual Meeting of Stockholders)... March 29, 2000
Current Report on Form 8-K................................ February 18, 2000
Quarterly Report on Form 10-Q............................. May 15, 2000
</TABLE>
We are also incorporating by reference all other reports that we file with
the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
between the date of this prospectus and the date of the completion of the
exchange offer.
95
<PAGE>
GLOSSARY OF TERMS
<TABLE>
<C> <S>
assay....................... A test for a particular substance.
auto-immunity............... A condition in which an individual's immune
system starts reacting against his or her own
tissues, causing diseases such as lupus.
bacteriology................ The study of a group of single-celled
procaryotic organisms called bacteria.
biotechnology............... The industrial use of living organisms or
biological techniques developed through basic
research.
chromatography.............. An analytical technique used to separate
molecules based on how they tend to cling to or
dissolve in various solids, liquids and gases.
confocal.................... Having the same focus or foci.
DNA......................... (deoxyribonucleic acid): The molecule that
encodes genetic information.
electrophoresis............. (ionophoresis): A method of separating large
molecules (such as DNA fragments or proteins)
from a mixture of similar molecules.
epidemiology................ The scientific study of diseases; includes
analyzing the occurrence and distribution of
diseases and the factors that govern their
spread.
fluorescent label........... A molecule which fluoresces and can be attached
to a probe molecule that does not fluoresce.
FT-IR....................... Fourier Transform Infrared Spectrometry.
gel electrophoresis......... Electrophoresis in which molecules (as proteins
and nucleic acids) migrate through a gel and
separate into bands according to size.
gene transfer............... The transfer of genes into a cell by any of a
number of different methods available.
genetics.................... The study of the patterns of inheritance of
specific traits.
genomics.................... The study of genes, which includes genome
mapping, gene sequencing and gene function.
glycated hemoglobin......... glycate: the product of the nonenzymic reaction
between a sugar and the free amino group(s) of
proteins in which it is not known if the sugar
is attached by a glycosyl or a glycoside
linkage, or has formed a Shiff base.
glycation................... The nonenzymic reaction that forms a glycate.
hemoglobin.................. The protein in red blood cells that carries
oxygen.
homocysteine................ A cardiac marker.
imaging..................... Radiological production of a clinical image
using x-rays, ultrasound, computed tomography,
magnetic resonance, radionuclide scanning,
thermography, etc.; especially, cross-sectional
imaging, such as ultrasonography, CT, or MRI.
The action or process of producing an image
especially by means other than visible light
(acoustic imaging)--compare magnetic resonance
imaging.
medical imaging: The use of MRI scans, x-rays,
PET scans, CT scans, etc. to create pictures of
various features of the human body to aid in
medical diagnosis.
</TABLE>
96
<PAGE>
<TABLE>
<C> <S>
immunoassay................. A test which uses the ability of antibodies to
home in on a particular antigenic target, such
as a bacterial or viral antigen, to identify
its presence in a given sample. In clinical
diagnostics, different methodologies such as
radioimmunoassay (RIA) and enzyme immunoassay
(EIA) are used to give qualitative or
quantitative determinations from patients
samples.
immuno-hematology........... A branch of immunology that deals with the
immunologic properties of blood.
immunology.................. A subfield of biology that deals with the study
of antigens and the immune process and how
humans and higher animals fight off disease.
informatics................. The study of the application of computer and
statistical techniques to the management of
information. In genome projects, informatics
includes the development of methods to search
databases quickly, to analyze DNA sequence
information, and to predict protein sequence
and structure from DNA sequence data.
(bioinformatics: The use of computers in solving
information problems in the life sciences;
mainly, it involves the creation of extensive
electronic databases on genomes, protein
sequences, etc. Secondarily, it involves
techniques such as the three-dimensional
modeling of biomolecules and biologic systems).
(medical informatics: Medical informatics is the
use of computers and software to solve clinical
or health care problems and the use of
algorithms to improve communication,
understanding and management of medical
information).
in vitro.................... Literally, in glass; outside the living body and
in an artificial environment.
liquid chromatography....... A method of separating and purifying a substance
into its component parts.
microbiology................ The study of organisms that are too small to be
seen with the naked eye, such as bacteria,
viruses and yeasts.
phosphor.................... 1: a phosphorescent substance.
2: a luminescent substance that emits light when
excited by radiation (as electrons) and is used
especially in fluorescent lamps and cathode-ray
tubes.
proteomics.................. The study of the protein complement of genes.
radioactive................. radioactive isotope: An isotope of an element
that has an unstable nucleus; it tries to
stabilize itself by giving off ionizing
radiation.
radioisotope................ A radioactive isotope; radioisotopic/adjective.
reagent..................... A substance used (as in detecting or measuring a
component, in preparing a product, or in
developing photographs) because of its chemical
or biological activity.
RIA......................... (radioimmunoassay): immunoassay of a substance
that has been radioactively labeled.
spectral.................... of, relating to, or made by a spectrum.
spectroscopy................ 1: the production and investigation of spectra.
2: the process or technique of using a
spectroscope or spectrometer.
</TABLE>
97
<PAGE>
<TABLE>
<C> <S>
spectrum.................... A continuum of color formed when a beam of light
is dispersed (as by passage through a prism) so
that its component wavelengths are arranged in
an ordered arrangement by a particular
characteristic (as frequency or energy).
toxicology.................. The scientific study of the chemistry, effects
and treatment of poisonous substances.
virology.................... The scientific study of viral and viral
infections.
wafer....................... A thin slice, typically 10-30 mils thick, sawed
from a cylindrical ingot (boule) of bulk
semiconductor material (usually silicon), four
to eight inches in diameter.
</TABLE>
98
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
BIO-RAD LABORATORIES, INC.
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Income.......................................... F-5
Consolidated Statements of Cash Flows...................................... F-6
Consolidated Statements of Changes in Stockholders' Equity................. F-7
Notes to Consolidated Financial Statements................................. F-8
Condensed Consolidated Balance Sheets...................................... F-23
Condensed Consolidated Statements of Income................................ F-24
Condensed Consolidated Statements of Cash Flows............................ F-25
Notes to Condensed Consolidated Financial Statements....................... F-26
PASTEUR SANOFI DIAGNOSTICS
Report of Independent Public Accountants................................... F-28
Consolidated Balance Sheets................................................ F-29
Consolidated Statements of Operations...................................... F-30
Consolidated Statements of Stockholders' Equity............................ F-31
Consolidated Statements of Cash Flows...................................... F-32
Notes to Consolidated Financial Statements................................. F-33
Consolidated Balance Sheet................................................. F-43
Consolidated Statement of Operations....................................... F-44
Consolidated Statement of Stockholders' Equity............................. F-45
Consolidated Statement of Cash Flows....................................... F-46
Notes to Consolidated Financial Statements................................. F-47
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Bio-Rad Laboratories, Inc.:
We have audited the accompanying consolidated balance sheets of Bio-Rad
Laboratories, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income, cash flows
and changes in stockholders' equity for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bio-Rad
Laboratories, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
San Francisco, California, February 9, 2000,
except for Note 14, as to which the date is
February 17, 2000
F-2
<PAGE>
BIO-RAD LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 17,087 $ 10,081
Accounts receivable, less allowance of $9,582 in 1999
and $3,629 in 1998.................................... 193,898 106,010
Inventories:
Raw materials.......................................... 32,398 26,038
Work in process........................................ 31,936 21,614
Finished goods......................................... 61,943 44,759
--------- ---------
Total inventories.................................... 126,277 92,411
Deferred tax assets.................................... 20,584 18,340
Prepaid expenses and other current assets.............. 20,871 8,547
--------- ---------
Total current assets................................. 378,717 235,389
Property, Plant and Equipment:
Land and improvements.................................. 8,937 8,057
Buildings and leasehold improvements................... 73,230 56,280
Equipment.............................................. 168,401 133,838
--------- ---------
Total property, plant and equipment.................. 250,568 198,175
Accumulated depreciation............................... (124,626) (116,045)
--------- ---------
Net property, plant and equipment.................... 125,942 82,130
Marketable Securities.................................... 1,169 6,174
Goodwill................................................. 105,350 18,616
Other Assets............................................. 57,684 24,990
--------- ---------
Total Assets......................................... $ 668,862 $ 367,299
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
BIO-RAD LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................ $ 11,547 $ 8,721
Current maturities of long-term debt..................... 10,413 672
Accounts payable......................................... 64,737 26,706
Accrued payroll and employee benefits.................... 59,919 27,351
Sales, income and other taxes payable.................... 14,086 6,396
Other current liabilities................................ 41,819 27,398
-------- --------
Total current liabilities............................ 202,521 97,244
Long-Term Debt, net of current maturities.................. 239,211 42,339
Deferred Tax Liabilities................................... 7,016 13,382
-------- --------
Total liabilities.................................... 448,748 152,965
-------- --------
Commitments and Contingent Liabilities
Stockholders' Equity:
Preferred stock, $1.00 par value, 2,300,000 shares
authorized;
none outstanding........................................ -- --
Class A common stock, $1.00 par value, 15,000,000 shares
authorized; outstanding 1999--9,977,862; 1998--
9,973,679............................................... 9,978 9,974
Class B common stock, $1.00 par value, 6,000,000 shares
authorized; outstanding 1999--2,484,716; 1998--
2,452,899............................................... 2,485 2,453
Additional paid-in capital............................... 18,830 18,523
Class A treasury stock, 335,450 shares in 1999 and
306,368 shares in 1998 at cost ......................... (7,392) (7,047)
Retained earnings........................................ 200,993 189,838
Accumulated other comprehensive income:
Currency translation................................... (4,741) 92
Net unrealized holding gain (loss) on marketable
securities............................................ (39) 501
-------- --------
Total stockholders' equity........................... 220,114 214,334
-------- --------
Total Liabilities and Stockholders' Equity........... $668,862 $367,299
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BIO-RAD LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales....................................... $549,489 $441,942 $426,914
Cost of goods sold.............................. 255,223 202,438 189,331
-------- -------- --------
Gross profit.................................... 294,266 239,504 237,583
Selling, general and administrative expense..... 194,457 166,978 164,792
Product research and development expense........ 51,210 41,381 46,138
Purchased in-process research and development
expense........................................ 15,500 -- --
-------- -------- --------
Income from operations.......................... 33,099 31,145 26,653
Other income (expense):
Interest expense.............................. (12,741) (3,731) (1,216)
Investment income, net........................ 873 8,790 1,601
Other, net.................................... (4,815) (1,976) (4,310)
-------- -------- --------
Income before taxes............................. 16,416 34,228 22,728
Provision for income taxes...................... 4,695 9,926 6,364
-------- -------- --------
Net income...................................... $ 11,721 $ 24,302 $ 16,364
======== ======== ========
Basic earnings per share:
Net income.................................... $ 0.97 $ 1.98 $ 1.33
======== ======== ========
Weighted average common shares................ 12,110 12,264 12,260
======== ======== ========
Diluted earnings per share:
Net income.................................... $ 0.96 $ 1.97 $ 1.32
======== ======== ========
Weighted average common shares................ 12,165 12,358 12,394
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
BIO-RAD LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers................ $ 527,132 $ 436,029 $ 414,694
Cash paid to suppliers and employees........ (453,266) (395,265) (381,489)
Interest paid............................... (9,307) (3,833) (1,155)
Income tax payments......................... (17,237) (9,370) (10,950)
Miscellaneous receipts (payments)........... (2,341) (226) 9
--------- --------- ---------
Net cash provided by operating activities... 44,981 27,335 21,109
Cash flows from investing activities:
Capital expenditures, net................... (27,275) (21,176) (23,571)
Payments for acquisitions................... (202,828) -- (31,238)
Purchases of marketable securities and
investments................................ (2,216) (19,086) (8,352)
Sales of marketable securities and
investments................................ 6,600 16,367 3,419
Foreign currency hedges, net................ 2,401 (1,360) 3,817
--------- --------- ---------
Net cash used in investing activities....... (223,318) (25,255) (55,925)
Cash flows from financing activities:
Net borrowings under line-of-credit
arrangements............................... (13,493) (1,365) 4,665
Long-term borrowings........................ 353,108 133,710 87,275
Payments on long-term debt.................. (151,788) (130,666) (55,329)
Arrangement and other fees for long-term
acquisition financing...................... (5,008) -- --
Proceeds from issuance of common stock...... 343 103 1,459
Purchase of treasury stock.................. (2,233) (4,665) (5,302)
Reissuance of treasury stock................ 1,322 1,978 750
--------- --------- ---------
Net cash provided by (used in) financing
activities................................. 182,251 (905) 33,518
Effect of exchange rate changes on cash....... 3,092 (1,937) 2,751
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 7,006 (762) 1,453
Cash and cash equivalents at beginning of
year......................................... 10,081 10,843 9,390
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 17,087 $ 10,081 $ 10,843
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
BIO-RAD LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Common Stock, $1.00 par value:
Balance at beginning of year............... $ 12,427 $ 12,421 $ 12,321
Issuance of common stock................... 36 6 100
Balance at end of year..................... 12,463 12,427 12,421
Additional Paid-In Capital:
Balance at beginning of year............... 18,523 18,426 17,067
Issuance of common stock................... 307 97 1,359
Balance at end of year..................... 18,830 18,523 18,426
Treasury Stock:
Balance at beginning of year............... (7,047) (6,006) (1,639)
Purchase of treasury stock................. (2,233) (4,665) (5,302)
Reissuance of treasury stock............... 1,888 3,624 935
Balance at end of year..................... (7,392) (7,047) (6,006)
Retained Earnings:
Balance at beginning of year............... 189,838 167,182 151,003
Net income................................. 11,721 24,302 16,364
Reissuance of treasury stock at less than
cost...................................... (566) (1,646) (185)
Balance at end of year..................... 200,993 189,838 167,182
Accumulated Other Comprehensive Income:
Balance at beginning of year............... 593 4,654 4,756
Currency translation adjustments........... (4,833) 1,241 (4,719)
Net unrealized holding gains............... 66 819 5,746
Reclassification adjustment for gains
included in net income.................... (606) (6,121) (1,129)
Balance at end of year..................... (4,780) 593 4,654
-------- -------- --------
Total Stockholders' Equity............... $220,114 $214,334 $196,677
======== ======== ========
Comprehensive Income:
Net income................................. $ 11,721 $ 24,302 $ 16,364
Currency translation adjustments........... (4,833) 1,241 (4,719)
Net unrealized holding gains............... 66 819 5,746
Reclassification adjustments for gains
included in net income.................... (606) (6,121) (1,129)
-------- -------- --------
Total Comprehensive Income............... $ 6,348 $ 20,241 $ 16,262
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except share and per share data)
1. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Bio-Rad
Laboratories, Inc. and all subsidiaries ("Bio-Rad" or the "Company") after
elimination of intercompany balances and transactions. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes.
Changes in such estimates may affect amounts reported in the future. Certain
amounts in the financial statements of prior years have been reclassified to be
consistent with the 1999 presentation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with
original maturities of three months or less which are readily convertible into
cash. Cash equivalents are stated at cost, which approximates market value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade accounts receivable. The Company
performs credit evaluation procedures and with the exception of certain
developing countries, generally does not require collateral. As a result of
increased risk in these countries, some Bio-Rad sales are subject to collateral
letters of credit. Credit risk is limited due to the large number of customers
and their dispersion across many geographic areas. However, a significant
amount of trade receivables are with national healthcare systems in countries
within the European Economic Community. The Company does not currently
anticipate a credit risk associated with these receivables.
Inventory Valuation
Inventories are valued at the lower of average cost or market and include
material, labor and overhead costs.
Property, Plant and Equipment
Property, plant and equipment are carried at historical cost. Depreciation
is computed on a straight-line basis over the estimated useful lives of the
assets ranging from two to thirty years. Leasehold improvements are amortized
over the lives of the respective leases or the lives of the improvements,
whichever is shorter.
Marketable Securities
The Company's marketable securities are classified as available-for-sale and
are recorded at current market value. Unrealized holding gains and losses are
included as a separate component of stockholders' equity. Realized gains and
losses are included in investment income. For the purpose of determining
realized gains and losses, the cost of securities sold is based upon specific
identification.
F-8
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Goodwill
Goodwill, representing the excess of the cost over the net tangible and
identifiable intangible assets of acquired businesses, is stated at cost and is
amortized on a straight-line basis over the estimated future periods to be
benefited, typically ten to fifteen years. Goodwill, other intangibles and
other long-lived assets are periodically reviewed for impairment to ensure they
are properly valued.
Revenue Recognition and Warranty
Bio-Rad recognizes revenues when products are shipped or services are
rendered and all significant obligations of the Company have been met. Where
appropriate, the Company also establishes a concurrent reserve for returns and
allowances.
The Company warrants certain equipment against defects in design, materials
and workmanship, generally for one year. Upon shipment of equipment sold at a
price which includes a warranty, the Company establishes, as part of cost of
goods sold, a provision for the expected costs of such warranty.
Foreign Currency Translation
Balance sheet accounts of international subsidiaries are translated at the
current exchange rate as of the end of the accounting period. Income statement
items are translated at average exchange rates. The resulting translation
adjustment is recorded as a separate component of stockholders' equity.
Forward Exchange Contracts
The Company does not use derivative financial instruments for speculative or
trading purposes. As part of distributing its products, the Company regularly
enters into intercompany transactions. The Company enters into forward foreign
exchange contracts to hedge against future movements in foreign exchange rates
that affect foreign currency denominated intercompany receivables and payables.
These contracts generally have maturity dates of 60 days or less, relate
primarily to currencies of industrial countries and are marked to market at
each balance sheet date. The resulting gains or losses are included in other
income and expense and offset exchange losses or gains on the related
receivables and payables. Unrealized gains and losses are not deferred.
Exchange gains and losses on these contracts are net of premiums and discounts
which result from interest rate differentials between the U.S. and the
countries of the currencies being traded. The cash flows related to these
contracts are classified as cash flows from investing activities in the
Statement of Cash Flows.
Stock Compensation Plans
Stock-based compensation is recognized using the intrinsic value method. For
disclosure purposes, pro forma net income and earnings per share are provided
as if the fair value method had been applied.
Earnings Per Share
Basic earnings per share are calculated on the basis of the weighted average
number of common shares outstanding for each period. Diluted earnings per share
are calculated assuming the exercise of certain stock options. Treasury stock
is not considered outstanding for purposes of calculating weighted average
shares.
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including cash and cash
equivalents, accounts receivable, notes payable, accounts payable, long-term
debt and forward exchange contracts, the carrying
F-9
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
amounts approximate fair value. The fair values of other instruments are
disclosed in relevant notes to the financial statements.
2. Acquisitions
In October 1999, the Company acquired Pasteur Sanofi Diagnostics S.A., a
French corporation (PSD), from its shareholders, Sanofi-Synthelabo S.A. and
Institut Pasteur. The Company paid $202,828 for all of the capital stock of PSD
(and certain ancillary assets and assumed liabilities related to PSD). PSD was
founded by the Institut Pasteur and operates in the HIV and infectious disease
diagnostic product market. The purchase of PSD was financed with the proceeds
from a $200,000 Senior Credit Agreement and a $100,000 Senior Subordinated
Credit Agreement (see Note 5). The acquisition was accounted for using the
purchase method of accounting. The operating results of PSD have been included
in the Consolidated Statement of Income from the date of acquisition.
As a result of the acquisition, the Company recorded $88,630 of goodwill.
Goodwill reflects the excess of the purchase price, purchase liabilities and
liabilities assumed over the fair value of net identifiable assets and in-
process research and development projects acquired. Acquired in-process
research and development of $15,500 was charged to expense in the fourth
quarter in accordance with generally accepted accounting principles. Purchase
liabilities recorded included approximately $14,000 for severance and other
employee costs and $4,000 for the consolidation and closure of certain leased
facilities. The Company expects to complete its workforce reduction by
September 30, 2000. The closure of facilities identified by the Company will be
completed in fiscal 2000, with lease payments, net of sublease revenues,
continuing until all contractual obligations are met. For the year 1999 no
material amounts were charged to the purchase liability for severance and
facility closures. The Company does not believe that the final purchase price
allocation will differ significantly from the preliminary purchase price
allocation recorded in the current fiscal year.
As the Company's 1999 financial statements include only three months of
operations of PSD, the following selected unaudited pro forma information is
being provided to present a summary of the combined results of Bio-Rad and PSD
as if the acquisition had occurred as of January 1, 1998, giving effect to
purchase accounting adjustments and actual costs of financing. The pro forma
data is for informational purposes only and may not necessarily reflect the
results of operations of Bio-Rad had PSD operated as part of the Company for
the years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Unaudited Pro Forma
Year Ended December 31,
-----------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales............................................ $ 722,000 $ 669,800
Net income (loss)................................ $ 6,300 $ (5,000)
Basic earnings (loss)per share................... $ 0.52 $ (0.41)
</TABLE>
The pro forma amounts reflect the results of operations for Bio-Rad and PSD
and the following purchase accounting adjustments for the periods presented:
Amortization of intangible assets and goodwill based on the purchase
price allocation for the period presented.
Amortization of debt financing fees and expenses over the relative term
of the following debt: Senior Credit Agreement, Senior Subordinated Credit
Facility and Senior Subordinated Notes.
The additional interest expense on debt incurred to finance the
acquisition offset by a reduction of historical interest resulting from the
elimination of PSD's debt.
F-10
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The estimated income tax effect on the pro forma adjustments, including
a limitation on the deductibility of goodwill amortization.
The pro forma statements do not include the $15,500 write-off of in-
process research and development. This charge is included in the
Consolidated Statements of Operations of the Company for 1999.
3. Marketable Securities
The Company's portfolio is comprised principally of equity securities with
an aggregate market value of $1,169 and $6,174 and cost of $1,224 and $5,469 at
December 31, 1999 and 1998, respectively. At December 31, 1999, gross
unrealized holding gains and losses were $104 and $159, respectively. At
December 31, 1998, gross unrealized holding gains and losses were $1,044 and
$339, respectively.
Information regarding the proceeds and gross realized gains and losses from
sales of securities is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Proceeds....................................... $ 6,600 $ 16,367 $ 3,419
======= ======== =======
Gross realized gains........................... $ 1,260 $ 9,168 $ 1,211
Gross realized losses.......................... (410) (548) (82)
------- -------- -------
Net realized gains............................. $ 850 $ 8,620 $ 1,129
======= ======== =======
</TABLE>
4. Investment in Affiliates
In December 1997, Bio-Rad began investing in Instrumentation Laboratory,
S.p.A. (IL), an Italian based clinical diagnostics company. At December 31,
1999, Bio-Rad held approximately 27% of the outstanding stock of IL. A
privately held company based in Spain controls over 50% of the outstanding
stock of IL. The most recently published financial statements for IL are as of
February 28, 1999.
Given the limited availability of financial information and the low volume
of shares traded, Bio-Rad management does not believe there is a sufficient
liquid market for IL stock. Accordingly, the investment is reported as Other
Assets. Additionally, since Bio-Rad does not have the ability to significantly
influence the operating and financial policies of IL, the investment has been
recorded at its cost of $18,830.
An unrealized holding gain of $652 was included in comprehensive income in
1997. This amount was reversed in 1998 when the investment in IL was
reclassified to Other Assets.
5. Notes Payable and Long-Term Debt
Notes payable include local credit lines maintained by the Company's
subsidiaries aggregating approximately $32,742, of which $21,195 was unused at
December 31, 1999. The weighted average interest rate on these lines was 5.76%
and 5.14% at December 31, 1999 and 1998, respectively. The parent company
guarantees most of these credit lines.
F-11
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The principal components of long-term debt are as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1999 1998
-------- -------
<S> <C> <C>
Senior Subordinated Credit Agreement..................... $100,000 $ --
Term loan................................................ 100,000 --
Revolving credit agreement............................... 49,000 42,000
Capitalized leases....................................... 624 606
Other.................................................... -- 405
-------- -------
249,624 43,011
Less current maturities.................................. 10,413 672
-------- -------
Long-Term Debt........................................... $239,211 $42,339
======== =======
</TABLE>
On September 30, 1999, the Company entered into a $200,000 Senior Credit
Agreement and a $100,000 Senior Subordinated Credit Agreement to finance the
acquisition of PSD and certain related assets and to provide funds for working
capital needs. The Senior Credit Agreement included a term loan and revolving
facility, each in the amount of $100,000. Debt issue costs related to these
financings were $8,600.
The $100,000 Senior Subordinated Credit Agreement was replaced on January
31, 2000 (see Note 14).
The term loan and revolving facility are secured by an interest in the
Company's assets. Interest on both loans is based upon either the Eurodollar,
the Federal Funds effective or corporate based (prime) rate. The term loan
interest rate was 8.92% at December 31, 1999. The revolving credit agreement
provides for borrowings on a secured basis through September 2004. The
interest rate at December 31, 1999 was 9.13%. A commitment fee ranging from
.30% to .50% annually is charged on the daily unborrowed portion of the
revolving credit agreement.
The Company entered into interest rate swap agreements to reduce the impact
of changing interest rates on its revolving credit agreement. At December 31,
1999, the Company had two interest rate swap agreements with commercial banks,
having an aggregate notional amount of $25,000. The agreements essentially fix
the Company's interest rate exposure on $25,000 worth of floating rate loans
under its revolving credit agreement at 8.50%. The agreements mature December
29, 2000 and June 30, 2002. The resulting applicable interest rate was 8.81%
on the revolving facility versus an effective rate of 9.13%. In terms of the
interest rate swap, the Company is exposed to credit loss in the event of
nonperformance by a counterparty, however the Company has not experienced such
nonperformance to date and considers such a possibility remote.
The Senior Credit Agreement (including amendments) requires the Company,
among other things, to comply with certain financial ratios. The Company was
in compliance with all financial ratios as of December 31, 1999. This
agreement also contains certain other restrictions, including limitations on
payment of cash dividends, sales of assets, incurrence of indebtedness, the
creation of liens, making certain investments and engaging in sale/leaseback
transactions.
Maturities of long-term debt at December 31, 1999, are as follows: 2000--
$10,413; 2001--$15,137; 2002--$20,074; 2003--$25,000; 2004--$79,000;
thereafter--$100,000.
F-12
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Income Taxes
The U.S. and international components of income before taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
U.S........................................... $15,176 $24,173 $11,343
International................................. 1,240 10,055 11,385
------- ------- -------
Income before taxes........................... $16,416 $34,228 $22,728
======= ======= =======
The provision for income taxes consists of:
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current:
U.S. Federal................................ $ 4,583 $ 8,564 $ 3,277
International............................... 8,323 4,974 3,226
U.S. State.................................. 853 374 552
------- ------- -------
13,759 13,912 7,055
Deferred...................................... (9,064) (3,986) (691)
------- ------- -------
Provision for income taxes.................... $ 4,695 $ 9,926 $ 6,364
======= ======= =======
The Company's income tax provision differs from the amount computed by
applying the U.S. federal statutory rate to income before taxes as follows:
<CAPTION>
Year Ended December 31
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
U.S. statutory tax rate....................... 35% 35% 35%
State taxes, net of federal income tax
benefit...................................... 2 (1) 1
Foreign Sales Corporation tax benefit......... (10) (5) (6)
Research and development tax credit........... (1) (1) (2)
International taxes in excess of U.S. Foreign
Tax Credit................................... 12 -- 1
Loss carryforwards utilized................... (5) (1) (6)
Amortization of goodwill...................... 4 -- 2
Foreign losses in connection with the PSD
acquisition not benefited.................... 31 -- --
Favorable resolution of U.S. income tax
disputes..................................... (40) -- --
Other......................................... 1 2 3
------- ------- -------
Provision for income taxes.................... 29% 29% 28%
======= ======= =======
</TABLE>
F-13
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------
1999 1998
-------- -------
<S> <C> <C>
Deferred Tax Assets:
Reserves for obsolete inventory, warranty and bad
debts.............................................. $ 12,622 $12,102
Eliminated intercompany profit...................... 3,661 3,265
Tax benefit of foreign loss carryforwards........... 16,457 4,732
Other............................................... 11,975 3,583
-------- -------
44,715 23,682
Valuation allowance................................. (24,131) (5,342)
-------- -------
Deferred Tax Assets................................. $ 20,584 $18,340
======== =======
Deferred Tax Liabilities:
Deferred gain on condemnation....................... $ 3,522 $ 4,473
Depreciation........................................ 1,567 1,174
Development cost of Hercules facility............... 1,385 1,413
Other............................................... 542 6,322
-------- -------
Deferred Tax Liabilities............................ $ 7,016 $13,382
======== =======
</TABLE>
The valuation allowance is needed to reduce the deferred tax assets to an
amount that is more likely than not to be realized. The net change in the
valuation allowance in 1999 was an increase of $18,789, primarily resulting
from an increase in tax loss carryforwards. The net change in 1998 was an
increase of $2,057, primarily resulting from an increase in tax loss
carryforwards.
At December 31, 1999, Bio-Rad's international subsidiaries had combined net
operating loss carryforwards of $40,231. A portion of these loss carryforwards
will expire in the following years: 2000--$809; 2001--$394; 2002--$754; 2003--
$150; 2004--$178; 2005--$1,639 and 2008--$393. The remainder of these loss
carryforwards have no expiration date. The utilization of these carryforwards
is limited to the separate taxable income of each individual subsidiary.
Bio-Rad does not provide for taxes which would be payable if the cumulative
undistributed earnings of its international subsidiaries, approximately $36,916
at December 31, 1999, were remitted to the U.S. parent company. Unless it
becomes advantageous for tax or foreign exchange reasons to remit a
subsidiary's earnings, such earnings are indefinitely reinvested in subsidiary
operations. The withholding tax and U.S. federal income taxes on these
earnings, if remitted, would in large part be offset by tax credits.
7. Stockholders' Equity
Stock Classification
The Company's outstanding stock consists of Class A Common Stock (Class A)
and Class B Common Stock (Class B). Each share of Class A and Class B
participates equally in the earnings of Bio-Rad, and is identical in most
respects except that Class A has limited voting rights. Each share of Class A
is entitled to one-tenth of a vote on most matters, and each share of Class B
is entitled to one vote. Additionally, Class A stockholders are entitled to
elect 25% of the Board of Directors and Class B stockholders are entitled to
elect
F-14
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the balance of the directors. Cash dividends may be paid on Class A shares
without paying a cash dividend on Class B shares but no cash dividend may be
paid on Class B shares unless at least an equal cash dividend is paid on Class
A shares. Class B shares are convertible at any time into Class A shares on a
one-for-one basis at the option of the stockholder.
Stock Option Plans
Bio-Rad maintains incentive and non-qualified fixed stock option plans for
officers and certain other key employees. Under the Amended 1994 Stock Option
Plan, the Company may grant options to its employees for up to 1,175,000 shares
of common stock provided that no option shall be granted after March 1, 2004.
Under the plans, Class A and Class B options are granted at prices not less
than fair market value on the date of grant, are exercisable on a cumulative
basis at a rate not greater than 25% per annum commencing one year after the
date of grant and expire five years after the date of grant.
The Company has made no charge to income with respect to any stock options.
At the time options are exercised, the par value of the shares is credited to
common stock and the excess is credited to additional paid-in capital. The
Company may receive income tax benefits from the exercise of non-qualified
stock options and from certain dispositions of stock received by employees
under qualified or incentive stock options. The fair value of each option
granted since January 1, 1995, was estimated on the date of the grant using the
Black-Scholes option-pricing model with the following assumptions for grants in
1999, 1998 and 1997, respectively: no dividend yield for all periods; expected
lives of 2.2 and 3.0 years in 1999, 2.0 and 2.9 years in 1998 and 1.8 and 2.8
years in 1997; expected volatility of 34%, 35% and 33%; and risk-free interest
rates ranging from 4.72% to 4.82%, 5.39% to 5.48% and 5.63% to 6.15%.
Activity under the plans is summarized below (amounts reported in the Price
columns represent the weighted average exercise price):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Shares Price Shares Price Shares Price
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................. 561,047 $23.73 517,018 $21.40 482,900 $16.34
Granted.................. 166,080 19.89 150,653 23.54 147,050 32.54
Exercised................ (60,914) 8.47 (89,625) 10.09 (90,445) 11.88
Forfeited................ (19,712) 25.10 (14,677) 25.07 (19,909) 25.38
Expired.................. (1,386) 7.37 (2,322) 9.46 (2,578) 12.04
------- ------- -------
Outstanding at end of
year.................... 645,115 $24.18 561,047 $23.73 517,018 $21.40
======= ======= =======
Options exercisable at
year-end................ 280,825 222,539 172,689
======= ======= =======
Weighted average fair
value of options granted
during the year......... $ 6.46 $ 7.62 $ 10.76
======= ======= =======
</TABLE>
F-15
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following summarizes information about fixed stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Range of Number Weighted Average Number
Exercise Outstanding Remaining Weighted Average Exercisable Weighted Average
Prices at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
-------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$18.00-$19.69 206,131 2.4 years $19.04 85,851 $18.13
$19.80-$23.94 184,916 3.2 22.49 44,441 22.63
$25.92-$29.33 124,813 1.3 26.50 85,909 26.51
$31.63-$35.89 129,255 2.1 32.53 64,624 32.53
------- -------
$18.00-$35.89 645,115 2.4 24.18 280,825 24.72
======= =======
</TABLE>
Employee Stock Purchase Plan
Under the Amended and Restated 1988 Employee Stock Purchase Plan (the Plan),
the Company has authorized the sale of 745,000 shares of Class A to eligible
employees. The purchase price of the shares under the Plan is the lesser of 85%
of the fair market value on the first day of each calendar quarter, or 85% of
the fair market value on the last day of each calendar quarter. Employees may
designate up to 10% of their compensation for the purchase of stock. Under the
Plan, the Company sold 58,762 shares for $1,098, 51,446 shares for $1,129 and
43,785 shares for $982 to employees in 1999, 1998 and 1997, respectively. At
December 31, 1999, 105,364 shares remained authorized under the Plan.
The fair value of the employees' purchase rights since 1995 was estimated
using the Black-Scholes model with the following assumptions for 1999, 1998 and
1997, respectively: no dividend yield for all periods; an expected life of
three months for all periods; expected volatility ranging from 22% to 35%, from
28% to 38% and from 19% to 30%; and risk-free interest rates ranging from 4.28%
to 4.88%, from 4.27% to 5.23% and from 5.02% to 5.41%. The weighted average
fair value of those purchase rights granted in 1999, 1998 and 1997 was $4.74,
$5.55 and $5.50, respectively.
Pro Forma Disclosures
If compensation cost for the Company's stock-based compensation plans had
been determined based upon the fair value at grant dates for awards under those
plans consistent with the method of Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation", the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net income
As reported..................................... $11,721 $24,302 $16,364
Pro forma....................................... $10,469 $23,026 $15,173
Diluted earnings per share
As reported..................................... $ 0.96 $ 1.97 $ 1.32
Pro forma....................................... $ 0.86 $ 1.86 $ 1.22
</TABLE>
Under the requirements of SFAS No. 123, the above disclosures relate only to
options granted after December 15, 1994, and do not include the impact of
outstanding options that were made prior to the period for which SFAS No. 123
is effective. Since employee stock options vest over several years, and
additional
F-16
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
grants are likely to be made in the future, during the phase-in period of SFAS
No. 123 the disclosures are not likely to be representative of the effects on
reported pro forma net income or earnings per share in future years.
8. Earnings Per Share
Weighted average shares used for diluted earnings per share include the
dilutive effect of outstanding stock options of 55,000, 94,000 and 134,000
shares, for the years ended December 31, 1999, 1998 and 1997, respectively.
Options to purchase 261,000, 229,000 and 133,000 shares of common stock were
outstanding during 1999, 1998 and 1997, respectively, but were excluded from
the computation of diluted earnings per share because the exercise price of the
options was greater than the average market price of the common shares. The
options were still outstanding at the end of 1999.
9. Other Income and Expense
Other, net includes the following income and (expense) components:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Amortization of goodwill....................... $(3,813) $(2,068) $(1,612)
Exchange gains (losses)........................ (886) 22 (711)
Other non-operating litigation costs, net...... 73 117 (1,606)
Miscellaneous other items...................... (189) (47) (381)
------- ------- -------
Other, net..................................... $(4,815) $(1,976) $(4,310)
======= ======= =======
</TABLE>
Exchange gains (losses) include premiums and discounts on forward foreign
exchange contracts.
10. Supplemental Cash Flow Information
The reconciliation of net income to net cash provided by operating
activities is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
Net income.................................. $ 11,721 $24,302 $ 16,364
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 27,495 20,975 19,470
Foreign currency hedge transactions, net.. (2,401) 1,360 (4,001)
Gains on dispositions of marketable
securities............................... (850) (8,620) (1,129)
Increase in accounts receivable, net...... (16,082) (5,739) (6,176)
(Increase) decrease in inventories........ 4,095 (166) (14,831)
(Increase) decrease in other current
assets................................... 5,609 4,629 (6,369)
Increase (decrease) in accounts payable
and other current liabilities............ 26,153 (4,808) 18,775
Increase in income taxes payable.......... 4,804 1,040 1,122
Decrease in deferred taxes................ (16,946) (5,292) (1,276)
Other..................................... 1,383 (346) (840)
-------- ------- --------
Net cash provided by operating activities... $ 44,981 $27,335 $ 21,109
======== ======= ========
</TABLE>
F-17
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Commitments and Contingent Liabilities
Rents and Leases
Net rental expense under operating leases was $13,607 in 1999, $12,622 in
1998 and $11,339 in 1997. Leases are principally for facilities and
automobiles.
Annual future minimum lease payments at December 31, 1999, under operating
leases are as follows: 2000--$10,166; 2001--$7,554; 2002--$4,914; 2003--$3,605;
2004--$2,769; subsequent to 2004--$7,084.
Deferred Profit Sharing Retirement Plan
The Company has a profit sharing plan covering substantially all U.S.
employees. Contributions are made at the discretion of the Board of Directors.
Bio-Rad has no liability other than for the current year's contribution.
Contributions charged to income were $4,030, $3,566 and $3,285 in 1999, 1998
and 1997, respectively.
Foreign Exchange Contracts
The Company enters into forward foreign exchange contracts as a hedge
against foreign currency denominated intercompany receivables and payables. At
December 31, 1999, the Company had contracts maturing in January 2000 to sell
foreign currency with a market value of $64,390 and to purchase foreign
currency with a market value of $6,339. At December 31, 1998, the Company had
contracts maturing in January 1999 to sell foreign currency with a market value
of $48,053 and to purchase foreign currency with a market value of $1,811.
12. Legal Proceedings
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, the
outcome of these claims, legal actions and complaints would have no material
adverse effect on the future results of operations or the financial position of
the Company.
13. Segment Information
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in 1998 which changed the way the Company
reports information about its operating segments.
Bio-Rad is a multinational manufacturer and worldwide distributor of life
science research products, clinical diagnostics and analytical instruments.
Bio-Rad has three reportable segments: Life Science, Clinical Diagnostics and
Analytical Instruments. These reportable segments are strategic business lines
that offer different products and services and require different marketing
strategies.
The Life Science segment develops, manufactures, sells and services liquid
chromatography, electrophoresis, gene amplification and transformation, imaging
and image analysis, DNA sequencing and sample preparation products. These
products are sold to university and medical school laboratories, pharmaceutical
and biotechnology companies, and government and industrial research facilities.
The Clinical Diagnostics segment develops, manufactures, sells and services
automated test systems, informatics systems, test kits and specialized quality
controls for the healthcare market. These products are sold to reference
laboratories, hospital laboratories, state newborn screening facilities,
physicians office laboratories, and insurance and forensic testing
laboratories.
F-18
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Analytical Instruments segment develops, manufactures, sells and
services FT-IR spectroscopy systems, semiconductor test and manufacturing
instruments, spectral reference publications and software. These products are
sold to industrial companies, government institutions, academia and forensic
analysis laboratories.
The accounting policies of the segments are the same as those described in
Significant Accounting Policies (see Note 1). Segment profit or loss used for
corporate management purposes includes an allocation of corporate expense based
upon sales and an allocation of interest expense based upon accounts receivable
and inventories. In addition, certain items that are classified as non-
operating expenses and reported as other income and expense on a consolidated
basis are included in segment profit or loss. Segments are expected to manage
only assets completely under their control. Accordingly, segment assets include
primarily accounts receivable, inventories and gross machinery and equipment.
Information regarding industry segments at December 31, 1999, 1998 and 1997
and for the years then ended is as follows:
<TABLE>
<CAPTION>
Life Clinical Analytical
Science Diagnostics Instruments
-------- ----------- -----------
<S> <C> <C> <C> <C>
Segment net sales................... 1999 $234,696 $249,243 $67,974
1998 209,655 170,002 66,100
1997 205,704 150,095 75,800
Allocated interest expense.......... 1999 $ 3,761 $ 7,775 $ 1,206
1998 1,501 1,464 571
1997 550 428 212
Depreciation and amortization....... 1999 $ 8,003 $ 15,466 $ 1,335
1998 7,328 11,242 1,652
1997 7,258 7,553 3,768
Segment profit (loss)............... 1999 $ 16,643 $ 16,661 $ 2,928
1998 12,649 18,160 (2,166)
1997 6,816 19,257 (1,003)
Segment assets...................... 1999 $131,689 $320,419 $35,387
1998 124,219 129,089 38,607
1997 116,289 111,453 44,964
Capital expenditures................ 1999 $ 10,673 $ 13,388 $ 1,378
1998 6,487 15,213 1,912
1997 7,461 14,432 1,991
</TABLE>
Capital expenditures include capitalized leases of $100, $311 and $331 in
1999, 1998 and 1997, respectively.
Inter-segment sales are primarily from Life Science to Clinical Diagnostics
and are priced to give Life Science a market representative gross margin. This
represents the difference between total segment net sales and consolidated net
sales. The difference between total segment allocated interest expense,
depreciation and amortization, and capital expenditures and the corresponding
consolidated amounts is attributable to the Company's corporate headquarters.
F-19
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following reconciles total segment profit to consolidated income before
taxes:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Total segment profit......................... $ 36,232 $28,643 $25,070
Gross profit on inter-segment sales.......... (1,204) (1,925) (2,338)
Net corporate operating, interest and other
expense not allocated to segments........... (3,985) (1,280) (1,605)
Purchased in-process research and
development................................. (15,500) -- --
Investment income, net....................... 873 8,790 1,601
-------- ------- -------
Consolidated income before taxes............. $ 16,416 $34,228 $22,728
======== ======= =======
</TABLE>
The following reconciles total segment assets to consolidated total assets:
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Total segment assets....................... $487,495 $291,915 $272,706
Cash and other current assets.............. 58,542 36,968 39,025
Net property, plant and equipment excluding
segment specific gross machinery and
equipment................................. (41,378) (11,364) (5,635)
Other long-term assets..................... 164,203 49,780 45,780
-------- -------- --------
Total assets............................... $668,862 $367,299 $351,876
======== ======== ========
</TABLE>
The following presents sales to external customers by geographic area based
primarily on the location of the use of the product or service:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Europe......................................... $188,969 $141,004 $132,551
Pacific Rim.................................... 110,729 88,917 98,070
United States.................................. 225,795 195,309 184,533
Other (primarily Canada and Latin America)..... 23,996 16,712 11,760
-------- -------- --------
Total net sales.............................. $549,489 $441,942 $426,914
======== ======== ========
</TABLE>
The following presents long-lived assets by geographic area based upon the
location of the asset:
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Europe......................................... $ 34,129 $ 7,860 $ 7,004
Pacific Rim.................................... 6,954 4,933 3,885
United States.................................. 247,293 118,628 112,967
Other (primarily Canada and Latin America)..... 1,769 489 602
-------- -------- --------
Total long-lived assets...................... $290,145 $131,910 $124,458
======== ======== ========
</TABLE>
F-20
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Subsequent Event
The Company entered into a $100,000 Senior Subordinated Credit Agreement
dated January 31, 2000. This agreement had a one-year term and provided for an
automatic rollover for an additional term maturing in September 2005. The
proceeds of this transaction were used to replace the Senior Subordinated
Credit Agreement dated September 30, 1999. Fees paid in January 2000 to replace
and initiate the Senior Subordinated Credit Agreements were $4,000. The
replacement loan was repaid in February 2000.
The Company sold $150,000 aggregate principal amount of Senior Subordinated
Notes due in 2007 under an indenture dated February 17, 2000. The notes were
offered at 98.832% of par and pay a fixed rate of interest of 11.625% per year.
The notes are redeemable at the Company's option prior to the due date under
certain terms and conditions. The Company's obligations under the notes are not
secured and rank junior to all of the Company's existing and future senior
debt. The indenture requires the Company, among other things, to comply with
certain financial ratios and covenants. The proceeds from this transaction were
used (1) to repay the $100,000 Senior Subordinated Credit Agreement dated
January 31, 2000, (2) to permanently retire $20,000 of the $100,000 term loan,
and (3) to repay a portion of the outstanding borrowings under the revolving
facility.
15. Quarterly Financial Data--(unaudited)
Summarized quarterly financial data for 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1999
Net sales......................... $125,738 $115,794 $113,527 $194,430
Gross profit...................... 70,182 65,241 61,628 97,215
Net income (loss)................. 10,802 7,881 4,253 (11,215)
Basic earnings (loss) per share... $ 0.89 $ 0.65 $ 0.35 $ (0.92)
Diluted earnings (loss) per
share............................ $ 0.89 $ 0.65 $ 0.35 $ (0.92)
1998
Net sales......................... $116,174 $107,898 $ 98,982 $118,888
Gross profit...................... 64,076 58,857 53,577 62,994
Net income........................ 8,776 7,151 1,938 6,437
Basic earnings per share.......... $ 0.72 $ 0.58 $ 0.16 $ 0.52
Diluted earnings per share........ $ 0.71 $ 0.58 $ 0.16 $ 0.52
</TABLE>
F-21
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Information Concerning Common Stock--(unaudited)
The Company's Class A and Class B Common Stock are listed on the American
Stock Exchange with the symbols BIO.A and BIO.B, respectively. The following
sets forth, for the periods indicated, the high and low prices for the
Company's Class A and Class B Common Stock.
<TABLE>
<CAPTION>
Class A Class B
----------- -----------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1999
First Quarter............................... 21 3/4 18 7/8 21 3/8 19 3/8
Second Quarter.............................. 29 20 3/8 27 1/2 23 3/8
Third Quarter............................... 28 25 5/8 27 25 7/8
Fourth Quarter.............................. 27 1/2 22 1/2 27 1/8 23 1/8
1998
First Quarter............................... 27 22 1/2 26 3/8 23 1/4
Second Quarter.............................. 34 1/8 24 1/8 33 3/4 27
Third Quarter............................... 31 7/8 23 5/16 29 1/2 24 1/4
Fourth Quarter.............................. 24 3/4 19 1/2 22 3/8 19 3/4
</TABLE>
On February 28, 2000, the Company had 570 holders of record of Class A
Common Stock and 265 holders of record of Class B Common Stock. Bio-Rad has
never paid a cash dividend and has no present plans to pay cash dividends.
F-22
<PAGE>
BIO-RAD LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................ $ 15,321 $ 17,087
Accounts receivable.................................. 189,574 193,898
Inventories.......................................... 136,287 126,277
Prepaid expenses, taxes and other current assets..... 41,101 41,455
-------- --------
Total current assets............................... 382,283 378,717
Net property, plant and equipment.................... 126,134 125,942
Marketable securities................................ 1,359 1,169
Other assets......................................... 161,586 163,034
-------- --------
Total assets..................................... $671,362 $668,862
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current maturities of long-term
debt................................................ $ 13,805 $ 21,960
Accounts payable..................................... 61,399 64,737
Accrued payroll and employee benefits................ 53,362 59,919
Sales, income and other taxes payable................ 12,797 14,086
Other current liabilities............................ 44,591 41,819
-------- --------
Total current liabilities.......................... 185,954 202,521
Long-term debt, net of current maturities............ 258,062 239,211
Deferred tax liabilities............................. 8,348 7,016
-------- --------
Total liabilities................................ 452,364 448,749
-------- --------
Stockholders' Equity
Preferred stock, $1.00 par value, 2,300,000 shares
authorized; none outstanding........................ -- --
Class A common stock, $1.00 par value, 15,000,000
shares authorized; outstanding--9,979,162 at March
31, 2000 and 9,977,862 at December 31, 1999......... 9,979 9,978
Class B common stock, $1.00 par value, 6,000,000
shares authorized; outstanding--2,498,966 at March
31, 2000 and 2,484,716 at December 31, 1999......... 2,500 2,485
Additional paid-in capital........................... 19,104 18,830
Class A treasury stock, 272,500 shares at March 31,
2000 and 335,450 shares at December 31, 1999 at
cost................................................ (6,005) (7,392)
Retained earnings.................................... 203,766 200,993
Accumulated other comprehensive income:
Currency translation............................... (10,553) (4,741)
Net unrealized holding gain (loss) on marketable
securities........................................ 207 (39)
-------- --------
Total stockholders' equity....................... 218,998 220,114
-------- --------
Total liabilities and stockholders' equity..... $671,362 $668,862
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE>
BIO-RAD LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
Net sales................................................... $183,686 $125,738
Cost of goods sold.......................................... 86,720 55,556
-------- --------
Gross profit................................................ 96,966 70,182
Selling, general and administrative expense................. 60,718 43,017
Product research and development expense.................... 17,871 10,534
-------- --------
Income from operations...................................... 18,377 16,631
Interest expense............................................ (8,766) (896)
Investment income, net...................................... 288 74
Other, net.................................................. (5,553) (680)
-------- --------
Income before taxes......................................... 4,346 15,129
Provision for income taxes.................................. 1,391 4,327
-------- --------
Net income.................................................. $ 2,955 $ 10,802
======== ========
Basic earnings per share:
Net income................................................ $ 0.24 $ 0.89
======== ========
Weighted average common shares............................ 12,177 12,108
======== ========
Diluted earnings per share:
Net income................................................ $ 0.24 $ 0.89
======== ========
Weighted average common shares............................ 12,256 12,123
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
BIO-RAD LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers........................... $ 183,781 $ 115,236
Cash paid to suppliers and employees................... (176,672) (108,512)
Interest paid.......................................... (7,353) (914)
Income tax payments.................................... (2,676) (2,776)
Miscellaneous payments................................. (2,902) (1,629)
--------- ---------
Net cash provided by (used in) operating activities.... (5,822) 1,405
Cash flows from investing activities:
Capital expenditures, net.............................. (8,318) (4,608)
Purchases of marketable securities and investments..... (376) (632)
Sales of marketable securities and investments......... 481 222
Foreign currency hedges, net........................... 2,330 1,806
--------- ---------
Net cash used in investing activities.................. (5,883) (3,212)
Cash flows from financing activities:
Net borrowings under line-of-credit arrangements....... (5,009) (3,096)
Long-term borrowings................................... 369,251 19,051
Payments on long-term debt............................. (353,047) (16,146)
Arrangement and other fees for long-term financing..... (4,500) --
Proceeds from issuance of common stock................. 290 292
Treasury stock activity, net........................... 1,205 (1,785)
--------- ---------
Net cash provided by (used in) financing activities.... 8,190 (1,684)
Effect of exchange rate changes on cash.................. 1,749 1,446
--------- ---------
Net increase (decrease) in cash and cash equivalents..... (1,766) (2,045)
Cash and cash equivalents at beginning of period......... 17,087 10,081
--------- ---------
Cash and cash equivalents at end of period............... $ 15,321 $ 8,036
========= =========
Reconciliation of net income to net cash provided by
operating activities:
Net income............................................. $ 2,955 $ 10,802
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 10,688 5,225
Foreign currency hedge transactions, net............. (2,330) (1,806)
Gains on dispositions of marketable securities....... (304) (52)
Decrease (increase) in accounts receivable........... 2,910 (8,129)
Increase in inventories.............................. (10,922) (756)
Decrease (increase) in other current assets.......... 193 (724)
Decrease in accounts payable and other current
liabilities......................................... (7,502) (2,719)
(Decrease) increase in income taxes payable.......... (1,041) 931
Other................................................ (469) (1,367)
--------- ---------
Net cash provided by (used in) operating activities...... $ (5,822) $ 1,405
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Bio-Rad Laboratories, Inc. ("Bio-Rad" or the "Company"), reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results of the interim periods presented. All such adjustments
are of a normal recurring nature. The condensed consolidated financial
statements should be read in conjunction with the notes to consolidated
financial statements contained in the Company's Annual Report for the year
ended December 31, 1999 (the Company's 1999 Annual Report). Certain amounts in
the financial statements of the prior year have been reclassified to be
consistent with the 2000 presentation.
2. Inventories
The principal components of inventories are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
(in thousands)
<S> <C> <C>
Raw materials....................................... $ 33,197 $ 32,398
Work in process..................................... 38,535 31,936
Finished goods...................................... 64,555 61,943
-------- --------
$136,287 $126,277
======== ========
</TABLE>
3. Property, Plant and Equipment
The principal components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
(in thousands)
<S> <C> <C>
Land and improvements.............................. $ 8,900 $ 8,937
Buildings and leasehold improvements............... 68,574 73,230
Equipment.......................................... 169,777 168,401
--------- ---------
247,251 250,568
Accumulated depreciation........................... (121,117) (124,626)
--------- ---------
Net property, plant and equipment.................. $ 126,134 $ 125,942
========= =========
</TABLE>
4. Acquisitions
In October 1999, the Company acquired Pasteur Sanofi Diagnostics S.A. At
that time, liabilities were recorded of approximately $14.0 million for
severance and other employee costs and $4.0 million for the consolidation and
closure of certain leased facilities. As of March 31, 2000, expenses charged
against these reserves were approximately $2.7 million for severance and other
employee costs and $0.6 million for facilities.
5. Earnings Per Share
Weighted average shares used for diluted earnings per share include the
dilutive effect of outstanding stock options of 79,000 and 15,000 shares, for
the three month periods ended March 31, 2000 and 1999, respectively.
Options to purchase 215,000 and 409,000 shares of common stock were
outstanding during 2000 and 1999, respectively, but were excluded from the
computation of diluted earnings per share because the exercise price of the
options was greater than the average market price of the common shares. The
options were still outstanding at March 31, 2000.
F-26
<PAGE>
BIO-RAD LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Other Income and Expense
Other income, net for the three months ended March 31, 2000 includes a $3
million payment to settle a dispute arising under the terms of an engagement
letter between the Company and an investment bank.
7. Comprehensive Income
The components of the Company's total comprehensive income were:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
2000 1999
--------- ---------
(in thousands)
<S> <C> <C>
Net Income......................................... $ 2,955 $ 10,802
Currency translation adjustments................... (5,812) (2,326)
Net unrealized holding gains (losses).............. 463 (389)
Reclassification adjustments for gains included in
net income (expense).............................. (217) (37)
--------- ---------
Total comprehensive income (expense)............. $ (2,611) $ 8,050
========= =========
</TABLE>
8. Segment Information
Information regarding industry segments for the three months ended March 31,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Life Clinical Analytical
Science Diagnostics Instruments
------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Segment net sales..................... 2000 $66,829 $99,586 $18,379
1999 $60,204 $48,016 $18,304
Segment profit........................ 2000 $ 7,133 $ 2,992 $ 341
1999 $ 6,847 $ 9,595 $ 904
</TABLE>
Inter-segment sales are primarily between Life Science and Clinical
Diagnostics and are priced to give Life Science a representative gross margin.
The following reconciles total segment profit to consolidated income before
taxes:
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
----------------
2000 1999
------- -------
(in thousands)
<S> <C> <C>
Total segment profit................................... $10,466 $17,346
Gross profit on inter-segment sales.................... (561) (406)
Net corporate operating, interest and other expense not
allocated to segments................................. (3,857) (1,368)
Goodwill amortization.................................. (1,990) (517)
Investment income, net................................. 288 74
------- -------
Consolidated income before taxes....................... $ 4,346 $15,129
======= =======
</TABLE>
F-27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pasteur Sanofi Diagnostics:
We have audited the accompanying consolidated balance sheets of Pasteur
Sanofi Diagnostics (PSD) (a French corporation) and Subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
PSD's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Pasteur Sanofi Diagnostics and Subsidiaries as of December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles in the United States.
PGA
Philippe Mongin
Partner of Andersen Worldwide
Paris, France
July 31, 1999
F-28
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997
(in millions of U.S. dollars, except share and per share data)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash........................................................ $ 6.9 $ 3.7
Accounts receivable, net of allowance of $6.5 million and
$6.5 million, respectively................................. 84.7 80.9
Inventories:
Raw materials.............................................. 8.1 7.7
Work in process............................................ 13.5 12.7
Finished goods............................................. 22.2 21.0
------- -------
Total inventories.......................................... 43.8 41.4
Prepaid expenses and other current assets................... 10.9 9.2
Current portion of note receivable.......................... 4.3 4.2
------- -------
Total current assets....................................... 150.6 139.4
------- -------
Property, Plant and Equipment:
Land........................................................ 0.6 0.6
Buildings................................................... 36.8 31.0
Equipment................................................... 96.4 86.3
------- -------
Total property, plant and equipment........................ 133.8 117.9
Accumulated depreciation.................................... (91.7) (79.2)
------- -------
Net property, plant and equipment.......................... 42.1 38.7
Note receivable, net of current portion...................... 18.0 20.8
Intangible and other assets, net............................. 1.2 1.4
------- -------
Total assets............................................... $ 211.9 $ 200.3
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Lines of credit............................................. $ 17.3 $ 16.7
Accounts payable............................................ 25.0 31.0
Related entity payable, net................................. 95.3 78.5
Royalty accruals............................................ 6.9 5.3
Royalties payable to related entity......................... 8.3 5.7
Payroll accruals............................................ 8.9 8.7
Other current liabilities................................... 13.5 16.8
------- -------
Total current liabilities.................................. 175.2 162.7
Deferred Tax Liability....................................... -- --
Long-Term Liabilities........................................ 9.9 7.5
Commitments and Contingencies
Stockholders' Equity:
Common stock (par value of $20; 2,321,160 shares authorized,
issued and outstanding as of December 31, 1998 and 1997)... 47.3 47.3
Additional paid-in capital.................................. 182.2 182.2
Accumulated deficit......................................... (179.5) (175.7)
Accumulated currency translation adjustment................. (23.2) (23.7)
------- -------
Total stockholders' equity................................. 26.8 30.1
------- -------
Total liabilities and stockholders' equity................. $ 211.9 $ 200.3
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-29
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions of U.S. dollars, except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Net sales................................... $ 201.8 $ 227.5 $ 259.9
Royalty revenue............................. 17.9 18.3 20.6
Related entity sales........................ 9.2 10.8 8.0
--------- --------- ---------
Total revenue............................. 228.9 256.6 288.5
--------- --------- ---------
Cost of Sales:
Product cost of sales....................... 93.4 103.0 112.0
Royalty expense............................. 15.6 13.9 13.8
Related entity royalty expense.............. 12.0 14.3 14.7
--------- --------- ---------
Total cost of sales....................... 121.0 131.2 140.5
--------- --------- ---------
Gross profit.............................. 107.9 125.4 148.0
--------- --------- ---------
Operating Expenses:
Selling, general and administrative......... 74.4 89.7 112.1
Distribution................................ 8.6 8.7 10.4
Research and development.................... 22.6 23.8 38.5
--------- --------- ---------
Total operating expenses.................. 105.6 122.2 161.0
--------- --------- ---------
Operating income (loss)................... 2.3 3.2 (13.0)
Interest expense, net......................... (5.4) (5.9) (8.9)
Other, net.................................... 0.3 (5.6) (26.8)
--------- --------- ---------
Pretax loss............................... (2.8) (8.3) (48.7)
Income tax.................................... 1.0 0.7 (0.2)
--------- --------- ---------
Net loss...................................... $ (3.8) $ (9.0) $ (48.5)
========= ========= =========
Basic and diluted loss per share.............. $ (1.63) $ (3.88) $ (20.89)
========= ========= =========
Weighted average common shares outstanding.... 2,321,160 2,321,160 2,321,160
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-30
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1998, 1997 and 1996
(in millions of U.S. dollars, except share and per share data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Currency Total
---------------- Paid-in Accumulated Translation Stockholders'
Shares Amount Capital Deficit Adjustment Equity
--------- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995................... 2,321,160 $47.3 $182.2 $(118.2) $(10.4) $100.9
Net loss.............. -- -- -- (48.5) -- (48.5)
Currency translation
adjustment........... -- -- -- -- (5.0) (5.0)
--------- ----- ------ ------- ------ ------
Balance, December 31,
1996................... 2,321,160 47.3 182.2 (166.7) (15.4) 47.4
Net loss.............. -- -- -- (9.0) -- (9.0)
Currency translation
adjustment........... -- -- -- -- (8.3) (8.3)
--------- ----- ------ ------- ------ ------
Balance, December 31,
1997................... 2,321,160 47.3 182.2 (175.7) (23.7) 30.1
Net loss.............. -- -- -- (3.8) -- (3.8)
Currency translation
adjustment........... -- -- -- -- 0.5 0.5
--------- ----- ------ ------- ------ ------
Balance, December 31,
1998................... 2,321,160 $47.3 $182.2 $(179.5) $(23.2) $ 26.8
========= ===== ====== ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-31
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)
<TABLE>
<CAPTION>
Year Ended December
31,
----------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Operating Activities:
Net loss............................................. $ (3.8) $ (9.0) $(48.5)
Adjustment to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization...................... 11.3 15.4 24.0
Loss on sale of assets............................. -- 3.9 1.3
Changes in operating assets and liabilities:
Decrease in inventories............................ 0.8 4.3 3.0
Decrease (increase) in trade and other
receivables....................................... 3.1 (3.5) (3.1)
Decrease in other assets........................... 3.7 1.4 2.4
Increase (decrease) in accounts payable............ (8.0) 16.9 (8.9)
Increase (decrease) in other liabilities........... 0.1 (12.8) 29.7
------ ------ ------
Net cash provided by (used in) operating
activities...................................... 7.2 16.6 (0.1)
------ ------ ------
Investing Activities:
Purchase of property and equipment................... (14.0) (26.6) (26.4)
Proceeds from sales of property and equipment........ -- 23.7 0.6
------ ------ ------
Net cash used in investing activities............ (14.0) (2.9) (25.8)
------ ------ ------
Financing Activities:
Proceeds from (repayment of) lines of credit......... (0.6) (31.4) 0.2
Proceeds from related entity......................... 10.2 20.4 33.4
Proceeds from issuance of long-term debt............. -- (2.9) 4.3
Repayment of principal of long-term debt............. -- -- (14.8)
------ ------ ------
Net cash provided by (used in) financing
activities...................................... 9.6 (13.9) 23.1
------ ------ ------
Effect of Foreign Exchange Rate Changes on Cash........ 0.4 (0.6) (0.4)
------ ------ ------
Net Increase (Decrease) in Cash........................ 3.2 (0.8) (3.2)
Cash and cash equivalents, beginning of year........... 3.7 4.5 7.7
------ ------ ------
Cash and cash equivalents, end of year................. $ 6.9 $ 3.7 $ 4.5
====== ====== ======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest........................................... $ 5.7 $ 6.4 $ 9.5
Income taxes....................................... 0.9 1.1 0.3
</TABLE>
The accompanying notes are an integral part of these statements.
F-32
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(in millions of U.S. dollars)
1. Presentation of the Company:
Pasteur Sanofi Diagnostics (PSD) is a Societe Anonyme registered in France.
PSD is involved in the research, development, manufacture and distribution of
diagnostics products, including primarily reagents and microplates systems. The
shareholders of PSD are Sanofi-Synthelabo (Sanofi) and Institut Pasteur,
73.66 percent and 26.34 percent, respectively.
PSD has an international presence with a strong position in Western Europe
(49 percent of 1998 sales), emerging countries (28 percent of 1998 sales),
North America (16 percent of 1998 sales) and Japan (7 percent of 1998 sales).
On July 3, 1999, Bio-Rad entered into an agreement with Sanofi-Synthelabo
and Institut Pasteur to acquire the stock of PSD and certain other ancillary
assets and to repay debt of PSD for total consideration not to exceed $210
million, subject to adjustments. The purchase price will be funded with the
proceeds of a senior subordinated note offering, together with borrowings under
a new senior credit facility, which will include a term loan and a revolving
credit facility.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The consolidated financial statements include the accounts of PSD and its
majority-owned subsidiaries after elimination of intercompany balances and
transactions. All entities included in the financial statements have a 12-month
period of operations that ended as of December 31. These financial statements
have been prepared from the accounting records maintained in France. All
amounts are presented in millions of U.S. dollars, except share amounts and
unless otherwise noted.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Changes in such estimates may affect amounts reported in
the future.
Foreign Currency Translation
PSD's functional currency is the French Franc. In the accompanying financial
statements, assets and liabilities are translated into U.S. dollars at the
current exchange rate as of the applicable balance sheet dates. Revenue and
expenses are translated at the weighted average exchange rate prevailing during
the 12-month periods. Net exchange gains or losses resulting from the
translation of assets and liabilities of foreign subsidiaries, except those in
highly inflationary economies, are accumulated in a separate section of
stockholders' equity entitled, "Accumulated currency translation adjustment."
Concentration of Credit Risk
Financial instruments that potentially subject PSD to concentration of
credit risk consist primarily of trade accounts receivable. PSD performs credit
evaluation procedures and generally does not require collateral. Credit risk is
limited due to the large number of customers and their dispersion across many
geographical areas. In addition, a significant amount of trade receivables are
with national healthcare systems in countries within the European Economic
Community. PSD does not currently anticipate a significant credit loss
associated with these receivables.
F-33
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Sanofi Fujirebio Diagnostics, Inc., a joint venture with Fujirebio, Inc.,
conducts all its business with Fujirebio, Inc. This represents sales of $14.5
million, $21.8 million and $9.3 million in 1998, 1997 and 1996, respectively.
The accounts receivable balances due from Fujirebio were $5.6 million in 1998
and $5.0 million in 1997.
PSD has a note receivable from Beckman Instruments, Inc. Payment on this
note is by installments, with an installment due on April 30 each year, up to
and including April 30, 2004. The short-term element of this note receivable
was $4.2 million in 1998 and $4.2 million in 1997. The long-term portion of
this note receivable was $18.0 million in 1998 and $20.8 million in 1997.
Inventories
Inventories are valued at the lower of average cost or market and include
material, labor and overhead costs.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization computed using the straight-line method over the following
estimated useful lives:
<TABLE>
<C> <S>
Buildings................. 20 years
Leasehold improvements.... 3-10 years (or over the remaining lease term,
if shorter)
Software.................. 1-4 years
Production equipment ..... 3-10 years
Other equipment........... 10 years
</TABLE>
Retirement Benefits
PSD accrues the costs of pension, termination and postretirement benefits
during the years in which the employees render services. Related benefit
expense is determined by an actuary, in accordance with SFAS 87. Liabilities
and prepaid expenses are accrued on an actuarial basis using, in most cases,
actuarial methods and assumptions that are compatible with U.S. GAAP
requirements.
For defined contribution plans and multiemployer pension plans, expenses are
recorded as incurred. For defined benefit indemnities, retirement plans and
postretirement benefit plans, liabilities and prepaid expenses are accrued over
the estimated term of service of the employee using actuarial methods.
Differences caused by actuarial gains or losses arising from changes in
actuarial assumptions are amortized over the residual working life of the
employees.
Revenue Recognition
Revenue from sales is recognized at the time products are shipped or service
is rendered and all significant obligations of PSD are complete.
Research and Development Costs
Research and development costs are charged to the profit and loss account as
incurred.
F-34
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Forward Exchange Contracts
PSD does not use derivative financial instruments for speculative or trading
purposes. As part of distributing its products, PSD regularly enters into
transactions in currencies other than the French Franc. Sanofi enters into
forward foreign exchange contracts to hedge against future movements in foreign
exchange rates that affect foreign-currency-denominated receivables and
payables on behalf of PSD. These contracts generally have maturity dates of 11
months or less and relate primarily to currencies of industrial countries. The
fee for the administration of these contracts is 0.1 percent of the face value
of the transaction carried out on PSD's behalf. The resulting gains or losses
are included in other income and expense offsetting exchange losses or gains on
the related receivables and payables. Unrealized gains and losses are not
deferred. Exchange gains and losses on these contracts are net of the premiums
and discounts resulting from interest rate differentials between France and the
countries of the currencies being traded.
Income Taxes
Deferred taxes are provided utilizing the liability method in accordance
with by SFAS No. 109, "Accounting for Income Taxes," whereby deferred tax
assets are recognized for deductible temporary differences and operating loss
carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
Earnings per Share
Basic earnings per share are calculated on the basis of the weighted average
number of common shares outstanding for each period.
Fair Value of Financial Instruments
For certain of PSD's financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, long-term debt and forward
exchange contracts, the carrying amounts approximate fair value. The fair
values of other instruments are disclosed in relevant notes to the financial
statements.
3. Divestitures:
As a result of the increasing difficulties encountered in developing a
profitable business with the Access(TM) product line, particularly in North
America, PSD divested this product line in 1996.
Consequently, an asset purchase agreement was signed on March 24, 1997, with
the U.S. company Beckman Instruments Inc (Beckman), under which all Access-
related intellectual property rights, the U.S. production facility and other
Access assets worldwide were sold. The final purchase date was April 30, 1997.
Three agreements were signed with Beckman:
. A manufacturing agreement for Access reagents produced in the French
Steenvoord facility for a period of seven years.
. A scientific cooperation agreement for a three-year period.
. A distribution agreement, under which Beckman agreed to appoint PSD as
its exclusive distributor for Access products in selected territories
for a three-year period (five years in France).
F-35
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The estimated costs of this disposal were provided in the financial
statements for the year ended December 31, 1996, for an aggregate amount of
$26.4 million. The actual cost of the divestiture incurred in 1997 was $27.1
million, including the following:
<TABLE>
<S> <C>
Employee severance and relocation................................... $ 6.7
Cost of transfer of manufacturing................................... 3.3
Loss on disposal.................................................... 14.9
Other related costs................................................. 2.2
</TABLE>
The proceeds of the sale of $53.8 million included a cash portion of $23.7
million and a note of $30.1 million, which is payable in installments of $4.3
million on each anniversary of the sale date for seven years. The final payment
will occur on April 30, 2004. This long-term note receivable was discounted at
the closing date by $5.9 million. The interest income included in the financial
statements in relation to this receivable is $1.3 million for 1998 and 1997,
respectively. The effective interest rate for this note is 5.7 percent.
Net sales from the Access product line for 1998, 1997 and 1996,
respectively, were $37.8 million, $45.4 million and $57.1 million. The net
operating income or losses are not separately identifiable.
4. Lines of Credit:
PSD has the following short-term financing facilities:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Authorized lines of credit....................... $37.0 $35.0
Outstanding amounts under lines of credit........ 17.3 16.7
Maximum balances outstanding..................... 20.0 18.0
Average balances outstanding..................... 14.0 16.0
</TABLE>
Average interest rates on outstanding balances were 6.1 percent in 1997 and
5.7 percent in 1998.
5. Operating Leases:
PSD leases certain equipment and premises under operating leases that expire
on various dates. Future payments on operating leases are due as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
------------------------ ------
<S> <C>
1999 ............................................................... $ 5.2
2000 ............................................................... 3.2
2001 ............................................................... 2.0
2002 ............................................................... 2.1
2003................................................................ 2.1
Thereafter.......................................................... 6.0
-----
Total minimum lease payments...................................... $20.6
=====
</TABLE>
Net rental expense under operating lease was $4.5 million, $4.6 million and
$5.2 million in 1998, 1997 and 1996, respectively.
F-36
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Retirement Benefits:
PSD provides various types of retirement and termination benefits to its
employees. The type of benefits offered to an individual employee group is
determined by the local legal requirements as well as the historical operating
practices of the specific business unit.
Pension benefits are generally determined using a formula that uses the
employee's years of credited service and average final earnings. Termination
benefits are generally lump-sum payments based upon an individual's years of
credited service and annualized salary at retirement or termination of
employment.
The actuarial assumptions used vary by business unit and country, based upon
local considerations, with the following averages:
<TABLE>
<S> <C>
Benefit obligation discount rate................................... 4 to 6%
Estimated annual rate of increase in future compensation........... 2 to 8%
</TABLE>
Net benefit costs related to PSD's defined benefit plans included the
following components:
Pension Benefits
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Net periodic cost:
Service cost..................................... $ (0.6) $(0.7) $(0.6)
Expected interest cost........................... (0.4) (0.4) (0.5)
Amortization of net transition obligation........ (0.2) (0.2) (0.3)
------ ----- -----
Net periodic benefit cost........................ $ (1.2) $(1.3) $(1.4)
====== ===== =====
The plans are unfunded. The net pension liability is included in long-term
liabilities in the accompanying balance sheet. The following tables set forth
the defined benefit plans' change in benefit obligation and the net pension
liability:
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation at beginning of
year............................................ $ (8.9) $(9.3) $(8.6)
Service cost................................... (0.6) (0.7) (0.6)
Interest cost.................................. (0.4) (0.4) (0.5)
Actuarial gain................................. -- -- (0.2)
Benefits paid.................................. 0.2 0.4 0.1
Other (exchange rate).......................... (0.6) 1.2 0.5
------ ----- -----
Projected benefit obligation at end of year...... (10.3) (8.8) (9.3)
Unrecognized actuarial loss...................... 0.2 0.2 0.2
Unrecognized actuarial transition obligation..... 1.7 1.8 2.4
------ ----- -----
Net pension liability............................ $ (8.4) $(6.8) $(6.7)
====== ===== =====
</TABLE>
Multiemployer Plans
Certain employees of PSD participate on a commingled basis with other (non-
PSD) companies in defined benefit pension plans. Such commingled plans are
known as multiemployer pension plans. Pension expense for multiemployer pension
plans is recorded based upon the agreed funding requirements, and was $0.5
million,
F-37
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
$0.5 million and $1.5 million for the years ended December 1998, 1997 and 1996,
respectively. The decrease between 1996 and 1997 resulted from the sale in 1997
of the Access segment (581 active participants were terminated in April 1997).
The multiemployer pension plans include current and former employees of
Sanofi. According to an agreement in principle between Sanofi and PSD, Sanofi
remains liable for the benefit obligations accrued up to the closing date to
the employees of SDP Inc. and Genetic Systems Corporation.
Recent actuarial valuations indicate that only one multi-employer plan has a
significant projected benefit obligation and that this plan is adequately
funded.
7. Commitments and Contingencies:
On April 30, 1997, Sanofi agreed to guarantee in favor of Beckman the full
and timely payment by PSD or SDP Inc. of all sums due under their
indemnification obligation provided by Article IX of the Asset Purchase
Agreement entered into between PSD, SDP Inc. and Beckman on March 24, 1997,
whereby PSD and SDP Inc. sold to Beckman their Access immunoassay analyzer
business.
Pursuant to such Asset Purchase Agreement, Beckman is entitled to be
indemnified in full for any and all loss resulting from any proceedings by
Johnson & Johnson Clinical Diagnostics Ltd. (or any successor-in-interest)
against Beckman alleging infringement of European patent 149 565, U.S. Patent 4
745 077 or Japanese patent 60-159651 arising out of the manufacturing and/or
sale by, or on behalf of, Beckman of the Access immunoassay analyzers and/or
related consumables.
Pursuant to an agreement dated April 28, 1997, PSD has agreed to hold Sanofi
harmless from and against any sums that Sanofi may pay under the guaranty.
Central Labo Europe (CLE) alleged breach of design and trademark by
Europlastic, a supplier for PSD. The product in question is manufactured
exclusively for PSD. PSD agreed to pay any damages awarded to CLE if
Europlastic was found guilty. CLE is suing for $2.1 million in damages. PSD is
requesting DIAMED, the owner of the patent licensed to PSD, to hold it harmless
in the CLE dispute, if necessary.
In 1992, Biochem-Immuno Systems, Inc. ("Biochem") sued Institut Pasteur and
PSD jointly, seeking a license under certain of Institut Pasteur's patents and
further requesting damages of $11.3 million. Prior to the filing of the claim,
the parties had engaged in discussions regarding a possible license arrangement
but had not reached agreement before Biochem began marketing products covered
by the Institut Pasteur patents. The matter is before the Superior Court of the
District of Montreal, in the province of Quebec, Canada. Since 1994, no papers
have been filed and no actions have been taken by either party. Counsel for PSD
believes the foregoing action has no merit and should be dismissed.
PSD granted to Biomerieux a license to sell certain diagnostic products.
Subsequently, Biomerieux purchased Cambridge Biotech Corporation ("Cambridge"),
which had an existing separate license agreement with PSD granting it the right
to sell different diagnostic products. The Cambridge-PSD license called for
lower royalty payments than those provided in the Biomerieux-PSD agreement. PSD
filed an action in Paris against Biomerieux on January 15, 1999 for unpaid
royalties under the Biomerieux-PSD license. Biomerieux counterclaimed that it
was entitled to lower royalty rates pursuant to the lower rates set forth in
the Cambridge-PSD license and alternatively that it was entitled to
indemnification from PSD for approximately $9.5 million, which it alleged was
the price it paid to acquire Cambridge. Counsel for PSD believes the
counterclaim has no merit.
F-38
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
PSD is a party to various other claims, legal actions and complaints arising
in the ordinary course of business. In the opinion of management and counsel,
the outcome of these claims and legal actions would have no material adverse
effects on the future results of operations or the financial position of PSD.
PSD is currently in dispute with the French tax administration, relating to
tax treatment of royalties paid on unpatented techniques and withholding tax on
an intercompany loan. The total amount in dispute is $1.5 million. According to
PSD policy these disputed amounts have not been paid, nor have they been
provided for, but warranty has been provided to the French tax administration,
as required under French tax law.
The practices, which gave rise to the dispute described above, have
continued to be applied on a consistent basis since the period subject to tax
audit (1991-1994). The tax exposure resulting from the continued use of these
practices, excluding penalties is estimated at $0.8 million per year. These
risks are covered by Sanofi's indemnification of Bio-Rad pursuant to the
purchase agreement between Bio-Rad and Sanofi.
PSD and its subsidiaries are committed to purchase Access consumables for a
minimum amount of $8.5 million and a minimum number of 90 Access instruments
from Beckman Coulter during 1999.
PSD has $13.4 million to be received against foreign currencies delivered
(out of which $9.3 million relates to Japanese Yen and $3.1 million relates to
U.S. dollars), and $12.7 million to deliver against foreign currencies to be
received (out of which $11.7 million relates to U.S. dollars).
PSD has granted comfort letters or guarantees to banks in favor of its
subsidiaries to secure local borrowings, for a total of $16.2 million.
8. Other, Net:
Other, net comprises the following items:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ------
<S> <C> <C> <C>
Effects of Access sale............................... $ -- $(6.0) $(26.4)
Foreign exchange gains............................... 1.0 0.8 0.2
Foreign exchange losses.............................. (0.4) (0.6) --
Other................................................ (0.3) 0.2 (0.6)
----- ----- ------
Total.............................................. $ 0.3 $(5.6) $(26.8)
===== ===== ======
</TABLE>
9. Royalty Income and Expense:
PSD has royalty agreements with Sanofi, Institut Pasteur and other third
party license holders. The related party element of these royalty income and
expenses are disclosed under Note 11.
PSD grants sublicenses to third parties for the use of patents in order to
manufacture and distribute products using such patents. These sublicense
agreements generally provide for the payment of royalties based on sales of the
licensee related to such products. Related revenue is recognized at the time of
the sale.
Royalty expense includes royalties which are due for the use of patents to
manufacture and distribute certain products. These are calculated on the basis
of a percentage of sales made by PSD or its sublicensees or on the basis of
unitary fixed amounts of the products. Related expenses are recognized at the
time of the sale of the products.
F-39
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Income Taxes:
PSD has a tax sharing agreement with Sanofi. Income taxes have been
calculated for PSD and each of its subsidiaries on a separate company basis
pursuant to the requirements of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
The components of pretax loss are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ------ ------
<S> <C> <C> <C>
French............................................. $(1.9) $ 19.5 $(25.4)
International...................................... (0.9) (27.8) (23.3)
----- ------ ------
Income before taxes and extraordinary charge..... $(2.8) $ (8.3) $(48.7)
===== ====== ======
The provision for income taxes consists of:
<CAPTION>
1998 1997 1996
----- ------ ------
<S> <C> <C> <C>
Current:
French........................................... $ 0.1 $ (0.4) $ (0.3)
International.................................... 0.9 1.1 0.1
----- ------ ------
Provision for income taxes......................... $ 1.0 $ 0.7 $ (0.2)
===== ====== ======
</TABLE>
PSD's income tax provision differs from the amount computed by applying the
French statutory rate to income before taxes as follows:
<TABLE>
<CAPTION>
1998 % 1997 % 1996 %
----- ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Income charged at statutory
tax rate..................... $(1.2) (41.7) $(3.5) (41.7) $(17.8) (36.7)
Permanent differences......... (0.3) (10.5) (8.0) (96.0) 11.8 24.4
Differences between French
statutory rate and other tax
rates........................ (0.5) (16.5) 3.7 44.1 -- --
Tax credits used.............. (0.2) (8.9) (0.8) (10.1) (1.7) (3.5)
Utilization of carryforward
losses....................... (0.5) (17.7) (1.0) (12.0) (0.2) (0.5)
Effect of carryforward
losses....................... 3.6 127.7 10.9 131.8 7.9 16.4
Other......................... 0.1 3.4 (0.6) (7.8) 0.2 (0.4)
----- ----- ----- ----- ------ -----
Actual tax charge........... $ 1.0 35.8 $ 0.7 8.3 $ 0.2 (0.3)
===== ===== ===== ===== ====== =====
</TABLE>
The components of the deferred tax asset (liability) consisted of the
following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Current deferred tax asset:
Temporary timing differences................. $ 5.0 $ 13.0
Other temporary differences between tax
reporting and U.S. GAAP financial reporting:
Elimination of intercompany profit......... 3.6 4.1
Tax benefit of loss carryforwards.......... 71.6 66.6
Other, net................................. 5.4 3.1
------ ------
Total deferred tax asset................... 85.6 86.8
Valuation allowance........................ (85.6) (86.8)
------ ------
Net current deferred tax asset................. $ -- $ --
====== ======
Noncurrent deferred tax liability.............. $ -- $ --
====== ======
</TABLE>
F-40
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The valuation allowance is needed to reduce the deferred tax asset to an
amount that is more likely than not to be realized.
At December 31, 1998, PSD had net operating loss carryforwards of $107.9
million and $136.0 million of capital loss carryforwards. These carryforwards
will expire in the following years:
<TABLE>
<CAPTION>
Net Operating Capital Losses
Expiration Date Loss Carryforward Carryforward
--------------- ----------------- --------------
<S> <C> <C>
2000...................................... $ -- $ --
2001...................................... 0.1 5.0
2002...................................... 0.4 --
2003...................................... 0.6 --
2004 to 2012.............................. 104.1 131.0
Unlimited................................. 2.7 --
------ ------
$107.9 $136.0
====== ======
</TABLE>
These carryforwards mainly relate to the subsidiaries located in France and
in the United States of America and their utilization is limited to the
separate taxable income of the subsidiaries. The capital losses carryforward
may only be utilized against future capital gains.
PSD does not provide for taxes that would be payable if the cumulative
undistributed earnings of its international subsidiaries were remitted. Unless
it becomes advantageous for tax or foreign exchange reasons to remit a
subsidiary's earnings, such earnings are indefinitely reinvested in subsidiary
operations.
11. Related Entity Transactions and Balances:
PSD makes sales to other companies within the Sanofi group. Such sales are
included in the profit and loss account.
PSD has a royalty agreement with Institut Pasteur. Royalty expense includes
royalties paid for the use of the Pasteur name. These are calculated on the
basis of a percentage varying between 1 percent and 2 percent of net sales in
each subsidiary.
Additional transactions with Institut Pasteur (mainly relating to research
and development costs and rights to first refusal on new products) were $2.1
million, $2.3 million and $2.7 million in 1998, 1997 and 1996, respectively.
Additionally, PSD's premises at Marnes la Coquette are leased to PSD by
Institut Pasteur. The rentals charged through the profit and loss account with
respect to this lease agreement were $0.9 million, $0.9 million and $1.0
million in 1998, 1997 and 1996, respectively.
Elements of costs incurred by Sanofi on behalf of PSD are also included in
the profit and loss account as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Sales representatives.................................... $ 3.6 $ 4.4 $ 3.2
Shared services.......................................... 3.4 4.0 4.9
Holding company costs.................................... 0.2 0.3 0.2
Finance costs............................................ 4.7 4.9 4.5
----- ----- -----
Total.................................................. $11.9 $13.6 $12.8
===== ===== =====
</TABLE>
F-41
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Shared service and sales representatives' costs are charged to PSD at cost
plus a mark-up of 1 percent to 5 percent and include both direct and indirect
costs, while holding company expenses are calculated on the basis of actual
costs incurred and allocated based on headcount and sales figures for each
Sanofi division. Finance costs are the actual costs incurred by each Sanofi
division in using the Sanofi cash-pooling facility. The cost of borrowing is
based on the market rate plus a margin.
Sanofi also provides working capital financing. Interest is payable on the
net related entity payable at a rate of 3.5 percent to 4.5 percent. The
interest charged was $5.0 million, $5.3 million and $5.2 million in 1998, 1997
and 1996, respectively. Interest receivable from related parties was $0.3
million, $0.4 million and $0.6 million for 1998, 1997 and 1996, respectively.
12. Employee Profit-Sharing Plans:
Sanofi operates a profit-sharing plan. Profit sharing is calculated on the
basis of actual evolution of consolidated earnings per share of the Sanofi
group.
The amounts included in the profit and loss account for employee profit
sharing for 1998, 1997 and 1996 are $2.5 million, $2.1 million and $2.0
million, respectively.
13. Segment Information:
The business is managed through zones defined by country of origin of sales.
All sales are derived from in-vitro diagnostic products. Geographic sales data
is presented below:
<TABLE>
<CAPTION>
1998 % 1997 % 1996 %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
France.................................... $101.7 48 $101.0 42 $109.6 41
USA....................................... 33.3 16 44.4 19 63.1 24
Other foreign............................. 76.0 36 92.9 39 95.2 35
------ --- ------ --- ------ ---
Total................................... $211.0 100 $238.3 100 $267.9 100
====== === ====== === ====== ===
</TABLE>
The following presents long-lived assets by geographical area, based upon
the location of the asset:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
France................................................... $23.5 $24.6 $24.8
USA...................................................... 32.4 31.1 47.6
Other foreign............................................ 5.4 5.0 12.2
----- ----- -----
Total.................................................. $61.3 $60.7 $84.6
===== ===== =====
</TABLE>
F-42
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999
(in millions of U.S. dollars, except share data)
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
ASSETS
Current Assets:
Cash.............................................................. $ 8.4
Accounts receivable, net.......................................... 74.0
Inventories:
Raw materials.................................................... 7.4
Work in process.................................................. 11.8
Finished goods................................................... 17.6
-------
Total inventories............................................... 36.8
Prepaid expenses and other current assets......................... 14.4
Current portion of note receivable................................ 4.1
-------
Total current assets............................................ 137.7
Property, Plant and Equipment:
Land.............................................................. 0.6
Buildings......................................................... 35.1
Equipment......................................................... 91.9
-------
Total property, plant and equipment............................. 127.6
Accumulated depreciation.......................................... 91.2
-------
Net property, plant and equipment............................... 36.4
Intangible assets, net............................................. 1.5
Notes receivables, net of current portion.......................... 14.2
Other assets....................................................... 0.5
-------
Total assets.................................................... $ 190.3
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Lines of credit................................................... $ 17.8
Accounts payable.................................................. 24.0
Related entity payable............................................ 82.6
Other current liabilities......................................... 31.7
-------
Total current liabilities....................................... 156.1
Long-term liabilities.............................................. 9.1
Stockholders' Equity:
Common stock (par value of $20; 2,321,160 shares authorized,
issued and outstanding).......................................... 47.3
Additional paid-in capital........................................ 182.2
Accumulated deficit............................................... (179.4)
Accumulated currency translation adjustment....................... (25.0)
-------
Total stockholders' equity...................................... 25.1
-------
Total liabilities and stockholders' equity...................... $ 190.3
=======
</TABLE>
The accompanying notes are an integral part of these statements.
F-43
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the nine months ending September 30, 1999
(in millions of U.S. dollars, except share and per share data)
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Revenue:
Net sales........................................................ $ 160.7
Royalty revenue.................................................. 12.6
----------
Total revenue.................................................. 173.3
----------
Cost of Sales:
Product cost of sales............................................ 71.8
Royalty expense.................................................. 21.1
----------
Total cost of sales............................................ 92.9
----------
Gross profit................................................... 80.4
----------
Operating Expenses:
Selling, general and administrative.............................. 54.8
Distribution..................................................... 6.4
Research and development......................................... 15.5
----------
Total operating expenses....................................... 76.7
----------
Operating income............................................... 3.7
Interest expense (net)............................................. (2.7)
Other, net......................................................... (0.7)
----------
Pretax income.................................................. 0.3
Income tax......................................................... 0.2
----------
Net income......................................................... $ 0.1
==========
Weighted average common shares..................................... 2,321,160
==========
Basic and diluted earnings per share............................... $ 0.04
==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-44
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the nine months ending September 30, 1999
(in millions of U.S. dollars, except share data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Currency Total
---------------- Paid-in Accumulated Translation Stockholders'
Shares Amount Capital Deficit Adjustment Equity
--------- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31,
1998................... 2,321,160 $47.3 $182.2 $(179.5) $(23.2) $26.8
Net Income............ 0.1 0.1
Currency Translation
Adjustment........... (1.8) (1.8)
--------- ----- ------ ------- ------ -----
Balance September 30,
1999................... 2,321,160 $47.3 $182.2 $(179.4) $(25.0) $25.1
========= ===== ====== ======= ====== =====
</TABLE>
The accompanying notes are an integral part of these statements.
F-45
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ending September 30, 1999
(in millions of U.S. dollars)
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Operating Activities:
Net income....................................................... $ 0.1
Adjustment to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.................................. 8.3
Changes in operating assets and liabilities:
Decrease in inventories........................................ 3.4
Decrease in trade and other receivables........................ 3.5
Increase in other assets....................................... (5.7)
Decrease in accounts payable................................... 1.1
Decrease in other liabilities.................................. (2.2)
-----
Net cash provided by operating activities.................... 8.5
-----
Investing Activities:
Purchase of property and equipment............................... (6.5)
-----
Net cash used in investing activities........................ (6.5)
-----
Financing Activities:
Proceeds from lines of credit, net............................... 2.2
Proceeds from long-term receivable............................... 4.5
Repayment to related entity, net................................. (6.7)
-----
Net cash used in financing activities........................ (0.0)
-----
Effect on foreign exchange rate changes on cash.................... (0.5)
-----
Net increase in cash............................................... 1.5
Cash and cash equivalents, beginning of year....................... 6.9
-----
Cash and cash equivalents, end of year............................. $ 8.4
=====
</TABLE>
The accompanying notes are an integral part of these statements.
F-46
<PAGE>
PASTEUR SANOFI DIAGNOSTICS SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(in millions of U.S. dollars)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements of
PSD and Subsidiaries, ("PSD" or the "Company"), reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
of the interim period presented. All such adjustments are of a normal recurring
nature. All amounts are presented in millions of U.S. dollars, except share
amounts, and unless otherwise noted. The condensed consolidated financial
statements should be read in conjunction with the notes to the consolidated
financial statements contained in the Company's report for the years ended
December 31, 1998 and 1997.
2. SEGMENT INFORMATION:
The business is managed through zones defined by country of origin of sales.
All sales are derived from in-vitro diagnostic products. Geographic sales data
are presented below:
<TABLE>
<CAPTION>
9/30/99
-------
<S> <C>
France............................................................. 75.8
United States...................................................... 24.4
Other foreign...................................................... 60.5
-----
Total............................................................ 160.7
=====
</TABLE>
The following presents long-lived assets by geographical area based upon the
location of the asset:
<TABLE>
<CAPTION>
9/30/99
-------
<S> <C>
France............................................................. 22.9
United States...................................................... 29.1
Other foreign...................................................... 1.6
----
Total............................................................ 53.7
====
</TABLE>
3. SUBSEQUENT EVENTS:
On July 3, 1999, Bio-Rad entered into an agreement with Sanofi-Synthelabo
and Institut Pasteur to acquire the stock of PSD and certain other ancillary
assets and to repay debt of PSD for total consideration not to exceed $210
million, subject to adjustments. Bio-Rad will fund the purchase price with the
proceeds of a new senior credit facility, which will include a term loan and a
revolving credit facility and a bridge loan.
F-47
<PAGE>
PRELIMINARY PROSPECTUS MAY 17, 2000
[LOGO OF BIO-RAD]
BIO-RAD LABORATORIES, INC.
Offer to Exchange up to $150,000,000 of its
11 5/8% Senior Subordinated Notes due 2007,
Which Have Been Registered Under the Securities Act,
for up to $150,000,000 of its Outstanding
11 5/8% Senior Subordinated Notes due 2007
----------------
PROSPECTUS
----------------
, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company has the power to indemnify its directors, officers and other
persons against liability for certain acts pursuant to Section 145 of the
Delaware General Corporation Law and pursuant to the Company's Certificate of
Incorporation. Section 7 of the Company's Certification of Incorporation
provides as follows:
"7. A director of the corporation shall not be personally liable to the
corporation or any stockholder for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article 7 to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation
Law, as so amended. Any repeal or modification of any provision of this
Article 7 by the stockholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification."
In addition, the Company maintains a standard form of directors' and
officers' liability insurance policy. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Company, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, and is, therefore, unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
A list of exhibits filed with this registration statement on Form S-4 is set
forth on the Exhibit Index and is incorporated in this Item 21 by reference.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
II-1
<PAGE>
provided, however, that paragraphs (a)(l)(i) and (a)(l)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3 and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hercules, State of
California, on May 15, 2000.
BIO-RAD LABORATORIES, INC.
/s/ David Schwartz
By: _________________________________
David Schwartz
President, Chief Executive Officer
and
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint David Schwartz and Thomas C.
Chesterman to be his true and lawful attorney-in-fact and agent, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign this registration
statement and any and all amendments thereto (including without limitation any
post-effective amendments thereto and any registration statement pursuant to
Rule 462(b)), and to file each of the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, and every act and thing necessary or desirable to be done, as fully
to all intents and purposes as he might or could do in person, thereby
ratifying and confirming all that said attorney-in-fact and agent, each acting
alone, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David Schwartz President, Chief Executive May 15, 2000
____________________________________ Officer and Chairman of the
David Schwartz Board (Principal Executive
Officer)
/s/ Thomas C. Chesterman Vice President and Chief May 15, 2000
____________________________________ Financial Officer
Thomas C. Chesterman (Principal Financial and
Accounting Officer)
/s/ James J. Bennett Executive Vice President, May 15, 2000
____________________________________ Chief Operating Officer and
James J. Bennett Director
/s/ Norman D. Schwartz Vice President and Group May 15, 2000
____________________________________ Manager, Life Science and
Norman D. Schwartz Director
/s/ Burton A. Zabin Vice President and Director May 15, 2000
____________________________________
Burton A. Zabin
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Alice N. Schwartz Director May 15, 2000
____________________________________
Alice N. Schwartz
/s/ Albert J. Hillman Director May 15, 2000
____________________________________
Albert J. Hillman
/s/ Philip L. Padou Director May 15, 2000
____________________________________
Philip L. Padou
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
3.1 Restated Certificate of Incorporation of Bio-Rad Laboratories, Inc.,
filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K (SEC
File No. 001-07928) for the fiscal year ended December 31, 1992 and
incorporated herein by reference.
3.2 Bylaws of Bio-Rad Laboratories, Inc., filed as Exhibit 2(c) to the
Company's Registration Statement on Form S-7, made effective April 22,
1980 (Registration No. 2-66797) and incorporated herein by reference.
4.1 Indenture, dated as of February 17, 2000, by and between Bio-Rad
Laboratories, Inc. and Norwest Bank Minnesota, N.A., as Trustee for
the 11 5/8% Senior Subordinated Notes due 2007, filed as Exhibit 4.5
to the Company's Annual Report on Form 10-K (SEC File No. 001-07928)
for the fiscal year ended December 31, 1999 and incorporated herein by
reference.
4.2 Registration Rights Agreement, dated as of February 17, 2000, by and
among Bio-Rad Laboratories, Inc. and Warburg Dillon Read LLC and ABN
AMRO Incorporated, filed as Exhibit 4.6 to the Company's Annual Report
on Form 10-K (SEC File No. 001-07928) for the fiscal year ended
December 31, 1999 and incorporated herein by reference.
5.1 Opinion of Latham & Watkins.
10.1 Purchase Agreement, dated as of July 3, 1999, between Sanofi-
Synthelabo, Institut Pasteur and Bio-Rad Laboratories, Inc., filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K (SEC File No.
001-07928) filed with the Securities and Exchange Commission on July
16, 1999 and incorporated herein by reference.
10.2 Bio-Rad Laboratories, Inc. 1994 Stock Option Plan, filed as Exhibit
4.1 to the Company's Registration Statement on Form S-8, made
effective May 18, 1994 (Registration No. 33-53337) and incorporated
herein by reference.
10.3 Bio-Rad Laboratories, Inc. Amended and Restated 1998 Employee Stock
Purchase Plan, filed as Exhibit 10.5 to the Company's Quarterly Report
on Form 10-Q (SEC File No. 001-07928) for the quarter ended September
30, 1998 and incorporated herein by reference.
10.4 Bio-Rad Laboratories, Inc. Employees' Deferred Profit Sharing
Retirement Plan (Amended and Restated Effective as of January 1,
1997), filed as Exhibit 10.6 to the Company's Quarterly Report on Form
10-Q (SEC File No. 001-07928) for the quarter ended September 30, 1997
and incorporated herein by reference.
10.5 Non-competition and employment continuation letter agreement, dated as
of January 15, 1997, by and between the Company and James J. Bennett,
filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K
(SEC File No. 001-07928) for the fiscal year ended December 31, 1996
and incorporated herein by reference.
10.6 Employment and Non-Compete Agreement, dated as of August 1, 1997,
between the Company and Dr. Burton A. Zabin, filed as Exhibit 10.11 to
the Company's Quarterly Report on Form 10-Q (SEC File No. 001-07928)
for the quarter ended June 30, 1997 and incorporated herein by
reference.
10.7 Split-Dollar Life Insurance Agreement, dated as of September 17, 1999,
by and between the Company and the Schwartz Irrevocable Descendants
Trust, filed as Exhibit 10.12 to the Company's Annual Report on Form
10-K (SEC File No. 001-07928) for the fiscal year ended December 31,
1999 and incorporated herein by reference.
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of Bio-Rad Laboratories, Inc., filed as Exhibit 21.1 to
the Company's Annual Report on Form 10-K (SEC File No. 001-07928) for
the fiscal year ended December 31, 1999 and incorporated herein by
reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
23.1 Consent of Latham & Watkins (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of PGA.
24.1 Powers of Attorney (included on the signature pages of this
Registration Statement).
25.1 Statement of Eligibility and Qualification on Form T-1 of Norwest Bank
Minnesota, N.A., as Trustee for the 11 5/8% Senior Subordinated Notes
due 2007.
99.1 Letter of Transmittal with Respect to the Exchange Offer.
99.2 Notice of Guaranteed Delivery with Respect to the Exchange Offer.
99.3 Letter to DTC Participants Regarding the Exchange Offer.
99.4 Letter to Beneficial Holders Regarding the Exchange Offer.
99.5 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
</TABLE>
<PAGE>
EXHIBIT 5.1
[LATHAM & WATKINS LETTERHEAD APPEARS HERE]
May 17, 2000
Bio-Rad Laboratories, Inc.
1000 Alfred Nobel Drive
Hercules, California 94547
Re: $150,000,000 Aggregate Principal Amount of
11 5/8% Senior Subordinated Notes due 2007
------------------------------------------
Ladies and Gentlemen:
In connection with the registration of $150,000,000 aggregate
principal amount of 11 5/8% Senior Subordinated Notes due 2007 (the "Series B
Notes") by Bio-Rad Laboratories, Inc., a Delaware corporation (the "Company"),
under the Securities Act of 1933, as amended, on Form S-4 filed with the
Securities and Exchange Commission on May 17, 2000 (the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below. The Series B Notes will be issued pursuant to an indenture dated
as of February 17, 2000 (the "Indenture") by and between the Company and Norwest
Bank Minnesota, N.A., as trustee (the "Trustee"). The Series B Notes will be
issued in exchange for the Company's outstanding 11 5/8% Senior Subordinated
Notes due 2007 on the terms set forth in the prospectus contained in the
Registration Statement and the Letter of Transmittal to be filed as an exhibit
thereto. Capitalized terms used herein without definition have the meanings
assigned to them in the Indenture.
In our capacity as your special counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization and issuance of the
Series B Notes. In addition, we have made such legal and factual examinations
and inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such documents, corporate records
and instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
<PAGE>
Bio-Rad Laboratories, Inc.
May 17, 2000
Page 2
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
We are opining herein as to the effect on the subject transaction only
of the internal laws of the State of New York, and we express no opinion with
respect to the applicability thereto, or the effect thereon, of the laws of any
other jurisdiction or as to any matters of municipal law or the laws of any
local agencies within any state.
Subject to the foregoing and the other matters set forth herein, it is
our opinion, as of the date hereof, that assuming due authorization, execution,
delivery and authentication of the Series B Notes, upon issuance in the manner
described in the Registration Statement, the Series B Notes will be legally
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
The opinions rendered above relating to the enforceability of the
Series B Notes are subject to the following exceptions, limitations and
qualifications: (i) the effect of bankruptcy, insolvency, fraudulent
conveyances, reorganization, moratorium or other similar laws now or hereafter
in effect relating to or affecting the rights or remedies of creditors, (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought; (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy; and (iv) we
express no opinion regarding the waivers of rights or defenses contained in
Section 4.6 of the Indenture.
To the extent that the obligations of the Company under the Series B
Notes and the Indenture may be dependent upon such matters, we have assumed for
purposes of this opinion that the Trustee is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization; that
the Trustee is duly qualified to engage in the activities contemplated by the
Indenture; that the Indenture has been duly authorized, executed and delivered
by the Trustee and constitutes the legally valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms; that the
Trustee is in compliance, generally and with respect to acting as a trustee
under the Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
<PAGE>
Bio-Rad Laboratories, Inc.
May 17, 2000
Page 3
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters" in the prospectus contained therein.
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 12.1
Bio-Rad Laboratories, Inc.
Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
----------------------------------------------------- ---------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes 33.5 36.5 22.8 34.2 16.4 15.1 4.3
Add:
Interest expense 4.5 3.0 1.2 3.7 12.8 0.9 8.8
Interest component of rental expense 3.7 3.8 3.8 4.2 4.5 1.1 0.9
---- ---- ---- ---- ---- ---- ----
Earnings available for fixed charges 41.7 43.3 27.8 42.1 33.7 17.1 14.0
Fixed Charges:
Interest expense 4.5 3.0 1.2 3.7 12.8 0.9 8.8
Interest component of rental expense 3.7 3.8 3.8 4.2 4.5 1.1 0.9
---- ---- ---- ---- ---- ---- ----
Total fixed charges 8.2 6.8 5.0 7.9 17.3 2.0 9.7
Ratio of earnings to fixed charges 5.1x 6.4x 5.6x 5.3x 1.9x 8.6x 1.4x
</TABLE>
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN APPEARS HERE]
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated February 9, 2000 included herein and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
San Francisco, California
May 17, 2000
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated July 31, 1999 included herein and to
all references to our Firm included in this registration statement.
PGA
Represented by Philippe Mongin
Partner of Andersen Worldwide
/s/ PGA
- -----------------------
Paris, France
May 17, 2000
<PAGE>
Exhibit 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
- ---- SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
333 S. Grand Ave., Suite 740
Los Angeles, CA 90071
(Address of principal executive offices) (Zip code)
</TABLE>
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
333 S. Grand Ave., Suite 740
Los Angeles, CA 90071
(213) 253-6320
(Agent for Service)
_____________________________
BIO-RAD LABORATORIES, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-1381833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Alfred Nobel Drive
Hercules, CA 94547
(Address of principal executive offices) (Zip code)
</TABLE>
_____________________________
Senior Subordinated Notes due 2007
(Title of the indenture securities)
===============================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
--------------------
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
--------------------------
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
----------------
Item 16. List of Exhibits. List below all exhibits filed as a part of this
----------------- Statement of Eligibility. Norwest Bank incorporates
by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the trustee now in
effect.*
Exhibit 2. a. A copy of the certificate of authority of the trustee to
commence business issued June 28, 1872, by the Comptroller
of the Currency to The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller of the
Currency dated January 2, 1934, approving the consolidation
of The Northwestern National Bank of Minneapolis and The
Minnesota Loan and Trust Company of Minneapolis, with the
surviving entity being titled Northwestern National Bank
and Trust Company of Minneapolis.*
c. A copy of the certificate of the Acting Comptroller of the
Currency dated January 12, 1943, as to change of corporate
title of Northwestern National Bank and Trust Company of
Minneapolis to Northwestern National Bank of Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the Regional
Counsel, Comptroller of the Currency, acknowledging receipt
of notice of name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to Norwest Bank
Minneapolis, National Association.*
e. A copy of the letter dated January 4, 1988 from the
Administrator of National Banks for the Comptroller of the
Currency certifying approval of consolidation and merger
effective January 1, 1988 of Norwest Bank Minneapolis,
National Association with various other banks under the
title of "Norwest Bank Minnesota, National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the Federal
Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-32992.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 12th day of April 2000.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jeanie Mar
_______________
Jeanie Mar
Vice President
<PAGE>
EXHIBIT 6
April 12, 2000
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jeanie Mar
_________________
Jeanie Mar
Vice President
<PAGE>
EXHIBIT 99.1
Letter of Transmittal
To Tender for Exchange
11 5/8% Senior Subordinated Notes Due 2007
of
BIO-RAD LABORATORIES, INC.
Pursuant to the Prospectus dated , 2000
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 2000, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE
EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
AT ANY TIME PRIOR THE EXPIRATION DATE.
The Exchange Agent is:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand Delivery:
c/o Norwest Bank Minnesota, N.A. c/o Norwest Bank Minnesota, N.A.
333 South Grand Avenue, Suite 740 333 South Grand Avenue, Suite 740
Los Angeles, California 90071 Los Angeles, California 90071
Attn: Corporate Trust Department Attn: Corporate Trust Department
By Overnight Delivery: By Facsimile:
c/o Norwest Bank Minnesota, N.A. (213) 680-1827
333 South Grand Avenue, Suite 740 Attn: Customer Service
Los Angeles, California 90071
Attn: Corporate Trust Department Confirm by Telephone:
(213) 253-6320
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated ,
2000 (the "Prospectus"), of Bio-Rad Laboratories, Inc., a Delaware corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together with the Prospectus constitutes the Company's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 11 5/8% Senior
Subordinated Notes due 2007 (the "Exchange Notes") for each $1,000 principal
amount of its outstanding 11 5/8% Senior Subordinated Notes due 2007 (the
"Private Notes"). Recipients of the Prospectus should read the requirements
described in such Prospectus with respect to eligibility to participate in the
Exchange Offer. Capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
The undersigned hereby tenders the Private Notes described in the box
entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered holder of all the Private Notes (the "Holder")
and the undersigned represents that it has received from each beneficial owner
of Private Notes (the "Beneficial Owners") a duly completed and executed form
of "Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
1
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY COMPLETING ANY BOX
BELOW.
This Letter of Transmittal is to be used by a Holder (i) if certificates
representing Private Notes are to be forwarded herewith and (ii) if a tender
is made pursuant to the guaranteed delivery procedures in the section of the
Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures."
Holders that are tendering by book-entry transfer to the Exchange Agent's
account at DTC can execute the tender through ATOP for which the Exchange
Offer will be eligible. DTC participants that are accepting the Exchange Offer
must transmit their acceptance to DTC which will verify the acceptance and
execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will
then send an agent's message forming part of a book-entry transfer in which
the participant agrees to be bound by the terms of the Letter of Transmittal
(an "Agent's Message") to the Exchange Agent for its acceptance. Transmission
of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as
to execution and delivery of a Letter of Transmittal by the participant
identified in the Agent's Message.
Any Beneficial Owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such Holder promptly and instruct such Holder to
tender on behalf of the Beneficial Owner. If such Beneficial Owner wishes to
tender on its own behalf, such Beneficial Owner must, prior to completing and
executing this Letter of Transmittal and delivering its Private Notes, either
make appropriate arrangements to register ownership of the Private Notes in
such Beneficial Owner's name or obtain a properly completed bond power from
the Holder. The transfer of record ownership may take considerable time.
In order to properly complete this Letter of Transmittal, a Holder must (i)
complete the box entitled "Description of Private Notes," (ii) if appropriate,
check and complete the boxes relating to book-entry transfer, guaranteed
delivery, Special Issuance Instructions and Special Delivery Instructions,
(iii) sign the Letter of Transmittal by completing the box entitled "Sign Here
To Tender Your Notes" and (iv) complete the Substitute Form W-9. Each Holder
should carefully read the detailed instructions below prior to completing the
Letter of Transmittal.
Holders of Private Notes who desire to tender their Private Notes for
exchange and (i) whose Private Notes are not immediately available or (ii) who
cannot deliver their Private Notes, this Letter of Transmittal and all other
documents required hereby to the Exchange Agent on or prior to the Expiration
Date, must tender the Private Notes pursuant to the guaranteed delivery
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
Holders of Private Notes who wish to tender their Private Notes for
exchange must complete columns (1) through (3) in the box below entitled
"Description of Private Notes," and sign the box below entitled "Sign Here To
Tender Your Notes." If only those columns are completed, such Holder will have
tendered for exchange all Private Notes listed in column (3) below. If the
Holder wishes to tender for exchange less than all of such Private Notes,
column (4) must be completed in full. In such case, such Holder should refer
to Instruction 5.
The Exchange Offer may be extended, terminated or amended, as provided in
the Prospectus. During any such extension of the Exchange Offer, all Private
Notes previously tendered and not withdrawn pursuant to the Exchange Offer
will remain subject to such Exchange Offer.
The undersigned hereby tenders for exchange the Private Notes described in
the box entitled "Description of Private Notes" below pursuant to the terms
and conditions described in the Prospectus and this Letter of Transmittal.
2
<PAGE>
DESCRIPTION OF PRIVATE NOTES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name(s) and
Address(es)
of
Registered
Holder(s) Aggregate
(Please Principal Amount Principal Amount
fill in, if Certificate Represented by Tendered For
blank) Number(s) Certificate(s)(A) Exchange(B)
- ---------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Total Principal
Amount Tendered
- ---------------------------------------------------------------
</TABLE>
(A) Unless indicated in this column, any tendering Holder will be deemed to
have tendered the entire aggregate principal amount represented by the
Private Notes indicated in the column labeled "Aggregate Principal Amount
Represented by Certificate(s)." See Instruction 5.
(B) The minimum permitted tender is $1,000 in principal amount of Private
Notes. All other tenders must be in integral multiples of $1,000.
[_]CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
[_]CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Window Ticket Number (if any): ____________________________________________
Name of Institution that Guaranteed Delivery: _____________________________
Only Holders are entitled to tender their Private Notes for exchange in the
Exchange Offer. Any financial institution that is a participant in DTC's
system and whose name appears on a security position listing as the record
owner of the Private Notes and who wishes to make book-entry delivery of
Private Notes as described above must complete and execute a participant's
letter (which will be distributed to participants by DTC) instructing DTC's
nominee to tender such Private Notes for exchange. Persons who are Beneficial
Owners of Private Notes but are not Holders and who seek to tender Private
Notes should (i) contact the Holder and instruct such Holder to tender on his
or her behalf, (ii) obtain and include with this Letter of Transmittal,
Private Notes properly endorsed for transfer by the Holder or accompanied by a
properly completed bond power from the Holder, with signatures on the
endorsement or bond power guaranteed by a firm that is an eligible guarantor
3
<PAGE>
institution within the meaning of Rule 17Ad-5 under the Exchange Act,
including a firm that is a member of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trading company having an office in the United States or
certain other eligible guarantors (each, an "Eligible Institution"), or
(iii) effect a record transfer of such Private Notes from the Holder to such
Beneficial Owner and comply with the requirements applicable to Holders for
tendering Private Notes prior to the Expiration Date. See the section of the
Prospectus entitled "The Exchange Offer--Procedures for Tendering."
SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8) (See Instructions 1, 6, 7 and 8)
To be completed ONLY (i) if the To be completed ONLY (i) if the
Exchange Notes issued in exchange Exchange Notes issued in exchange
for the Private Notes, certifi- for Private Notes, certificates
cates for Private Notes in a for Private Notes in a principal
principal amount not exchanged amount not exchanged for Exchange
for Exchange Notes, or Private Notes, or Private Notes (if any)
Notes (if any) not tendered for not tendered for exchange, are to
exchange, are to be issued in the be mailed or delivered (i) to
name of someone other than the someone other than the
undersigned or (ii) if Private undersigned or (ii) to the
Notes tendered by book-entry undersigned at an address other
transfer which are not exchanged than the address shown below the
are to be returned by credit to undersigned's signature.
an account maintained at DTC.
Issue to: Mail or deliver to:
Name: ____________________________ Name: ____________________________
(Please Type or Print) (Please Type or Print)
Address: _________________________ Address: _________________________
---------------------------------- ----------------------------------
(Include Zip Code) (Include Zip Code)
---------------------------------- ----------------------------------
(Taxpayer Identification or (Taxpayer Identification or
Social Security No.) Social Security No.)
Credit Private Notes not ex-
changed and delivered by book-en-
try transfer to DTC account set
forth below:
----------------------------------
(Account Number)
4
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the Private Notes
indicated above. Subject to, and effective upon, acceptance for exchange of
the Private Notes tendered for exchange herewith, the undersigned will have
irrevocably sold, assigned, transferred and exchanged, to the Company, all
right, title and interest in, to and under all of the Private Notes tendered
for exchange hereby, and hereby will have appointed the Exchange Agent as the
true and lawful agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as agent of the Company) of such Holder with respect
to such Private Notes, with full power of substitution to (i) deliver
certificates representing such Private Notes, or transfer ownership of such
Private Notes on the account books maintained by DTC (together, in any such
case, with all accompanying evidences of transfer and authenticity), to the
Company, (ii) present and deliver such Private Notes for transfer on the books
of the Company and (iii) receive all benefits and otherwise exercise all
rights and incidents of beneficial ownership with respect to such Private
Notes, all in accordance with the terms of the Exchange Offer. The power of
attorney granted in this paragraph shall be deemed to be irrevocable and
coupled with an interest.
The undersigned hereby represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Private Notes; and that
when such Private Notes are accepted for exchange by the Company, the Company
will acquire good and marketable title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned further warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the exchange, assignment and transfer
of the Private Notes tendered for exchange hereby. The undersigned further
agrees that acceptance of any and all validly tendered Private Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement.
By tendering, the undersigned hereby further represents to the Company that
(i) the Exchange Notes to be acquired by the undersigned in exchange for the
Private Notes tendered hereby and any Beneficial Owner(s) of such Private
Notes in connection with the Exchange Offer will be acquired by the
undersigned and such Beneficial Owner(s) in the ordinary course of their
respective businesses, (ii) the undersigned is not engaged in, and does not
intend to engage in, a distribution of the Exchange Notes, (iii) the
undersigned and each Beneficial Owner acknowledge and agree that any person
who is a broker-dealer registered under the Exchange Act or is participating
in the Exchange Offer for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of Section
10 of the Securities Act in connection with a secondary resale transaction of
the Exchange Notes acquired by such person and cannot rely on the position of
the staff of the Commission set forth in certain no-action letters, (iv) the
undersigned and each Beneficial Owner understand that a secondary resale
transaction described in clause (iii) above and any resales of Exchange Notes
obtained by the undersigned in exchange for the Private Notes acquired by the
undersigned directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (v) neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined under Rule 405 under the Securities Act, of the
Company.
If the undersigned is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Private Notes that were acquired as a result
of market-making activities or other trading activities, it acknowledges that
it will deliver a prospectus meeting the requirements of Section 10 of the
Securities Act in connection with any resale of such Exchange Notes; however,
by so acknowledging and by delivering such prospectus, the undersigned will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. A broker-dealer may not participate in the Exchange Offer with
respect to the Private Notes acquired other than as a result of market-making
activities or other trading activities.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Private Notes,
if, as and when the Company gives oral or written notice thereof to the
Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders" in the Prospectus. Any Private Notes
tendered by the undersigned and not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in
the box above entitled "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
5
<PAGE>
The undersigned acknowledges that the Company's acceptance of Private Notes
validly tendered for exchange pursuant to any one of the procedures described
in the section of the Prospectus entitled "The Exchange Offer" and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not tendered for exchange in
the name(s) of the undersigned. Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Private Notes from the name of the Holder(s) thereof if the
Company does not accept for exchange any of the Private Notes so tendered for
exchange or if such transfer would not be in compliance with any transfer
restrictions applicable to such Private Note(s).
In order to validly tender Private Notes for exchange, Holders must
complete, execute, and deliver this Letter of Transmittal.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death, incapacity or dissolution of
the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of
the undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Private Notes is irrevocable.
6
<PAGE>
SIGN HERE TO TENDER YOUR PRIVATE NOTES
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated:___________, 2000
Must be signed by the Holder(s) exactly as name(s) appear(s) on
certificate(s) representing the Private Notes or on a security position
listing or by person(s) authorized to become registered Private Note
holder(s) by certificates and documents transmitted herewith. If signature is
by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, please provide the following information. (See Instruction 6.)
Name(s): _____________________________________________________________________
------------------------------------------------------------------------------
(Please Type or Print)
Capacity (full title): _______________________________________________________
------------------------------------------------------------------------------
Address: _____________________________________________________________________
------------------------------------------------------------------------------
(Include Zip Code)
Principal place of business (if different from address listed above): ________
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Area Code and Telephone No.: ( ): __________________________________________
Tax Identification or Social Security Nos.: __________________________________
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature: ________________________________________________________
Name and Title: ______________________________________________________________
------------------------------------------------------------------------------
(Please Type or Print)
Name of Firm: ________________________________________________________________
Address: _____________________________________________________________________
Area Code and Telephone No.: _________________________________________________
Dated: _______________________________________________________________________
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN THIS LETTER OF
TRANSMITTAL.
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the United States, or (3)
an Eligible Institution that is a member of one of the following recognized
Signature Guarantee Programs:
(a) The Securities Transfer Agents Medallion Program (STAMP);
(b) The New York Stock Exchange Medallion Signature Program (MSP); or
(c) The Stock Exchange Medallion Program (SEMP).
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the Holder(s) of the Private Notes tendered
herewith and such Holder(s) have not completed the box entitled "Special
Issuance Instructions" or the box entitled "Special Delivery Instructions" on
this Letter of Transmittal or (ii) if such Private Notes are tendered for the
account of an Eligible Institution. In all other cases, all signatures must be
guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Private Notes; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be completed by Holders
if certificates representing Private Notes are to be forwarded herewith. All
physically delivered Private Notes, as well as a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) and any
other required documents, must be received by the Exchange Agent at its
address set forth herein prior to the Expiration Date or the tendering holder
must comply with the guaranteed delivery procedures set forth below. Delivery
of the documents to DTC does not constitute delivery to the Exchange Agent.
The method of delivery of Private Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder. Except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. Instead
of delivery by mail, it is recommended that Holders use an overnight or hand
delivery service, properly insured. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date.
Neither this Letter of Transmittal nor any Private Notes should be sent to the
Company. Holders may request their respective brokers, dealers, commercial
banks, trust companies or nominees to effect the above transactions for such
Holders.
Holders of Private Notes who elect to tender Private Notes and (i) whose
Private Notes are not immediately available or (ii) who cannot deliver the
Private Notes, this Letter of Transmittal or other required documents to the
Exchange Agent prior the Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures set forth in the Prospectus.
Holders may have such tender effected if:
(a) such tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time, on the Expiration Date, the
Exchange Agent has received from such Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery, setting forth
the name and address of the Holder, the certificate number(s) of such
Private Notes and the principal amount of Private Notes tendered for
exchange, stating that tender is being made thereby and guaranteeing that,
within three New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing such Private Notes (or a Book-Entry
Confirmation), in proper form for transfer, and any other documents
required by this Letter of Transmittal, will be deposited by such Eligible
Institution with the Exchange Agent; and
(c) a properly executed Letter of Transmittal (or facsimile thereof), as
well as the certificate(s) for all tendered Private Notes in proper form
for transfer or a Book-Entry Confirmation, together with any other
documents required by this Letter of Transmittal, are received by the
Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date.
8
<PAGE>
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
thereof), waive any right to receive notice of the acceptance of their Private
Notes for exchange.
3. Inadequate Space. If the space provided in the box entitled "Description
of Private Notes" above is inadequate, the certificate numbers and principal
amounts of the Private Notes being tendered should be listed on a separate
signed schedule affixed hereto.
4. Withdrawals. A tender of Private Notes may be withdrawn at any time
prior to the Expiration Date by delivery of written notice of withdrawal (or
facsimile thereof) to the Exchange Agent at the address set forth on the cover
of this Letter of Transmittal. To be effective, a notice of withdrawal of
Private Notes must (i) specify the name of the person who tendered the Private
Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be
withdrawn (including the certificate number(s) and aggregate principal amount
of such Private Notes), and (iii) be signed by the Holder in the same manner
as the original signature on the Letter of Transmittal by which such Private
Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion,
whose determination shall be final and binding on all parties. Any Private
Notes so withdrawn will thereafter be deemed not validly tendered for purposes
of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Private Notes so withdrawn are validly retendered. Properly
withdrawn Private Notes may be retendered by following one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer--
Procedures for Tendering" at any time prior to the Expiration Date.
5. Partial Tenders. Tenders of Private Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to
be made with respect to less than the entire principal amount of any Private
Notes, fill in the principal amount of Private Notes which are tendered for
exchange in column (4) of the box entitled "Description of Private Notes," as
more fully described in the footnotes thereto. In the case of a partial tender
for exchange, a new certificate, in fully registered form, for the remainder
of the principal amount of the Private Notes, will be sent to the Holders
unless otherwise indicated in the appropriate box on this Letter of
Transmittal as promptly as practicable after the expiration or termination of
the Exchange Offer.
6. Signatures on this Letter of Transmittal, Powers of Attorney and
Endorsements.
(a) The signature(s) of the Holder on this Letter of Transmittal must
correspond with the name(s) as written on the face of the Private Notes
without alternation, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or
required documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the Holder listed and
transmitted hereby, no endorsements of Private Notes or bond powers are
required. If, however, Private Notes not tendered or not accepted, are to
be issued or returned in the name of a person other than the Holder, then
the Private Notes transmitted hereby must be endorsed or accompanied by a
properly completed bond power, in a form satisfactory to the Company, in
either case signed exactly as the name(s) of the Holder(s) appear(s) on the
Private Notes. Signatures on such Private Notes or bond powers must be
guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
(e) If this Letter of Transmittal or Private Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with this Letter of Transmittal.
(f) If this Letter of Transmittal is signed by a person other than the
Holder listed, the Private Notes must be endorsed or accompanied by a
properly completed bond power, in either case signed by such Holder exactly
as the name(s) of the Holder appear(s) on the certificates. Signatures on
such Private Notes or bond powers must be guaranteed by an Eligible
Institution (unless signed by an Eligible Institution).
9
<PAGE>
7. Transfer Taxes. Except as set forth in this Instruction 7, the Company
will pay all transfer taxes, if any, applicable to the exchange of Private
Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of Private Notes pursuant to the
Exchange Offer, then the amount of such transfer taxes (whether imposed on the
Holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemptions therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
8. Special Issuance and Delivery Instructions. If the Exchange Notes are to
be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the Holder or to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Holders of Private Notes tendering Private Notes by book-entry
transfer may request that Private Notes not accepted be credited to such
account maintained at DTC as such Holder may designate.
9. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt), compliance with conditions, acceptance and
withdrawal of tendered Private Notes will be determined by the Company in its
sole discretion, which determination shall be final and binding. The Company
reserves the absolute right to reject any and all Private Notes not properly
tendered or any Private Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Private Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify Holders of defects or irregularities with respect to tenders
of Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Private Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to waive,
amend or modify certain of the specified conditions as described under "The
Exchange Offer--Conditions" in the Prospectus in the case of any Private Notes
tendered (except as otherwise provided in the Prospectus).
11. Mutilated, Lost, Stolen or Destroyed Private Notes. Any tendering
Holder whose Private Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated herein for further
instructions.
12. Requests for Information or Additional Copies. Requests for information
or for additional copies of the Prospectus and this Letter of Transmittal may
be directed to the Exchange Agent at the address or telephone number set forth
on the cover of this Letter of Transmittal.
IMPORTANT: This Letter of Transmittal (or a facsimile thereof) together
with certificates, or confirmation of book-entry or the Notice of Guaranteed
Delivery, and all other required documents must be received by the Exchange
Agent prior the Expiration Date.
10
<PAGE>
IMPORTANT INFORMATION
Under current federal income tax law, a Holder whose tendered Private Notes
are accepted for exchange may be subject to backup withholding unless the
Holder provides the Company (as payor), through the Exchange Agent, with
either (i) such Holder's correct taxpayer identification number ("TIN") on
Substitute Form W-9 attached hereto, certifying that the TIN provided on
Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and
that (A) the Holder has not been notified by the Internal Revenue Service that
he or she is subject to backup withholding as a result of a failure to report
all interest or dividends or (B) the Internal Revenue Service has notified the
Holder that he or she is no longer subject to backup withholding; or (ii) an
adequate basis for exemption from backup withholding. If such Holder is an
individual, the TIN is such Holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
Holder may be subject to certain penalties imposed by the Internal Revenue
Service.
Certain Holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign individual may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed Internal Revenue Service
Form W-8 (which the Exchange Agent will provide upon request) signed under
penalty of perjury, attesting to the Holder's exempt status. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 (the "Guidelines") for additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the Holder or other payee. Backup withholding is not an
additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the record owner of the
Private Notes. If the Private Notes are held in more than one name or are not
held in the name of the actual owner, consult the enclosed Guidelines for
additional guidance regarding which number to report.
11
<PAGE>
PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Part 1--PLEASE PROVIDE YOUR TIN
SUBSTITUTE IN THE BOX AT RIGHT AND CERTIFY ----------------
Form W-9 BY SIGNING AND DATING BELOW Social Security
Department of Number OR
the Treasury
Internal ----------------
Revenue Employer
Service Identification
Number
Payer's Request
for Taxpayer --------------------------------------------------------
Identification Part 2--Certification--Under
Penalties of Perjury, I certify Part 3--
that:
Number (TIN) Awaiting
and Certification (1) The number shown on this form TIN [_]
is my current taxpayer
identification number (or I
am waiting for a number to be
issued to me) and
(2) I am not subject to backup
withholding either because I
have not been notified by the
Internal Revenue Service (the
"IRS") that I am subject to
backup withholding as a
result of failure to report
all interest or dividends, or
the IRS has notified me that
I am no longer subject to
backup withholding.
--------------------------------------------------------
Certification instructions--You must cross out item
(2) in Part 2 above if you have been notified by the
IRS that you are subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you are subject to backup withholding
you receive another notification from the IRS stating
that you are no longer subject to backup withholding,
do not cross out item (2).
SIGNATURE _______________________ DATE ______________
NAME _________________________________________________
ADDRESS ______________________________________________
CITY ___________________ STATE ___ ZIP CODE __________
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide such a number.
___________________________________ ___________________________________
Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
12
<PAGE>
EXHIBIT 99.2
Notice of Guaranteed Delivery
With Respect to Tender of
Any and All Outstanding 11 5/8% Senior Subordinated Notes due 2007
In Exchange For
11 5/8% Senior Subordinated Notes Due 2007
of
BIO-RAD LABORATORIES, INC.
Pursuant to the Prospectus dated , 2000
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 2000, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE
EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE.
The Exchange Agent is:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By Hand Delivery:
By registered or Certified Mail:
c/o Norwest Bank Minnesota, N.A.
c/o Norwest Bank Minnesota, N.A. 333 South Grand Avenue, Suite 740
333 South Grand Avenue, Suite 740 Los Angeles, California 90071
Los Angeles, California 90071 Attn: Corporate Trust Department
Attn: Corporate Trust Department
By Facsimile:
By Overnight Delivery:
(213) 680-1827
c/o Norwest Bank Minnesota, N.A. Attn: Customer Service
333 South Grand Avenue, Suite 740
Los Angeles, California 90071 Confirm by Telephone:
Attn: Corporate Trust Department
(213) 253-6320
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
As set forth in the prospectus (the "Prospectus") dated , 2000
of Bio-Rad Laboratories, Inc. (the "Company") and in the accompanying Letter
of Transmittal and instructions thereto (the "Letter of Transmittal"), this
form or one substantially equivalent thereto must be used to accept the
Company's offer (the "Exchange Offer") to exchange new 11 5/8% Senior
Subordinated Notes due 2007 (the "Exchange Notes") that have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for all
of its outstanding 11 5/8% Senior Subordinated Notes due 2007 (the "Private
Notes") if the Letter of Transmittal or any other documents required thereby
cannot be delivered to the Exchange Agent, or Private Notes cannot be
delivered or if the procedures for book-entry transfer cannot be completed
prior to the Expiration Date. This form may be delivered by an Eligible
Institution (as defined in the Prospectus) by mail or hand delivery or
transmitted via facsimile to the Exchange Agent as set forth above.
Capitalized terms used but not defined herein shall have the meaning given to
them in the Prospectus.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the Letter of Transmittal.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to the Company upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Private Notes specified below pursuant to the guaranteed delivery procedures
set forth in the section of the Prospectus entitled "The Exchange Offer--
Guaranteed Delivery Procedures." By so tendering, the undersigned does hereby
make, at and as of the date hereof, the representations and warranties of a
tendering Holder of Private Notes set forth in the Letter of Transmittal.
The undersigned understands that tenders of Private Notes may be withdrawn
if the Exchange Agent receives at one of its addresses specified on the cover
of this Notice of Guaranteed Delivery, prior to the Expiration Date, a
facsimile transmission or letter which specifies the name of the person who
deposited the Private Notes to be withdrawn and the aggregate principal amount
of Private Notes delivered for exchange, including the certificate number(s)
(if any) of the Private Notes, and which is signed in the same manner as the
original signature on the Letter of Transmittal by which the Private Notes
were tendered, including any signature guarantees, all in accordance with the
procedures set forth in the Prospectus.
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
2
<PAGE>
The undersigned hereby tenders the Private Notes listed below:
PLEASE SIGN AND COMPLETE
<TABLE>
<CAPTION>
Certificate Numbers of Private Notes Principal Amount of
(if Available) Private Notes Tendered
- --------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------
Signature(s) of registered holder(s) or Authorized Signatory
Name(s) ____________________________________________________________________
(Please Type or Print)
Title ______________________________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Area Code and Telephone No. ________________________________________________
Date _______________________________________________________________________
If Private Notes will be tendered by book-entry transfer, check the trust
company below:
[_] The Depository Trust Company
Depository Account No.: ____________________________________________________
3
<PAGE>
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a participant in a recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the Letter
of Transmittal (or facsimile thereof), together with the Private Notes
tendered hereby in proper form for transfer, or confirmation of the book-
entry transfer of such Private Notes into the Exchange Agent's account at
The Depository Trust Company, pursuant to the procedure for book-entry
transfer set forth in the Prospectus, and any other required documents, all
by 5:00 p.m., New York City time, on the third New York Stock Exchange
trading day following the Expiration Date (as defined in the Prospectus).
SIGN HERE
Name of Firm: ______________________________________________________________
Authorized Signature: ______________________________________________________
Name (please type or print): _______________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Area Code and Telephone No: ________________________________________________
Date: ______________________________________________________________________
DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER
OF CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED
BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
4
<PAGE>
INSTRUCTIONS
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at one of its addresses set forth on the cover hereof prior
to the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the Holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange
Agent. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service, properly insured. If such delivery is by
mail, it is recommended that the Holder use properly insured, registered mail
with return receipt requested. For a full description of the guaranteed
delivery procedures, see the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." In all cases, sufficient time should
be allowed to assure timely delivery. No Notice of Guaranteed Delivery should
be sent to the Company.
2. Signature on this Notice of Guaranteed Delivery; Guarantee of
Signatures. If this Notice of Guaranteed Delivery is signed by the Holder(s)
referred to herein, then the signature must correspond with the name(s) as
written on the face of the Private Notes without alteration, enlargement or
any change whatsoever. If this Notice of Guaranteed Delivery is signed by a
person other than the Holder(s) listed, this Notice of Guaranteed Delivery
must be accompanied by a properly completed bond power signed as the name of
the Holder(s) appear(s) on the face of the Private Notes without alteration,
enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Notice of Guaranteed Delivery.
3. Requests for Assistance or Additional Copies. Questions relating to the
Exchange Offer or the procedure for consenting and tendering as well as
requests for assistance or for additional copies of the Prospectus, the Letter
of Transmittal and this Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address set forth on the cover hereof or to your broker,
dealer, commercial bank or trust company.
5
<PAGE>
EXHIBIT 99.3
Letter to DTC Participants Regarding the Offer to Exchange
Any and All Outstanding 11 5/8% Senior Subordinated Notes due 2007
for
11 5/8% Senior Subordinated Notes due 2007
of
BIO-RAD LABORATORIES, INC.
Pursuant to the Prospectus dated , 2000
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 2000, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME
MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY
BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE.
, 2000
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated , 2000 (the
"Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that
together constitute the offer (the "Exchange Offer") by Bio-Rad Laboratories,
Inc., a Delaware corporation (the "Company"), to exchange up to $150,000,000 in
principal amount of its 11 5/8% Senior Subordinated Notes due 2007 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), for any and all outstanding 11 5/8% Senior
Subordinated Notes due 2007, issued and sold in a transaction exempt from
registration under the Securities Act (the "Private Notes"), upon the terms and
conditions set forth in the Prospectus. The Prospectus and Letter of
Transmittal more fully describe the Exchange Offer. Capitalized terms used but
not defined herein have the meanings given to them in the Prospectus.
We are asking you to contact your clients for whom you hold Private Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Private Notes registered
in their own name.
Enclosed are copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use in connection with the tender of
Private Notes and for the information of your clients;
3. The Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Private Notes and all other required documents cannot be
delivered to the Exchange Agent prior to the Expiration Date;
4. A form of letter that may be sent to your clients for whose accounts you
hold Private Notes registered in your name or the name of your nominee,
with space provided for obtaining the clients' instructions with regard
to the Exchange Offer; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
<PAGE>
DTC participants will be able to execute tenders through the DTC Automated
Tender Offer Program.
Please note that the Exchange Offer will expire at 5:00 p.m., New York City
time, on , 2000, unless extended by the Company. We urge you to
contact your clients as promptly as possible.
You will be reimbursed by the Company for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to your
clients.
Additional copies of the enclosed material may be obtained form the
Exchange Agent, at the address and telephone numbers set forth below.
Very truly yours,
Norwest Bank Minnesota, National Association
c/o Norwest Bank Minnesota, N.A.
333 South Grand Avenue, Suite 740
Los Angeles, California 90071
Attn: Corporate Trust Department
(213) 253-6320
----------------
Nothing herein or in the enclosed documents shall constitute you or any
person as an agent of the Company or the Exchange Agent, or authorize you or
any other person to make any statements on behalf of either of them with
respect to the Exchange Offer, except for statements expressly made in the
Prospectus and the Letter of Transmittal.
2
<PAGE>
EXHIBIT 99.4
Letter to Beneficial Holders Regarding the Offer to Exchange
Any and All Outstanding 11 5/8% Senior Subordinated Notes due 2007
for
11 5/8% Senior Subordinated Notes due 2007
of
BIO-RAD LABORATORIES, INC.
Pursuant to the Prospectus dated , 2000
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 2000, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE
EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE.
, 2000
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 2000 (the
"Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that
together constitute the offer (the "Exchange Offer") by Bio-Rad Laboratories,
Inc., a Delaware corporation (the "Company"), to exchange up to $150,000,000
in principal amount of its 11 5/8% Senior Subordinated Notes due 2007 (the
"Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for any and all outstanding 11 5/8%
Senior Subordinated Notes due 2007, issued and sold in a transaction exempt
from registration under the Securities Act (the "Private Notes"), upon the
terms and conditions set forth in the Prospectus. The Prospectus and Letter of
Transmittal more fully describe the Exchange Offer. Capitalized terms used but
not defined herein have the meanings given to them in the Prospectus.
These materials are being forwarded to you as the beneficial owner of
Private Notes carried by us for your account or benefit but not registered in
your name. A tender of any Private Notes may be made only by us as the
registered holder and pursuant to your instructions. Therefore, the Company
urges beneficial owners of Private Notes registered in the name of a broker,
dealer, commercial bank, trust company or other nominee to contact such
registered holder promptly if they wish to tender Private Notes in the
Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all of your Private Notes, pursuant to the terms and conditions set forth
in the Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your
Private Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender Private Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 2000. Private Notes tendered pursuant to the
Exchange Offer may be withdrawn, subject to the procedures described in the
Prospectus, at any time prior to the Expiration Date.
If you wish to have us tender any or all of your Private Notes held by us
for your account or benefit, please so instruct us by completing, executing
and returning to us the instruction form that appears below. The accompanying
Letter of Transmittal is furnished to you for informational purposes only and
may not be used by you to tender Private Notes held by us and registered in
our name for your account or benefit.
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF 11 5/8% SENIOR SUBORDINATED NOTES DUE 2007
OF BIO-RAD LABORATORIES, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein relating to the Exchange Offer of the Company.
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
This will instruct you to tender the principal amount of Private Notes
indicated below held by you for the account or benefit of the undersigned,
pursuant to the terms of and conditions set forth in the Prospectus and the
Letter of Transmittal.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (fill in amount):
$ of the Private Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Private Notes held by you for the account of
the undersigned (insert principal amount of Private Notes to be
tendered, if any):
$ of the Private Notes.
[_] NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you for
the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is acquiring the
Exchange Notes in the ordinary course of business of the undersigned, (iii)
the undersigned has no arrangement or understanding with any person to
participate in the distribution of Exchange Notes, (iv) the undersigned
acknowledges that any person who is a broker-dealer registered under the
Exchange Act or is participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of Section 10 of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the Staff of the Securities
and Exchange Commission set forth in certain no action letters (See the
section of the Prospectus entitled "The Exchange Offer--Resale of the Exchange
Notes"), (v) the undersigned understands that a secondary resale transaction
described in clause (iv) above and any resales of Exchange Notes obtained by
the undersigned in exchange for the Private Notes acquired by the undersigned
directly from the Company should be covered by an effective registration
statement containing the selling securityholder information required by Item
507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company, and (vii) if the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Private Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of Section 10 of the Securities Act in connection with any resale
of such Exchange Notes; however, by so acknowledging and by delivering such
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act; (b) to agree, on
behalf of the undersigned, as set forth in the Letter of Transmittal; and (c)
to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of Private Notes.
2
<PAGE>
The purchaser status of the undersigned is (check the box that applies):
[_] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[_] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act)
[_] A non "U.S. person" (as defined in Regulation S under the Securities
Act) that purchased the Private Notes outside the United States in
accordance with Rule 904 under the Securities Act
[_] Other (describe) _______________________________________________________
SIGN HERE
Name of Beneficial Owner(s): _______________________________________________
Signature(s): ______________________________________________________________
Name(s) (please print): ____________________________________________________
Address: ___________________________________________________________________
Principal place of business (if different from address listed above): ______
Telephone Number(s): _______________________________________________________
Taxpayer Identification or Social Security Number(s): ______________________
Date: ______________________________________________________________________
3
<PAGE>
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.
Social security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------
Give the
For this type of account: SOCIAL SECURITY
number of--
- ---------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
3. Custodian account of a funds, the first
minor (Uniform Gift to individual on
Minors Act) the account(1)
4. a. The usual revocable The minor(2)
savings trust
account (grantor The grantor-
is also trustee) trustee(1)
b. So-called trust
account that is The actual
not a legal or owner(1)
valid trust under
State law The owner(3)
5. Sole proprietorship
account
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------
Give the EMPLOYER
For this type of account: IDENTIFICATION
number of--
- ----------------------------------------------
<S> <C>
6. Sole proprietorship The owner
account
7. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(4)
8. Corporate account The corporation
9. Partnership account The partnership
held in the name of
the business
10. Association, club, The organization
religious, charitable,
or other tax-exempt
organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
- ----------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. The name of the business or the "doing
business as" name may also be entered. Either the social security number
or the employer identification number may be used.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number ("TIN") or you don't know
your number, obtain Form SS-5, Application for a Social Security Number Card,
or Form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on all dividend and
interest payments and on broker transactions include the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodian account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including the exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments described in section 6049(b)(6) to nonresident aliens.
. Payments of tax-exempt interest (including the exempt-interest dividends
under section 859).
. Payments described in section 6049(b)(7) to resident aliens.
. Payments on tax-free covenant bonds under section 1466.
. Payments made to a nominee.
Exempt payees described above should file the Substitute Form W-9 to avoid
possible erroneous backup withholding. Complete the Substitute Form W-9 as
follows:
ENTER YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ACROSS THE FACE OF
THE FORM, SIGN, DATE, AND RETURN THE FORM TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup with-
holding. For details, see the sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A and 6050N and the regulations thereunder.
Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of tax reforms. Payers must be given
the numbers whether or not recipients are required to file tax returns. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) Penalty for False Information With Respect to Withholding.--If you make a
false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) Misuse of Taxpayer Identification Numbers.--If the payer discloses or uses
taxpayer identification numbers in violation of Federal law, the payer may be
subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
